Rising cost of battery cells may push EV makers to increase prices in India

A sharp rise in the prices of imported battery cells on the back of supply chain disruptions due to the Russia-Ukraine conflict may prompt electric vehicle (EV) makers in India to increase prices of mainstream two- and three-wheelers, say industry experts.

The average cost of battery cells in 2021 was approximately $101 per kilowatt-hour (kWh), or about Rs 7,670/kWh, according to data sourced from Bloomberg NEF. According to Soumen Mandal, senior research analyst, IoT and automotive at Counterpoint Research India, the cost of cells in an EV battery today is around $130/kWh or higher--a figure that could increase further going forward.

The Ola S1 scooter has a 2.98kWh battery pack while the Ather 450X has a 2.61kWh battery. Ather Energy, an Indian electric scooter manufacturer, already increased prices of its 450X scooter by a little more than 3% to around Rs 5,500 in January. The company had attributed this price rise to rising input costs back then. Bhavish Aggarwal, chief executive of Ola Electric, too announced on 17 March that prices of the company’s S1 Pro electric scooter will be increased next month. The Ola S1 Pro’s latest selling price was Rs 1,29,999. Ola Electric, though, is yet to announce what its new price will be when it goes on sale again next month, in April 2022.

“Raw material prices required for making battery cells have gone up due to global conflicts and restrictions in trade, which has led to an increase in cell prices in all major cell-making nations such as China, Korea and Taiwan. With cell prices going up, so have the import costs that India’s battery makers pay – in the past two months, there has been almost a 30% increase in cell prices,” Rajat Verma, chief executive of Greater Noida-based battery making firm Lohum, said.

“Our suppliers in China have warned us that we will see further increases in the next quarters. Battery pack assemblers in India will pass on this added cost to the OEMs (original equipment manufacturers). Prices of EVs, as a result, will have to increase – given that the battery pack is such a substantial part of the products,” Verma added.

A March 2022 industry report on the Indian EV sector by Bank of America Securities states that Hero Electric is the clear leader in two-wheelers with 32% market share, followed by Okinawa at 21%. The report also acknowledges rising component costs, especially Nickel due to the ongoing Ukraine-Russia conflict, but states that with EV sales largely being boosted by urban markets, a rise of about 5% should not slow down EV adoption in the country.

Sohinder Singh Gill, chief executive of Hero Electric and director-general of Society of Manufacturers of Electric Vehicles (SMEV), acknowledged that the increasing prices of battery cells and raw material prices are affecting the industry but added that the overall price rise of electric scooters should not be more than 5-7% over their previous prices. According to Gill, Hero Electric does not plan to increase its product prices at the moment.

“Whether EVs will become more expensive or not will purely depend on the strategies of the companies. Some may have the resources to absorb the losses, while some may pass this on to the customer. Some may also choose to increase prices, but at a later stage. Some, if you see, have already increased the prices from as early as in January – and it’s all down to the rise in battery prices,” Gill said.

Gunjan Prithyani, research analyst at Bank of America Securities, also notes that despite the price rise, monthly volume run-rate of EV sales in India have crossed 30,000 units – accounting for adoption rate of over 4% of all two-wheeler sales in the country in March.

Recycling of batteries in India could address the issue. However, Samrath Kochhar, chief executive of battery assembler Trontek that supplies to companies such as Hero Electric among others, explained that “recycling in India is not very effective for the battery sector, since recycled batteries cannot cater to EVs, and we don’t make our own cells". He added, "Once cell plants are set-up in India in line with the production-linked incentive (PLI) scheme, recycling could offer an effective answer to the supply of raw materials – and help mitigate such price rises.”