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Commercial vehicle maker Ashok Leyland , the flagship company of the Hinduja Group, on Monday announced plans to invest ₹5,000 crore in battery manufacturing for both automotive and non-auto applications, including energy storage systems.
The truck and bus maker has entered into a long-term partnership with China’s CALB Group to create a localised battery supply chain in India.
This business would entail investments of over ₹5,000 crore over the next 7-10 years, the Chennai-based automaker said in a statement.
The battery manufacturing capacity will not only provide batteries for Ashok Leyland and its electric vehicle arm Switch Mobility’s own EV portfolio, but will also cater to non-captive demand in the entire automotive sector as well as the energy storage sector, the statement said.
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“Our strategic partnership with CALB is a significant step towards creating a localised battery supply chain in India to accelerate adoption of electric vehicles in India and reduce our dependence on fossil fuels,” said Dheeraj Hinduja, chairman, Ashok Leyland.
CALB has established several industrial bases in Changzhou, Xiamen, Wuhan, Chengdu, Hefei, Jiangmen, Meishan, Handan, as well as in Europe and ASEAN.
In the initial phase, the new battery business will focus on the automotive sector, and then move to non-automotive areas as well, including energy storage systems, said Shenu Agarwal, Managing Director and CEO, Ashok Leyland.
While several automakers have poured money into battery manufacturing, localisation of the battery cell has proven to be a difficult task.
Under the government's ₹18,100 crore production-linked incentive (PLI) scheme for Advanced Chemistry Cell, a cumulative capacity of 40 gigawatt-hour (GWh) battery cell capacity was awarded to Reliance New Energy, Ola Electric Mobility and Rajesh Exports. All three missed the timelines set by the government to avail incentives under the PLI scheme.
Bhavish Aggarwal-led Ola Electric, which was awarded 20 GWh capacity, is the only EV maker in India that has started producing lithium-ion cells in-house at its gigafactory in Krishnagiri, Tamil Nadu.
However, Ola has delayed its expansion plans. “We don't foresee the need to expand Cell Gigafactory capacity beyond 5 GWh for the next 3 to 4 years,” Aggarwal told investors during the company’s first-quarter earnings call. Ola has completed capex for only 1.4 GWh of cell capacity.
Many automakers have been wary of making investments in battery cell manufacturing. R.C. Bhargava, the chairman of India's biggest carmaker, Maruti Suzuki India Ltd, believes that putting up a capital-intensive battery cell plant in India is a huge risk due to the unavailability of raw materials, which are controlled largely by China.
Ola, too, imports a majority of raw materials for making battery cells from China.
In an interview with Fortune India earlier this year, Ather Energy co-founder and CEO Tarun Mehta said that Ather has no plans to manufacture battery cells. “You need a multitude of customers: two-wheelers and cars to make it work. Cell manufacturing can lock you down into a technology and form factor while the global industry is changing too fast,” he said.
Agreed, Swapnil Jain, co-founder of Ather Energy. Profit margins in cell manufacturing are slim, he said. “If you want to make money in the cell business, you have to look beyond the two-wheeler industry and you can’t look at one single OEM. You have to look at two-wheelers, four-wheelers and energy storage to have the size to make money,” he said.
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