How can the Phinergy (EV battery) acquisition help IOC & India?

Anyone tracking the US markets would certainly be aware of Tesla's meteoric rise this year, surpassing Ford and General Motors combined. The company under Musk's visionary, albeit unconventional leadership style is poised to benefit from both the electric and autonomous mobility trends. Rigorous control over battery quality in their Gigafactory giving Tesla’s cars mind-bending 500+ km ranges and a huge supercharger network spread all over the US gives the firm a strong competitive positioning to win in the industry.

Can India achieve something similar in the domestic market? In today's post, we look at the current state of the EV infrastructure landscape in India, IOCL's unconventional acquisition, and the potential of aluminium in Indian EV.

The current state of EV Infra in India:

While we are in the early days of EV growth in India, we are definitely taking steps in the right direction. That being said, we still have a long way to go. To put things in context, India currently has 500 EV charging points compared to 2,00,000 China had in 2016. With that established, let us look at what some of the firms in the country have been trying to do on the EV infra front.

1. Tata Power:  One of the biggest players in this field with a real stake in this business, they have 85 charging stations spread across 15 cities. They plan to open 500 more in 2020. This is an important business to them due to the synergy with their distribution network and this model has worked for companies like E.ON in the European market

2. Ather Grid: They started out making electric bikes that were comparable to IC bikes. Now Aether with their latest venture, Ather Grid, set up EV charging points. Although technologically better, they only have 40 locations with 30 in Bengaluru itself and the rest in Chennai

3. Magenta Power: They’re different from the others, in that they don’t sell power but sell the charging machines

4. eChargeBays: They focus on the pain point of home installation of EV charging, and from that experience have setup 40 charging stations, but all of them in Delhi

5. EESL: The only government player in this business performing at scale. They have set up 66 stations in Delhi and have set up 470 captive ones in partnerships with various organizations

IOCL's unconventional acquisition

As players battle it out to build a competitive edge in the 4th biggest auto market in the world, IOCL surprised many through its minority share purchase in Phinergy, an Aluminium-air battery company. On first glance, this looks like quite a strange move given that the world is moving towards Lithium batteries. But one look at the supply-chain gives the picture of a sourcing market India will never be able to dominate or even survive at scale.

The biggest lithium mines in the world are in South America, Australia, and China. A single Chinese company, Tianqi, controlled about 27% of the world’s lithium supply in 2018. To counter this, India had created an SPV called KABIL(Khanij Bidesh India Limited), consisting of NALCO, HCL, MECL which had high-level visits to all the South American countries in 2018 to try and get a part of this lithium supply chain. Our President also visited Bolivia, leading to the signing of an MoU to the same effect.

While these help secure supply to a certain extent, given that we do not have access to this resource in our country, it makes sense to look at alternatives. IOCL had been in plans to develop a 1 Giga-watt capacity battery plant since early 2019,and with the latest acquisition, they might get the technological help to make that happen.

The potential on aluminium in Indian EV

1. Aluminum is cheap and we have abundant domestic supply chain and sourcing

2. Energy density is high and Phinergy demonstrated 1,700+km run in a single charge

3. Aluminum batteries are not rechargeable like lithium and must be swapped out and recycled in a plant.

While the first two are straightforward pros, the 3rd is where the aluminium battery becomes a golden goose for IOCL. Batteries must be swapped, which can be done in a couple of minutes vs Lithium-ion cars where charging takes at least an hour. An actual quote from the IOCL chairman, “A customer is not concerned about how we make petrol if he can buy it wherever he wants. Similarly, if he goes to a station and we replace the metal plates, he is not bothered because the whole thing happens within three minutes.” This would fit right into their existing operations, albeit at lower volumes, due to 2-3x better mileage. But they can re-use their existing petrol bunk network, repurpose them to swap batteries, instead of having to struggle with space when each car needs 90 mins charging with lithium.

While everything looks hunky-dory, we need to understand, the aluminium battery is still unproven at scale and there are significant technological issues to be solved before this can be a success at a commercial scale. But if it does, India would be able to achieve it’s EV dream and IOCL will be able to avoid disruption.

We will continue to track changes in the space closely and keep our readers informed.

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About the Author: The post is written by our EZPP partner Jayadiya Sirasani with relevant edits and changes by our editorial team. Jayadiya is a graduate from IIM Calcutta, currently working with Accenture Strategy.

Disclaimer: This post is an attempt to understand an interesting business and is not a recommendation to buy/sell/hold any security.

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