Electric vehicle and EV battery manufacturers are facing the heat of the Russia-Ukraine crisis with the prices of essential components soaring and amidst the supply constraints. Many among them see the gap widening between the supply needed to deliver on the rising demand for EVs in India.
India is heavily dependent on imports when it comes to EV components, specifically that of batteries. Nickel, Cobalt, and Lithium are some of the essential raw materials for cells needed for EV batteries, and these are the ones hit majorly by the ongoing geopolitical crisis. Lockdowns in China due to the recent rise in covid cases in the country are adding to worries as nearly 90 percent of the cells used in India are imported from China.
The price impact is difficult to chart in the market as India is heavily dependent on imports of several components. “Lithium-ion cells are all imported these days. This means that we are not involved with buying raw materials. We see cell prices going up as much as 40 percent,” says Stefan Louis, CEO of Nexcharge, a JV between Exide Industries and Leclanché.
He adds, “Cell manufacturers give us data on material price evolution, but as there are many different materials in cells and we don’t have the detailed bill of material it’s difficult to correlate material prices with cell prices. In 2 years when India will have its first cell factories, the understanding for cell component prices will improve.”
Over the last month, Nickel prices have surged 25.30 percent monthly while it has recorded a 92.33 percent gain year-on-year. Cobalt too has gained 11.88 percent in a month, a jump of 55.86-percent against the last year in the same period. Russia is the second-largest exporter of Cobalt. Overall costs for EV battery manufacturing have risen by 25-30 percent in the last month.
India is a rising market for EVs but appears to be a smaller market for suppliers. Rajat Verma, founder & CEO, Lohum says, “China is a major producer for cell components of EV batteries, and tier-1 i.e. the good suppliers are focused on bigger markets like the US and Europe. India is fairly a tiny market for China. The bulk of the capacity from tier-1 providers has been undertaken for these markets. It is extremely difficult for India to get its hands on good quality cells.”
Now the makers want to pass on the costs and are ready with their plans on price escalation. Samrath Kochar, CEO, TRONTEK, one of the leading automotive battery suppliers, says, “We have seen a significant rise in cell prices. We are planning to increase the prices of our batteries to customers by 20-25 percent from the next month.”
With supply pressures building up along with the costs, EV makers see more trouble ahead. Samir Yajnik, executive director, Electra EV shares, “We have seen 5-10 percent rise in our costs and see it going up ahead. There have been massive delays in getting the components. It is taking up to 56-75 weeks in shipment due to delays. We are working on alternative designs and getting them certified so that we can meet the timeline. Our demand has gone up by 10 times but our supplies are limiting us to meet only 30-percent of it.”
According to data by the Federation of Automobile Dealers Associations of India, India saw sales of 32,443 electric 2-wheelers in February 2022, recording a 433 percent jump year-on-year. Electric passenger vehicles also saw a 297-percent jump (YoY) in February with total of 2,352 units sold in India.
With multifold demand in the sector, some OEMs are ordering more than their needs so as not to lose the market share. “Nickel prices have risen drastically in the last 15 days. The demand for EVs has gone up but the supply gap has widened. We have 50-60 percent stock for the next delivery plans. Some OEMs are hoarding components as they do not want to lose the market share,” said Suhas Rajkumar, CEO, Simple Energy.
Most of the industry players expect the challenges to continue in the near term and hope for India to rise in the manufacturing of some of these components.
