Epsilon Advanced Materials seeks US trade pact for EV battery compliance

Epsilon Advanced Materials, a Mumbai-based manufacturer of graphite anodes (and soon cathodes), which are crucial components in electric vehicle (EV) batteries, is pushing the Indian government to negotiate a Critical Raw Materials Act with the US. This would ensure that battery materials exported from India to the US comply with the US Inflation Reduction Act (IRA).

The IRA offers various incentives to accelerate EV adoption in the automotive industry. If signed, the agreement could position India as a key hub for global battery material exports.

Vikram Handa, managing director of Epsilon, says that under the IRA, an electric passenger car receives a $7,500 subsidy, provided that the cells and battery materials are either produced in the US or imported from countries with which the US has a free trade agreement (FTA), such as Australia.

However, Handa notes that the US signed a Critical Materials Agreement with Japan last year, granting Japanese companies similar benefits to those with US FTAs.

“We are asking the Indian government to negotiate a similar agreement. Such a deal would support the development of a battery material ecosystem in India, attract foreign investment, and make manufacturing anode graphite or a cathode plant in the country viable. Demand from local cell manufacturers has not yet materialised (as it is still imported) and will take four to six years to reach some volume,” says Handa.

Handa adds that it would be a win-win for both India and the US. Setting up a plant in India costs half as much as it does in the US or Europe. Also, the IRA restricts materials from sources of concern like China and Russia, which India, as a friendly country to the US, can leverage.

Epsilon has firmed up plans to establish a new anode graphite plant in Karnataka with a capacity of 30,000 tonnes (up from its current 2,000-tonne capacity) with an investment of Rs 4,000 crore, eventually expanding to 100,000 tonnes per annum. The initial capacity will support 30 gigawatt-hour (GWh) of batteries, with commercial production expected to start in early 2027.

The company expects that by 2028, Indian cell manufacturers will have built a capacity of 30-40 GWh, which Epsilon could supply. However, it needs assured customers before making this investment, which could come from exports to the US, where it already has a South Korean client and is setting up a plant.

Epsilon is planning a cathode unit with a similar capacity and has acquired a technology company in Germany while scouting for the best location.

Handa also critiques the current production-linked incentive (PLI) scheme for advanced cell batteries. He suggests offering upfront subsidies to cell makers due to the large investment required to set up a plant (Rs 12,000-13,000 crore for 20 GWh). He compares this to the semiconductor scheme, where the government covers 50 per cent of the cost of a fabrication or outsourced semiconductor assembly and test/assembly, testing, marking, and packaging plant.

Handa points out that while the PLI scheme has nudged cell makers, there is no support for battery material producers, who are developed alongside cell makers in countries like China.

Epsilon estimates that cell imports to India across automotive segments have increased, with 30-40 GWh of cells imported annually, particularly due to Chinese companies offering lower-than-cost prices.

The company projects that by 2026, only 4-5 GWh of domestic cell capacity will be built in India, but this could rise to 100 GWh by 2030 as major players like Exide, Amara Raja, Tata, Suzuki, and Reliance enter the market.