India to Mine Lithium for EV Batteries, Setting Stage for EV Manufacturing Boom

How does a farmer feel when it rains after a long drought?

How does an army officer feel after he comes back home from a war?

Or how does a common man feel after he wins the jackpot prize in the popular Indian TV show Kaun Banega Crorepati (KBC)?

That's exactly how an investor in the lithium sector must be feeling, after the big announcement by the Indian government.

Allow us to explain...

Government lifts ban on private mining of 6 minerals

A wave of happiness spread among investors when the cabinet approved amendments to the Mines and Minerals (Development and Regulation) Act, 1957, on 12 July 2023 allowing for the mining of lithium and five other minerals.

Private companies will also be able to mine the five minerals.

This is the fifth amendment to the Mines and Minerals (Development and Regulation) Act since 2014, with earlier changes mandating e-auction for mineral resources and allowing extension of mining leases which were expiring.

The amendments will lift the ban on commercial mining of six critical minerals -lithium, beryllium, titanium, niobium, tantalum and zirconium.

These minerals are required for manufacturing in several sectors, including electric vehicles (EV), EV batteries, glassware, automotive components, defence machinery, telecommunication equipment, capacitors, superalloys, carbides and medical technology.

This development comes just weeks after a committee set up by the Union Ministry of Mines declared 30 minerals as 'critical' for the country, including these six minerals. Critical minerals refer to those that are at risk of supply shortage, which may have a larger impact on the economy compared to that of other raw materials.

According to the amendment, companies will be allowed to suggest areas they want to explore, and eventually mine in India, as per the changes. This is a deviation from the usual practice where blocks or mines are defined by the government to be taken up for auction.

The amendment will pave the way for granting mineral concessions for undertaking the full range of exploration starting from reconnaissance to prospecting operations.

The changes are likely to incentivise private sector participation in all spheres of mineral exploration, with a focus on precious and critical ones. Expect some big news from private mining players in the coming days...

The companies will also be allowed to transfer the mineral concession in full or part during the exploration period or after exploration, as per the changes.

This amendment comes as a big boost to the lithium gold rush happening in India.

Lithium and its growing importance

All heads are turned to see how the EV megatrend will shape the Indian transportation industry for the future.

The EV revolution is a game changer for vehicles and lithium is at the epicentre.

Lithium is a special lightweight metal that can be used to manufacture lithium-ion batteries or Li-ion batteries. Li-ion batteries use lithium as a compound as the material at the positive electrode and graphite at the negative electrode.

The best thing about Li-ion batteries is that they are lightweight rechargeable batteries. Li-ion batteries are designed to last for a long time. A lithium-ion battery can perform between 500 to 10,000 recharge functions.

Lithium-ion batteries have been a promising clean technology because the battery stores energy in its cells, as opposed to generating energy by combusting fossil fuels in a gasoline and diesel engine, to power a vehicle or provide electricity to a building.

However, Lithium is not just used for batteries. It is also used in the production of special glass and ceramics, as it helps to reduce the melting temperature of these materials. It can also be used in the aerospace and military industries for its high heat transfer and thermal conductivity properties.

That is why, lithium is the need of the hour, which makes it white gold.

There is one more piece of news that makes lithium mining even more important in India.

Tesla in India!

Speaking of EVs and li-ion batteries, it would be impossible not to mention the world's most popular EV maker Tesla.

Like many other multinational companies, Tesla too could be exploring a 'China plus one' strategy, which includes diversifying to India.

Reportedly, Tesla has held discussions with union government officials, exploring the possibility of bringing its auto parts and electronics chain to India and of getting incentives and tax breaks in the process.

The development signals the US-headquartered electric vehicle maker's renewed interest in India, close on the heels of Prime Minister Narendra Modi's meeting with the company's chief executive Elon Musk during his trip to the US last month.

Tesla has expressed interest in bringing its own supply chain ecosystem to India, even as the government has asked the company to evaluate the existing auto components supply chain in the country.

Besides holding discussions with the government, the company has also been meeting industry executives. At a Society of Indian Automobile Manufacturers (SIAM) meeting recently held in the capital, Tesla said it would want to bring its own suppliers to India.

This opportunity may not necessarily translate into an opportunity for Indian automakers because Tesla maintained its "all in-house" stance.

However, there are some opportunities for other industries because Tesla cannot manufacture a car by importing the components entirely.

According to experts despite having world-class technology, the US EV maker will have to depend on suppliers who can supply them locally over importing all components from another country.

However, talks are in progress and government officials have invited Tesla to assess the Indian auto ecosystem.

The biggest challenge for India among all this will be setting up proper infrastructure. Not just the infrastructure for serving a manufacturing facility, but also the infrastructure for adoption.

In conclusion

At present, 47% of the world's lithium is produced in Australia, 30% in Chile and 15% in China. While these countries produce lithium, India is leading the lithium race.

China accounts for roughly 60% of the world's lithium chemical supply. It also produces three-quarters of all lithium-ion batteries.

Today, China controls the global processing industry, and it has achieved this feat by buying mines all around the world. No wonder, countries all around are looking for an alternative.

India became an attractive alternative when the Geological Survey of India discovered lithium deposits in the Salal-Haimana area, of the Reasi district, in Jammu & Kashmir.

However, the mere discovery of the lithium reserves isn't automatically going to change everything. India needs to build processing infrastructure and expertise.

One thing remains certain - the Lithium discovery has brought the focus on India's entire EV ecosystem. From mining firms to the final vehicle makers, all stand to benefit from India's self-reliance in this basic raw material.

We would recommend you track the developments in the lithium story closely. There could be more big announcements soon. Indian corporate groups, with expertise in mining and refining could announce plans of setting up Lithium refineries. PSUs will also be involved for sure.

This would be a massive gamechanger in the entire ecosystem and would signal India's direct challenge to China's dominance in the industry.

For more, watch the below video where Co-head of Research at Equitymaster Tanushree Banerjee explains how to profit from India's lithium stocks gold rush.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...