Securing local battery production infrastructure will shield the country’s green goals from external risks

India is charging full speed toward an electric vehicle (EV) revolution, a crucial step in its commitment to reducing urban pollution, cutting emissions and achieving energy independence. Supported by progressive policies and surging consumer interest, the EV sector is poised to transform India’s transportation landscape.
However, as the demand for EVs grows, a key vulnerability threatens this momentum: India’s heavy reliance on imported lithium-ion batteries. This dependency inflates EV costs, increases supply chain risks and challenges the accessibility of sustainable transportation. To turn the promise of an EV-led future into reality, India must prioritise a robust domestic battery production ecosystem, freeing itself from the constraints of import reliance and building a sustainable foundation for growth.

Cost of Dependency

India’s heavy reliance on imported batteries — mostly from China, South Korea, and Japan — has serious consequences. Batteries make up 40-50% of an EV’s price, so this dependency pushes up vehicle costs, limits affordability for many Indians, and keeps EVs out of reach for a broader market. In 2023, India imported over Rs 8,300 crore worth of lithium-ion batteries, a huge expense that could slow down EV adoption if left unaddressed.

Beyond costs, both international and domestic supply chain issues pose risks. Geopolitical tensions and global demand for batteries make India’s EV ambitions vulnerable to price spikes and supply disruptions while a fragmented local supply chain dominated by small and medium enterprises (SMEs) adds inefficiency. For India to achieve global competitiveness, it must streamline this supply chain by supporting SMEs, promoting strategic consolidation and encouraging technology-sharing partnerships. Creating regional manufacturing clusters dedicated to EV and battery production could lay the groundwork for a fully integrated and efficient ecosystem.

The emphasis of the Production-Linked Incentive (PLI) scheme on economies of scale is crucial, incentivising larger enterprises to build capacity and meet the rising demand. With major players like Tata Group, Amara Raja and Exide investing in battery manufacturing, a coordinated supply chain that seamlessly connects raw material sourcing, cell production and EV assembly is within reach. Such an ecosystem would reduce costs, improve efficiency and empower India’s EV industry to stand on its own.

Creating regional manufacturing clusters dedicated to EV and battery production will lay the groundwork for an efficient ecosystem.

The strategic risks of this dependency run even deeper. As geopolitical tensions and global demand for lithium-ion batteries increase, India’s EV sector is left vulnerable to supply chain disruptions and price volatility. Securing a local battery production infrastructure is not just an economic necessity but a strategic imperative to insulate the country’s EV ambitions from external uncertainties.

Targeted Policies

Recognising the pressing need for domestic production, the Indian government has introduced targeted policies to stimulate local battery manufacturing. The PLI scheme for Advanced Chemistry Cells (ACC), with an allocation of Rs 21,000 crore, aims to establish a robust manufacturing capacity of 50 GWh. This initiative has attracted key players like Ola Electric, Reliance New Energy Solar and Rajesh Exports, all of whom are setting up large-scale battery production facilities in India.

Alongside the PLI, the FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme provides incentives to speed up EV adoption and support the growth of charging infrastructure. Ola Electric’s new gigafactory in Chennai, which has started mass-producing batteries for two-wheelers, is a promising development. Given the popularity of two-wheelers on Indian roads, these advances could have a significant impact on the market. But to achieve full self-reliance across all vehicle categories, India will need ongoing policy support, collaboration across industries and scaling these early efforts into a truly domestic battery ecosystem.

Addressing Constraints

As battery factories take shape, India faces a stark resource issue: limited reserves of key raw materials. Essential minerals like lithium, cobalt and nickel are either scarce or entirely missing from India’s natural resources. As of today, India imports nearly 100% of its lithium needs, sourcing this mineral primarily from countries like Australia, Chile and Argentina, with lithium alone accounting for Rs 173 crore in imports annually. This reliance not only raises costs but limits India’s ability to control its EV supply chain.

However, there’s hope. Recent lithium discoveries in Jammu & Kashmir and initial findings in Karnataka could tip the scales. The estimated 5.9 million tonnes of lithium in Jammu & Kashmir is a huge opportunity to reduce import dependence, though mining and processing will take time to ramp up. At the same time, India’s energy grid is still heavily coal-dependent, which lessens the environmental benefits of EVs.

Adding more renewable sources like solar and wind into the grid would make EVs genuinely green while reducing emissions from battery production. Plus, establishing a battery recycling system could recover valuable materials, minimise waste and create a circular economy with a lighter environmental impact. With investments in sustainable mining and recycling, India can extend the lifespan of critical materials, reduce import dependency and develop a more sustainable battery ecosystem.

Technological Horizon

In a fiercely competitive global market for lithium, India must look beyond lithium-ion technology to secure its EV future. Alternative battery technologies such as sodium-ion and solid-state batteries offer promising paths forward, relying on more readily available materials and providing sustainable, cost-effective solutions. With strategic investment in research and development, the country could pioneer these alternatives, reducing its dependency on scarce minerals while positioning itself as an innovator in the global EV space.

Investing in a diversified battery technology portfolio will not only mitigate supply risks but also provide Indian manufacturers with a competitive edge. By cultivating local expertise in next-generation battery technologies, India can future-proof its EV market, ensuring a steady supply of affordable and sustainable battery options for the long term.

Seizing the Moment India’s EV future is promising, but to reach its full potential, the country must reduce its reliance on imports. A self-sufficient battery production network is key to a sustainable EV ecosystem, enabling India to hit its green goals and achieve genuine energy independence. By committing to local manufacturing, securing critical resources and focusing on innovative battery technology, India can create an EV market that’s competitive globally and kinder to the environment.

As India races toward its electric future, the time to act is now. Embracing self-reliance in battery production will allow India to electrify its roads with confidence, paving the way for a cleaner, more sustainable future for generations to come.

Authors: Dr Barun Kumar Thakur, Faculty of Economics, FLAME University, Nehantha Sathesh, Research Analyst, FLAME University, and Aditi Anand, Student, University of Edinburgh.