• India needs to run on local ACC manufacturing, creating a robust ecosystem for innovation and economic growth.

 What are Advanced Chemistry Cells and Why Are Efforts Being Made to Boost the Ecosystem?

ACCs are cutting-edge advanced storage technologies that have the ability to store electrical energy either as chemical energy or electrochemical energy and convert it back to electric energy when needed. Basically, ACC batteries are mostly used for EVs and energy storage, but they are also massively consumed in numerous other sectors such as UPS, mobile phones, telecom, inverters, etc. According to the experts, growing a domestic advanced cell supply chain ecosystem will help the country become globally competitive in terms of mobility, consumer electronics ecosystem, and grid energy storage. The domestic supply chain will help get rid of the challenges of any sort of supply constraints, which can put the overall battery industry at risk. Currently, India is at the nascent stage of developing its in-house advanced cell manufacturing ecosystem, and speaking of the global supply chain, its presence is very limited.  According to the Confederation of Indian Industry (CII), the market demand in the nation for ACC batteries is speculated to grow from a staggering 220 GWh by 2030 to 20 GWh in 2022 at a CAGR of 50 percent.

Why the PLI Scheme for ACCs will be a Game-Changer for India’s EV Industry

Feeling the heat of the importance of ACCs, the union government, after several rounds of discussions, has announced the much-awaited Production-Linked Incentive (PLI) scheme, the 'National Programme on Advanced Chemistry Cell (ACC) Battery Storage’ with a budgetary outlay of Rs 18,000 crore in 2021. With the help of this scheme, India is looking forward to a manufacturing capacity of 50 GigaWatt hours (GWh) of ACC. The aim is to escalate the domestic value addition in EV battery manufacturing and, at the same time, decrease the cost of batteries so that the nation can become globally competitive in the EV ecosystem.

Under the PLI scheme for ACC, around ten companies have submitted their bids. Ola Cell Technologies Pvt. Ltd., ACC Energy Storage Pvt. Ltd., and Reliance New Energy Battery Storage Ltd. have benefited from the scheme, and one of the bidders who had been approved previously has been disqualified by the government for non-compliance with the terms and conditions. Just a month ago, the union government even announced the re-bidding under the PLI for ACC so that the approved bidders could set up a huge battery manufacturing unit of 10 GWh with an outlay of Rs 3,620 crore.

Speaking on how the PLI scheme for ACC will be a game-changer for India’s EV industry, Soumen Mandal, senior automotive researcher at Counterpoint Research, told Circuit Digest exclusively, “India's automotive market is slowly transitioning to EVs. More than 1.5 Mn EVs were sold during 2023, a massive growth of 50 percent YoY. Approximately 40 percent of the initial cost of an electric vehicle (EV) is attributed to batteries, which India mostly imports. This import dependence leads to increased EV costs. The PLI scheme prioritizes the local manufacturing of Advanced Chemistry Cells (ACCs) in India, aiming to establish a more efficient supply chain and reduce battery cell costs, thereby making EVs more economical. In 2023, around six percent of sales were contributed by EVs in the automobile segment, and by 2030, 40 percent of sales will be contributed by electric cars. This will be possible if the PLI for ACC and FAME 11 is successfully implemented.”

Although India is working hard to boost the ACC battery storage capacity, industry leaders feel that the supply chain and finding the right talent are the major hurdles for firms to set up lithium-ion cell manufacturing units.

With a focus on maximizing domestic value addition, the PLI scheme encourages investments in Giga-scale ACC and battery manufacturing facilities, which will not only drive technological advancements but also create employment opportunities. Furthermore, by incentivizing continuous sales of domestically manufactured batteries, the scheme instills confidence in manufacturers to invest in long-term sustainability and innovation. Overall, the PLI scheme for ACC has the potential to revolutionize the EV battery ecosystem in India by fostering a competitive and self-reliant industry while accelerating the adoption of electric vehicles nationwide.

