A conservative guesstimate shows that India imported over $7 billion worth of EV batteries and magnets from China, and this doesn’t even include the motors and smaller components, such as insulation papers for batteries that India sources from its neighbour.
Looking at these numbers, experts warn that India risks becoming an ‘EV colony’ of China, increasing its already skewed trade balance with the Asian giant.
“EV adoption at scale will push India’s dependence on China to critical levels,” warns Ajay Srivastava, co-founder of the think tank Global Trade Research Initiative (GTRI). “It means China may halt supplies anytime if geopolitics demands it, and cripple our industry.”
China’s role cannot be overstated—either for Indian EV markets or global ones. Investment in electric cars since the early 2000s, supported by government subsidies and tax breaks, led the EV industry in China to overtake the world by 2022. Not just India, the US and European Union are also suffering from its dominance.
The US and EU have imposed tariffs and tried to cut back their dependence on China, but by reducing manufacturing incentives in the US, experts say, Trump has paved the way for China’s global dominance in the EV space.
Now, India is moving full throttle towards an EV transition. However, there are Chinese components powering it.
Not only batteries and other components, there’s also the entry of Chinese EV firms, like BYD and MG Motor in India through joint ventures, which could lead to “every third EV on Indian roads being manufactured by Chinese firms”, according to a GTRI report.
India’s EV penetration in 2024 stood at 7.46 percent, supported by union policies, like the PM E-DRIVE programme and the Electric Mobility Promotion Programme, all aimed at funding India’s transition to clean mobility.
But since India currently has negligible indigenous battery production capacity, it has to rely on imports for the rising number of EV manufacturing plants. The numbers from the past five years already show how lithium-ion battery imports have more than doubled since 2019, and more than 75 percent of these are from China.
Two Chinese EV makers—CATL and BYD—manufactured 53.6 percent of the world’s EV batteries in 2024, displaying the stronghold China has over the industry.
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India’s EV battery capacity, or lack thereof
Two main components set electric vehicles apart from normal internal combustion engine (ICE) vehicles—the battery and the motor. Since EVs are electric and don’t run on fuel, the batteries are the most important part. Everything else involved in the manufacturing process, according to Srivastava, is just the assembling of the parts.
India has had a remarkable run in EV production in the last five years, going from 1,74,500 in 2019-20 to 16,82,030 in 2023-24. Most of this production is dominated by a few players—Tata Motors, Mahindra and Mahindra and new Chinese entrant BYD in the four-wheeler space, and Ola Electric, TVS and Ather in the two-wheeler space.
None of these companies, however, are responsible for making their own batteries in the country. Currently in India, in fact, there is no company that has the facilities that count towards ‘EV battery production capacity’. The few battery manufacturers, like Exide energy and Amara Raja, are involved in importing battery cells and assembling them in India.
“To make an EV battery, the most important thing is manufacturing the cell, which nobody does in India,” said Deb Mukherji, former managing director of Omega Mobility. “Otherwise you can just assemble these cells into packs, which adds around 10 percent value. In India, we’re just doing that. ”
India is definitely making strides in setting up a real battery manufacturing capacity. Ola Electric’s Tamil Nadu-based gigafactory for EV batteries is expected to begin production in early 2025.
Similarly, the Tata Group is planning a 20 GWh (gigawatt hour) battery manufacturing plant in Gujarat and JSW Group’s 50 GWh plant is expected to come up by 2028-30. Reliance, too, has a plant coming up in Jamnagar by 2026 to make battery cells and storage units.
“It depends on various factors, but I think by the end of the decade, India can be confident about having an independent battery manufacturing capacity,” says Rahul Lamba, CEO of The Energy Company.
Beyond batteries
The entire EV import ecosystem in India doesn’t rely on China, though. To curb import reliance and boost domestic manufacturing, India levied a hefty import duty on completely built EVs, ranging between 70 and 100 percent. In March 2024, India tweaked this policy and reduced import duty to only 15 percent for certain EVs, if the companies promised to invest $500 million in local Indian manufacturing.
According to analysts, this will help international companies, like Tesla, enter the Indian market.
However, the import duty of 70-100 percent has prevented China from dominating Indian EV imports, letting Germany take the lead instead. EV imports have increased substantially from $2 million in 2019 to $233 million in 2023, but China does not account for even 25 percent of these imports.
Germany has long been known for its automobile manufacturing business, with major brands, like Audi, Mercedes, Volkswagen, BMW and Skoda. Given that India and Germany have been long-term trade partners, and India imported $16 billion worth of goods from Germany in 2023-24, the EV import hold of German companies is not surprising.
But the EV manufacturing sector, which is going to be India’s long-term focus given the plan to make India a manufacturing hub, is dominated by China. Not just for batteries, but other EV parts, too.
