India needs to gear up by setting up joint ventures with the global OEMs and mining companies to make its lithium value chain resilient and realise its green energy ambitions
The Indian government needs to plan a national framework on sourcing its reserves for critical metals. Photo: iStock Amid the transition to electrification that the global automotive industry is undergoing, a trend which deserves more attention is that of the auto world’s growing association with the mining industry. Top automakers are striking deals with mining companies to secure the supply of battery materials required for electric vehicles (EVs).
General Motors (GM), for instance, has announced a $650 million investment in a lithium mining project in Nevada, United States. Ford Motor Company announced long-term contracts with multiple lithium suppliers in the US, Canada and Chile. Volkswagen has announced plans of buying stakes in Canadian mines.
Beyond lithium, other metals such as cobalt, nickel and even copper are all sought after in the EV industry. These resources are finite and are unevenly distributed across the globe.
Extraction is not a core competency of automotive original equipment manufacturers (OEM) and the standard industry practice is to set up partnerships with battery manufacturers to source batteries for their EVs. These battery manufacturers would then interface with upstream mining and metal refinery players to procure battery raw materials.
The primary raw materials required for the cathode in cell making are cobalt, nickel, lithium and manganese. Unfortunately, some of them are available in politically unstable regions across the globe that raises several issues regarding the securitisation of these critical materials.
But the projected demand of EVs is expected to outstrip the supply of these critical metals. So, automakers are increasingly investing in upstream mining ecosystem in order to lock in raw material supply for the future.
India’s EV industry faces a strong challenge. It lacks all the raw materials used in a Nickel-Manganese-Cobalt battery, except graphite, which is used in anode. The demand for lithium-ion batteries is expected to rise to about 230 gigawatt-hours by 2030, according to estimates by Niti Aayog, and India currently imports all of its lithium reserves from resource rich countries.
China realised the need early and preemptively cemented their access to lithium mines in South America, cobalt mines in Africa and nickel mines in Indonesia. This strategy has helped China dominate the battery market with the world’s top two manufacturers Contemporary Amperex Technology Co Limited and BYD Co Ltd, which account for more than half the market share, belonging to the country.
Recently, BYD announced plans of investing in a lithium processing facility in Chile. Other nations and auto manufacturers have woken up to the rude reality of China’s grip on supply chains and are playing catch up.
Democratic Republic of Congo dominates over sixty per cent of the world’s cobalt mining while lithium is controlled by three countries namely Australia, Chile and Argentina. Nickel supply is more fragmented among Brazil, Russia, South Africa and Canada.
Indian battery manufacturers like Log9, when asked about their supply chain, told Down To Earth that battery material supplies are absent in India. What adds to their woes is that they hardly have any leverage in the international market. They are not in a bargaining position with their Chinese and Korean suppliers and mostly get low quality supplies and raw deals.
India needs to gear up by setting up joint ventures with the global OEMs and mining companies to make its lithium value chain resilient and realise its green energy ambitions. With the increasing demand for EVs in India, the government needs to plan a national framework on sourcing its reserves for critical metals including lithium to accelerate indigenous development of cells with creating a reliable value chain.
Recently, India became the newest member of the coveted Mineral Security Partnership, a 13-member alliance formed by the US. India’s inclusion in the club is vital for Global South to fulfil its ambition of shifting towards sustainable mobility through large, reliable fleets of electric public and private transport.
With China’s recent restrictions on export of gallium and germanium, global microchip manufacturers may look to India to grow their manufacturing facilities. India can prepare for this shift in global manufacturing by readying its special economic zones for foreign investors by negotiating mutually beneficial terms and upskilling its human resources for the surge in labour demand.
India must leverage this opportunity of microchip production as a bargaining tool for securing lithium supplies in the global market.
Other strategies that India may deploy include:
The Indian government, with its wide-ranging influence on national and international politics, must step up in support of the Indian industry. As a step in that direction, India’s Khanij Bidesh India Ltd, a state-owned joint venture, formed to scout for minerals overseas. It will “shortly” sign an agreement with Argentina to secure a few lithium blocks, a government source with direct knowledge of the matter told news agency Reuters June 28, 2023.
China is projected to continue leading in lithium-ion battery manufacturing until 2025 and Europe is expected to significantly expand its production capabilities. With several planned investments into manufacturing facilities and strategic agreements, Europe is poised to become the second-biggest producer of lithium-ion batteries in the world in 2025, with the recent Anglo- French deal in lithium mining accounting for around 25 per cent of the global production capacity.
India is already a member of the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development, which supports the advancement of good mining governance. India could leverage its strong diplomatic push to form regional strategic groupings among countries rich in critical materials in the Global South. This can help secure the country’s supply chain, with these countries getting strategic significance and globally encouragement to be a part of an all-inclusive EV transition.
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