The Current Challenges in India’s ACC Battery Ecosystem

Although various initiatives have been undertaken to grow the ecosystem and become self-reliant, experts feel that the limited availability of key raw materials like lithium and cobalt poses a significant challenge to battery manufacturing. This shortage often leads to dependency on imports, which can be expensive and subject to geopolitical risks. Then, the cost of imports is another major challenge in this ecosystem. Importing raw materials from foreign countries, particularly China, can be costly due to tariffs, transportation costs, and currency fluctuations. This adds to the overall manufacturing expenses, impacting the competitiveness of domestically produced batteries. There are huge regulatory hurdles. The stringent rules and regulations, both domestic and international, can create barriers to manufacturing and exporting batteries. Compliance with environmental standards, safety regulations, and trade policies adds complexity and cost to the process.

Sonam Motwani, CEO and Founder at Karkhana.io, told Circuit Digest, “While some lithium reserves have been identified in India, the exploration and processing of these resources are still in progress. Developing domestic capabilities for mining and refining lithium could help reduce dependence on imports. Manufacturing advanced chemistry cells requires sophisticated techniques and infrastructure. Ensuring that manufacturing facilities are equipped with the latest technology and skilled personnel is essential but can be costly and challenging to implement.”

Despite India's increasing demand, India’s dependence on imports highlights the huge gap in domestic production. Investment in batteries continues, and the lack of ACC facilities hampers self-sufficiency. India needs to run on local ACC manufacturing, creating a robust ecosystem for innovation and economic growth. The PLI initiative is an important step in this direction, catalyzing India’s journey towards energy independence and global competitiveness in the EV revolution.

Imports are always the major concern for India, both in terms of electronics manufacturing and electric vehicles. The country lacks the ecosystem and the policies to develop the raw materials. For instance, Lithium has been discovered on a large scale in Jammu, but a lack of advanced equipment, policies, political constraints, and environmental issues makes us more dependent on China.

Highlighting the major cause of imports and other barriers in this ecosystem, Rohit Pandit, Managing Director, Shuzlan Energy, said, "The challenges to the ACC ecosystem are multifaceted. First, it relies heavily on imports to meet demand, highlighting the lack of strong domestic manufacturing capacity. Second, existing investments in batteries do not meet global standards, hindering scalability and competitiveness. Furthermore, low prices lead to increased dependence on foreign suppliers. To address these issues, India needs strategic investments in ACC manufacturing, coupled with incentives for R&D and innovation. Collaboration between industry and academia can foster technological development, while structural change can encourage the integration of local production and supply chains. Ultimately, fostering a healthy ecosystem is key to achieving self-sufficiency and global competitiveness in the ACC region."

To reduce dependence on thermal energy and decrease air pollution on a large scale, the government of India even approved the National Mission on Transformative Mobility and Battery Storage in March 2019 to enhance clean mobility. The price of Li-ion batteries has been reducing at a rapid scale and is therefore accelerating the market for battery storage internationally. According to the government’s think tank public policy agency, Niti Aayog, the price of Li-ion batteries has been reducing at a CAGR of 20 percent.

The positive scenario is that the country both has the talent and the resources to set up cells and battery packs. Although numerous firms have already begun investing in the assembly of battery packs, the capacities of these units are not large when compared to international averages. The entire value addition and investment in ACC manufacturing are still very low in the nation, and therefore, over 80 percent of the demand for ACCs is still met through imports, mostly from China. 

How India Can Tackle the Challenges in the Coming Years

In an effort to meet this huge demand in the EV industry, various countries have already started manufacturing the battery storage ecosystem on a rapid scale. Manufacturing capacities over 5 GWh/year have already started developing all over the world. According to a survey by NITI Aayog, China has responded to this demand faster, with 78 percent of international manufacturing capacity for batteries, while Europe and the US hold a share of 7 percent and 8 percent, respectively. Researchers even feel that the anticipated capacity additions between 2022 and 2025 will surpass 1,450 GWh of new annual production capacity internationally, with China holding the majority of the market share and Europe as the emerging epicenter of higher growth.

Now, if India wants to improve its overall battery manufacturing ecosystem, then a phased approach is needed that can merge a large volume of the value chain over time as domestic demand escalates and in-house scientific proficiency and capacity improve to meet the demand. Therefore, a coordinated and strategic approach is the urgent need of the hour. Continued government support through initiatives like the ACC PLI scheme is crucial. Policies that incentivize domestic production, research and development, and exploration of raw materials can help overcome challenges related to shortages and import dependency.

