For Indian automakers, this isn’t really turning out to be an electrifying Diwali. First, a chronic chip shortage has forced fuel-based carmakers to skip production shifts. And now, even electric vehicle (EV) manufacturers are struggling to source lithium-ion batteries, prices of which are heading north even more quickly.
At the heart of the supply constraint is surging global demand – and a definitive shift in favour of the EV powertrain in Western Europe and the US. Additionally, factors such as production curbs in China due to a shortage of coal-fired power and congestion in shipping routes have hurt supplies to India from its northern neighbour.
China is a key supplier of lithium-ion cells to India apart from South Korea and Taiwan.
Furthermore, cell manufacturers prefer supplying to markets such as the richer neighbourhoods in Europe and the US – or markets that guarantee higher volumes.
To be sure, sales of EVs still remain negligible in India compared with more mature markets such as China, the US and some European countries.
According to Samrath Kochar, chief executive officer of Trontek Electronics, delays of 10-15 days in shipments from China have become the norm due to a shortage of containers. His company imports cells and assembles them into battery packs for several EV makers. “In September, our procurement declined by 50%; so our supplies also went down by 50%,” Kochar told.
Shipments due in September have finally arrived this month, providing some relief, but there was uncertainty on the next consignment, Kochar said.
‘Need Consortium for Big Orders’
Supply constraints have also significantly raised costs. Prices of battery-grade lithium carbonate have gone up to an all-time high after increasing 27% in just two weeks to September 30, according to a report by Benchmark Mineral Intelligence.
Shipping costs, too, have gone through the roof. According to some estimates, the cost of shipping from China has surged four times compared with this time last year. Companies have also resorted to flying in cells through air freight in some cases to overcome shortages.
All these have resulted in additional costs for EV makers. For example, Trontek has proposed a 5% increase in battery prices for its customers and hasn’t ruled out further increases.
“Every time I answer the phone, the prices appear to have changed,” said Gaurav Uppal, CEO at electric motorcycles maker One Electric. Indian manufacturers need to form a consortium and place large orders to keep cell makers interested in this market, Uppal said. Else, global cell makers would route supplies to markets that guarantee volumes.