Electric cars: A $42 billion opportunity for battery companies by 2030
Sumant Banerji March 21, 2018
The era of electric vehicles in India will usher in a wave of disruption across the automobile value chain but will present a $42 billion opportunity over the next 12 years for the battery industry, which will be most impacted by the shift.
Currently, all the batteries used in conventional petrol and diesel vehicles on the road are powered by lead acid technology, which forms an industry that is valued at Rs 30,000 crore as of 2016-17. As electrification gathers steam and companies launch more and more products, the lithium ion battery industry will outstrip the traditional battery segment by 2025.
According to brokerage house Motilal Oswal, in the 5 years following that, lithium ion battery industry in India will be worth $42 billion, offering a growth opportunity that is 9 times that of lead acid batteries. The opportunity for manufacturing battery cells, the most critical part of a lithium ion battery pack itself would be worth $15 billion.
At the same time, the lead acid battery industry would not be totally redundant even as electrification gathers pace. Most electric cars today still use a 12v lead acid battery (LAB) as auxiliary battery for SLI (starter, lighting and ignition) applications. This along with the existing pool of vehicles will continue to spur demand.
"We believe lead acid batteries will remain relevant even in the EV world. We expect localization of Li-ion battery to be highest priority for OEMs to reduce cost of batteries and lower forex exposure," the report said. "Given the criticality of the battery and scope of differentiation it offers, we expect OEMs to manufacture EV batteries in-house."
Unlike in cars today, batteries will also account for much higher part of the cost of a vehicle in future. Today, the basic engine, transmission and control unit of a car accounts for 75 per cent of the power train cost. In a battery EV, the battery pack and electric motor themselves corner 90 per cent of the cost.
A host of companies including market leader Maruti Suzuki, Hyundai Motor India, Honda cars India and Toyota have announced plans to launch electric cars in India from 2019 onwards. Home-grown firms like Tata Motors and Mahindra and Mahindra already sell electric versions of their existing compact sedans in the market (Tata only through EESL tenders).