At the same time, investing in R&D to develop alternative battery chemicals or improve existing technologies can mitigate the impact of raw material shortages and reduce manufacturing costs. Most importantly, the challenges in this ecosystem can be addressed impeccably through collaboration with other countries, and international organizations can facilitate knowledge sharing, technology transfer, and access to raw materials. Establishing partnerships for the joint exploration and processing of resources can help diversify the supply chain.

What’s more essential is building infrastructure for mining, refining, and manufacturing batteries domestically. On the other hand, addressing environmental concerns associated with battery manufacturing is important. Implementing sustainable practices, such as recycling and minimizing resource consumption, can mitigate the environmental impact and ensure the long-term viability of the industry. By countering these challenges and implementing strategic solutions, the ACC ecosystem for batteries can be strengthened, enabling sustainable growth and competitiveness in the global market.

"Currently, India's ACC ecosystem is nascent, and we must wait a few years for the market to mature and address these challenges effectively. Advanced Chemistry Cells (ACC) represent innovative power storage technologies that have the potential to store electric energy as either electrochemical or chemical energy. They can subsequently convert this energy back into electricity as needed. Given the anticipated surge in battery demand over the next decade, almost all major global battery manufacturers are actively investing in ACC technology from a commercial standpoint," added Soumen.

 In the current product mix, out of the 100 billion dollars, we are actually manufacturing 52.7 percent of the electronics components, according to last year's data.

The union government, policymakers, and the manufacturers have been undertaking key initiatives to boost the country’s electronics and semiconductor manufacturing ecosystem. In an effort to position India as a global hub for ESDM and semiconductor manufacturing, the Production Linked Incentive Scheme (PLI) for large-scale electronics manufacturing, IT Hardware, Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters Scheme (EMC 2.0) have been unleashed. In fact, the government has unleashed the most promising incentive scheme of Rs 76,000 Crore to attract investments from major semiconductor players. With the help of these schemes, India's electronics export is expected to reach $120 Bn by FY26. During April-November 2023, electronic goods exports were recorded at $17.74 Bn as compared to $14.36 Bn during April-November 2022, registering a growth of 23.56 percent.

According to some industry leaders, who wished to be unnamed, stated that around 30 years back, numerous electronic companies were not able to manufacture any kind of components because of the high restrictions imposed by the government in the industry. After every three months, manufacturers had to go to New Delhi to procure a new license for raw materials. The authorities during the late 90s even argued that India must focus on building software and let China lead the manufacturing ecosystem. In this regard, N Ramachandran, Managing Director, Mel Systems and Services Ltd, feels that the negative situation has changed dramatically because the government is now very proactive in supporting the industry.

Ramachandran said, “We need real support for infrastructure and existing industries. No small-scale unit can start an operation by purchasing land especially in cities like Chennai and this is because the price of land is more than their ability of investment. They cannot move to other smaller locations because their customer base, infrastructure, and manpower is located within the city. The level of subsidies is still inadequate in terms of components manufacturing. This is because they have higher investments, and the margin is very low. There is a requirement of additional PLI in areas such as PCBs and other components where the margins are very low.”

Speaking of the current challenges and prospects of India’s ESDM industry, Shri S Krishnan, IAS, Secretary MeitY feels that previously, the department was not looking to develop the core electronics and the focus was mostly centered upon developing software, e-governance and other aspects.  Currently, 70 percent of PCBs used in India are still imported. But, in the past 5-6 years, the core electronics mojo is back again on the right track. India is now having a very successful PLI on IT hardware and 27 companies have signed MoUs. Many of them have already started operating. This PLI offers benefits even to the existing companies and provides subsidies as well. The overall projected investment is only about Rs 2,500 Crores.

In an effort to counter the grave impediments, industry insiders mentioned that as India now competes in the global electronics market, sustainability has to be the core business strategy. All the major manufacturers including both the giant companies and MSMEs must look into sustainability deeply, and start transforming the major source of their unit’s energy into green energy. Most importantly, these sectors need to create more employment, which can fulfill the dreams of the youth and make them more passionate to do something for their own country. For instance, Tata group has also invested Rs 2000 crores in the ITIs, which can be used for upskilling and reskilling. The industry has to come forward and form partnerships with all the stakeholders. 

