EV plan hinges on securing rare resources

Rahul Mazumdar | Updated on: May 16, 2022
 India is not endowed with many of the rare minerals used to make lithium-ion battery cells

 India is not endowed with many of the rare minerals used to make lithium-ion battery cells | Photo Credit: Petmal

EV manufacture entails use of various scarce minerals. Securing their supply through deals with resource rich nations is vital

India automotive industry is experiencing a paradigm shift as it tries to switch to alternative and less energy demanding options like electric vehicles (EV). The transition from petrol to EV is a significant step in the move to a net-zero future, but at the same time it also impacts India’s import dependency.

EVs, ike various low carbon technologies, use several exotic metals in their design. Many of these metals are considered critical in the sense that they are required for effective functioning of the EVs. While the government has set a high target for EV sales, India is not endowed with many of the rare minerals such as lithium, cobalt, and nickel, which are used to make lithium-ion (Li-ion) battery cells, which then is utilised to generate electric car batteries.

In 2020, Australia was responsible for 49 per cent of global lithium production, while 65 per cent of graphite is produced in China, 68 per cent of cobalt in Congo, and 33 per cent of Nickel in Indonesia. Apart from graphite and nickel where India has 3 per cent and 5.32 per cent share globally and is amongst the top five, in rest there is a huge deficiency.

According to the IEA’s Sustainable Development Scenario, the demand for graphite, nickel, copper, cobalt and manganese is expected to see phenomenal growth, with lithium being the most sought after. The anode in Li-ion batteries requires graphite and, apparently, there are no substitutes for it. The cathodes, which also require Li-on, contains nickel and delivers high energy density, allowing the vehicle to travel further.

Cobalt is important for EV as it prevents the cathode from overheating while extending the life of batteries. Manganese, on the other hand, contributes 61 per cent of the cathode needs of the batteries.

International Energy Agency mentions that the amount of minerals an electric car would require would be at least six times more than a conventional petrol and diesel vehicle. This in essence would increase the demand for specific commodities required for EVs.

Possible measures

This rising demand could also become a cause of concern given the dependency on select rare minerals for inputs towards manufacturing of EV, which in the process may lead to cost escalation.

The semi-conductor shortage which began at the end of 2021 has still not been resolved completely and has hindered multiple industries. A similar hiccup can impact India’s upcoming EV industry in a big way at any point of time. Anticipating such issues and taking measured steps could reduce the risks of price volatility and supply disruptions emanating from rare earth.

Firstly, some of the state-run companies can form a joint venture to secure mineral assets which would be of demand for mass adoption of EVs by 2030. The learnings of International Coal Ventures Ltd may be looked into while forming such strategic joint ventures. Multiple Japanese companies are engaging with firms in Australia and Kazakhstan to develop mining projects, in order to reduce dependence on China.

Secondly, Indian exploring companies may look at opportunities for international collaborations in this space. The partnership could also be in the areas of joint exploration, and refining, and trading of critical minerals. In December 2018, Geoscience Australia and the US Geological Survey agreed to collaborate and work together on critical minerals issues.

Thirdly, a dedicated cell could be created by the government of India towards regular monitoring of availability of rare earths and other critical minerals under the Ministry of Mines. In this context, it is observed that countries like Japan have earmarked a $1.5-billion fund for developing alternative sources of rare earths, notching up the push for joint venture partnerships. Similarly, USA too in 2019 developed ‘A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals’ given the trade tensions between US and China.

Fourth, a few years back the Australian and the US mineral agencies signed a deal to jointly develop a better understanding of their critical minerals’ reserves and in the process explore their existence in other parts. India may like to have bilateral engagements under new platforms like QUAD to secure its needs in the years to come.

Lastly, India could explore the possibility of formation of an intergovernmental body amongst the Developing South, something akin to OPEC of 1960. This could include Chile, Argentina, Brazil, Cuba in Latin America; Congo, Gabon, Madagascar, Mozambique, and South Africa in Africa; Indonesia, the Philippines, and Russia, apart from India.

In the process of reducing its import reliance on crude, India may find itself dependent on other minerals jeopardising its EV ambition. If India wants to shift to EV, it is but imperative to secure its mineral resources which would be quintessential for its growth.

The writer is an Economist with India Exim Bank. Views are personal

Published on May 16, 2022
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