Will India’s Dream of Lithium Gigafactories be Realized?

Indian policymakers are of the view that if India is to play a substantial role in the coming EV revolution, then they would need a robust manufacturing system which would ensure that there are enough jobs and the country does not run a huge new import bill as it does now with crude oil imports. Besides if India does not play its cards well, then its huge automobile industry which accounts for almost 7% of the GDP and 49% of its manufacturing output could see huge job losses.

Also, read India’s New EV Roadmap Scaring the Automobile Industry Away

Other countries such as China, USA, Japan are already far ahead of India in terms of technology and scale. However, a centrally planned policy of encouraging manufacturing may not work, as India does not have a great experience of doing that. Numerous ministries and power centers lead to ad hoc and confused policies which do not allow Indian manufacturing to become world-class especially against the state-run capitalistic systems. Solar manufacturing has seen numerous bankruptcies in the past in India as predatory capitalism by China resulted in most solar companies globally going bankrupt.

India wants to build four 10 GWh lithium-ion battery manufacturing plants for which it is willing to give large fiscal and monetary sops ranging from low-cost loans to tax incentives. The reasoning is that India will require massive amounts of battery storage with the surge in EV numbers. The demand will also come from stationary storage applications of the power grid. Building these factories will lead to jobs and investment being created in India without making another huge revenue drain in the form of lithium battery imports from China. However, India is not well placed competitively to do this given that they do not have an edge in technology or raw materials. The country might be better served by developing manufacturing in areas where it has a comparative advantage without wasting its management time and money in an area where it is a high chance of failure.

The policy think-tank Niti Aayog is also looking at alternative chemistries such as solid-state batteries which it could support. However, developing and commercializing new technology is not an easy task and is a field which is littered with failure. Generally, in new technologies, 10 companies fail while one company makes it in the very bid. Government directed intervention in such a dynamic area is a recipe for disaster. The best thing that the government can do is to reduce the regulatory cholesterol for Indian industries – make taxation less cumbersome and reduce red tape. This will automatically lead to manufacturing successes as private industry identifies and capitalizes on opportunities much better.