Amid all the challenges associated with the industry, how India can fulfill the mission of achieving the target of $300 billion by 2025-26. Managing Director of Deki Electronics, Vinod Sharma said that it is not that easy to achieve that target even in the coming four years. Sharma said, "I am not pessimistic about the target, but if 2.4 trillion dollars of electronics is divided by 8 billion population, then there will be $300 per capita consumption of electronics. We will definitely reach that target in a short period, but in the three years it seems difficult. Companies, which are not preparing for that target will definitely be left behind. In the current product mix, out of the 100 billion dollars, we are actually manufacturing 52.7 percent of the electronics components, according to last year's data." 

“When we reach or close to reaching the target of 300 billion dollars, 150 billion dollars of components will be required, which is a little more than the amount of oil we are importing today. In fact, a week back, the nation imported more sensors than PCBs. Therefore, we need to chalk out a clear strategy to increase the volume of exports and reduce the key imports, and find out ways to escalate the value addition,” added Sharma.

Speaking of the future prospects of growth in the market, Richard Puthota, Senior Director Business Development at MacDermid Alpha Electronics Solutions mentioned that when customers are manufacturing different products, it helps to understand what kind of markets are emerging in the country. With the global engagements with major OEMs, the picture is crystal-clear where the industry is moving forward. When decisions are being made for the coming five years, developing technology is not the sole priority, but the numbers and the growth rate must be taken into consideration.  

Richard said, “EVs in automotive segments will help us in achieving huge growth numbers. In fact, the customs duty imposed on white goods appliances will also give us a huge number. From the technology side, IoT and cloud computing will play a significant role in boosting the growth of this industry and most importantly, the telecom sector will add huge value addition in the electronics industry. India’s export of electronics is going to reach 120 billion by the end of 2026. The biggest advantage of India is that it is leading in both production and consumption. Speaking of the FAME scheme, both state and the central governments come up with sales penetration of 80% on two and three wheelers, 30% on private cars, 70% commercial cars, 40% buses by 2030.”

Around ten years back, there was no possibility for India to contribute to the ESDM and semiconductor value chain. The imperative aspect is that India is already doing a lot of design on semiconductors, but they are done for international companies, which will cater to the benefit of that particular country.  It is now high time for the country to start doing design for itself. Now, the manufacturing area is a huge one and is about building a fab or an OSAT. There are a lot of procedures involved and India is nowhere in that ecosystem. 

Speaking on the contribution in the value chain Mr. GS Madhusudan, Co-founder and CEO, Incore Semiconductors Pvt Ltd. said, “It’s not about the technical talents and we have dozens. For instance, when the US asks us to develop or do a design, we do it. 30-40% of designs happen outside India. Extensive product knowledge is lacking among us. We have an advantage as we are having huge consumers of the products. India should actually focus on parts costs between 50 cents to 5 dollars because most of the consumption will be in this range. We have to build older node products such as compound semiconductors, power IGBTs, RF with older technology and if we do that, I think India can supply between 10-15 percent of the world’s demand.”

Industry experts even feel that developing automation is the urgent need of the hour for the progress of India’s manufacturing industry’s growth. India must look at it as a lens of maximizing efficiencies, minimizing rejections and at the same time, bringing consistency and improving the quality. Consistency can only come from automation and scale. For India to become a global hub for manufacturing electronics, automation becomes extremely important. But the point is how, when, and at what cost. 

Speaking of the challenges and growth of automation in industry, Ms. Nandini, Director at Tescom Pvt Ltd. said, “Msmes face the biggest challenge in deploying automation. We do not have a proper training center and costs are huge. Therefore, we start training workers when they join the organization. But, after 1-2 years, the workers start looking for jobs in a bigger organization. People in inspection systems and in testing are in huge demand and these are the areas which need to be automated.  So, in our SMT line, almost everything is automated, but post SMT activities also need to get automated within the timeframe of two years. If it’s delayed, we will definitely miss the bus.”

Sasikumar Gendham - Managing Director at Salcomp Manufacturing India Private Limited and Vice-President at ELCINA opines that ‘Rome was not built in a day.’ Therefore, India will also become a global powerhouse of manufacturing in the coming few years. But, without developing automation and digitization, there is no way India can succeed in electronics manufacturing globally.