Lithium is a crucial element used in the production of lithium-ion batteries, which are widely used in various industries, particularly in electric vehicles (EVs) and renewable energy storage systems. GSI (Geological Survey of India) discovered reserves of lithium in the state of Rajasthan and in the Union Territory of Jammu & Kashmir earlier this year. It is believed that the reserves in Rajasthan are much bigger in quantity than the one found in Jammu & Kashmir and can meet 80% of the total country’s demand. Currently, India imports all its lithium needs from Australia and Argentina and 70% of its lithium-ion cell requirement from China and Hong Kong.
Benefits of the Discovery
India has been actively promoting the adoption of electric vehicles to reduce dependence on fossil fuels and combat air pollution. The discovery of lithium reserves in India could help strengthen the domestic supply chain for lithium, making it more cost-effective to produce lithium-ion batteries. This, in turn, can accelerate the adoption of electric mobility by making EVs more affordable and accessible to the masses.
With the availability of domestic lithium reserves, India can reduce its reliance on imported lithium and develop a robust energy storage ecosystem. This can help stabilise the grid, improve the efficiency of renewable energy utilisation, and enhance energy security. Also, the discovery of lithium reserves can create new economic opportunities in India. It can lead to the development of lithium mining and processing industries, generating employment and attracting investments.
One of the prime factors of this discovery is the reduced dependence on imports as India currently relies heavily on imported lithium to meet its demand for lithium-ion batteries. The discovery of domestic lithium reserves can reduce import dependence, making the country more self-sufficient in meeting its lithium requirements.
Impact on Indian Economy
The presence of lithium reserves would lead to the development of mining and extraction operations in Jammu & Kashmir and Rajasthan. This would create job opportunities and stimulate economic growth in these regions. The mining sector can contribute to GDP through increased production, export revenues, and taxes paid by mining companies.
Lithium mining is just the initial stage. The reserves would need to be processed and refined to extract lithium carbonate or lithium hydroxide, which are the primary raw materials for lithium-ion batteries. The establishment of processing facilities in Jammu & Kashmir and Rajasthan would add value to the extracted lithium and contribute to GDP growth.
The availability of domestic lithium reserves can drive the establishment of manufacturing facilities in India. These facilities would produce batteries for various applications, including electric vehicles, energy storage systems, and consumer electronics. India has been pushing for the adoption of electric vehicles to reduce dependence on fossil fuels and address environmental concerns. The availability of domestic lithium reserves would lower the cost of lithium-ion batteries, which are a crucial component of EVs. This could accelerate the adoption of electric vehicles, leading to increased manufacturing and sales.
The discovery can contribute to economic diversification. India is currently dependent on imports for its lithium requirements, and domestic reserves would reduce import dependence and associated risks. Economic diversification is beneficial for long-term growth, as it reduces vulnerability to external factors and creates more self-sufficiency.
Sectors to Benefit
The presence of lithium reserves can have a positive impact on sectors related to lithium mining, battery manufacturing, electric vehicles, and renewable energy. As these sectors experience growth and increased investment due to the availability of domestic lithium, we may see a positive impact on the stock prices of companies operating in these sectors.
We expect automobile sector stocks to react positively to the lithium discovery as lower battery costs would lead to higher adoption of EVs in the long term.
Stocks on Radar
Tata Motors: Tata Motors is one of the leading automotive manufacturers in India and has a significant presence in the EV market. They produce electric cars such as the Tata Nexon EV and Tata Tigor EV.
TVS Motor: TVS Motor is a leading player in the electric two-wheeler space with its iQube series of products. The company has increased it market share in the 2-W space and recorded a sales milestone of 1,00,000 units for its range of EV scooter in FY23.
Hero MotoCorp: Hero Electric, a part of the Hero MotoCorp is a major player in the electric two-wheeler market in India. They specialise in manufacturing electric scooters and motorcycles, offering a range of models suitable for urban commuting.
Bajaj Auto: Bajaj Auto has entered the electric vehicle space with the launch of the Bajaj Chetak Electric scooter. They are actively expanding their electric vehicle portfolio.
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