After the battery, the next major component in an EV—the motor and controller—also depends on imports from China for the rare earth metals used in it. The permanent magnets used in electric vehicles are made up of rare earth materials and called Neodymium Iron Boron (Nd-Fe-B) magnets. Since India has no functional production capacity for rare earth metals, it needs to import these from other countries, with China again playing a huge role.
As imports of permanent magnets/magnetic material have increased in the last five years, so has the share of imports from China.
According to The Energy Company’s Lamba, even smaller components, like insulation papers to cover lithium batteries, are currently imported from China. The supply chain dominance that China displays is stellar, he says, and is mainly because Indian manufacturers have not risen to the opportunity yet.
“It isn’t like we can’t make insulation papers, or contactors for EVs. It’s just that no one in India has thought this way before,” says Lamba. “China, meanwhile, has been investing in manufacturing for decades.”
This is the reason Srivastava in his September 2024 report for GTRI argued for the EV sector in India to flourish organically, rather than be supported by subsidies and policies from the Indian government.
“Firstly, we’re entirely dependent on China to make our EVs. Secondly, there isn’t enough renewable energy penetration in the country for us to charge our EVs,” he said. “So what will end up happening is that we’re making Chinese EVs and they aren’t even reducing pollution, just shifting the base of pollution from cars to diesel generators used to charge the cars.”
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India’s EV push
Srivastava’s concern is not unfounded. In September 2024, the Indian government announced the PM E-DRIVE programme with an outlay of Rs 10,900 crore. The aim of the initiative is to support electric two-wheelers, three-wheelers and four-wheelers, along with EV charging stations.
PM E-DRIVE was announced the same year that the FAME-II programme, again with an outlay of Rs 11,500 crore, came to an end. Together, they represent the government’s intention to incentivise EVs for the regular consumers.
On the other hand, there’s the Production Linked Incentives for automobile industry (PLI Auto) and Advanced Cell Chemistry (PLI ACC) to provide incentives for working on indigenising the battery and other components needed for EVs in India.
The effect of FAME-II and PLI schemes on Indian EV production has been massive. According to data from the Union Ministry of Heavy Industries, India’s EV production has gone from 1,74,500 units in 2019-20 to around 16,82,030 units in 2023-24. This is an 863 percent increase in the country’s EV production capacity, and there has been quite a similar increase in sales in the same period.
The distribution of EV sales across the country though is uneven—six states are responsible for almost 60 percent of the total EVs sold in 2024.
According to data from the International Council on Clean Transportation, Uttar Pradesh led in EV sales in India with 19 percent of the total sales last year. Maharashtra with 12 percent of sales and Karnataka with nine percent were next. Tamil Nadu with seven percent, and Rajasthan and Bihar with six percent each brought the number to 59 percent.
By 2030, the Indian government plans to make EVs account for 30 percent of the annual automobile sales, up from the three percent in 2024. While this might seem ambitious, the mechanisms are already in place in the form of joint ventures between Indian and foreign companies and new EV plants being set up across the country.
According to forecasts by analyst S&P Global, just two companies—JSW and TATA—will invest a total of $30 billion by 2030 in India’s EV market. With the new joint venture between JSW Group and China based EV-maker SAIC Motors announced in 2024, and Tata’s plan to invest more than $2 billion in its EV ecosystem, the forecast doesn’t seem too far from becoming reality.
The entry of new players, like Vietnamese company VinFast, China’s BYD and Elon Musk’s Tesla, into the Indian market will also bolster sales and production. But this then begs the question—what about Indian manufacturers?
The EV future: India & the world
Lamba, Srivastava and Mukherji all agreed on one thing—research and development is the way to go, if India wants to make even a dent in the global EV ecosystem.
Lamba argued how Indian battery companies don’t even spend 2 percent of their net sales on R&D. “Chinese companies, like BYD, spend at least 10 percent of their net sales on research, which is why they’re able to come up with new cutting-edge technologies. We need to be doing at least that much.”
Mukherji, too, made a similar point. Since India cannot beat China in manufacturing at scale, he said, its best bet would be to innovate newer battery technologies. One of the main reasons for this is also that at the current stage, EV battery manufacturing is highly complex and rapidly changing.
“Today, BYD’s blade battery technology is the best in the market, but tomorrow, it might be something else—the ecosystem is advancing so fast,” Mukherji said. “So, it doesn’t even make sense for battery manufacturers to invest and set up a plant only to become obsolete in the next two years.”
In 2024, six of the top 10 EV battery manufacturers across the world were Chinese. The Shenzhen-based BYD, currently the world’s number one EV maker overtaking Tesla, began as a battery manufacturer in 1995 before becoming a global leader in EVs mere decades later.
All of this points towards the years of investment and research devoted by China to dominate the globe in EVs, and according to Srivastava, India needs to travel a similar path.
“With imported batteries and motors, which make up most of the cost, India’s EV industry is largely an assembly operation,” he said. “China’s grip on the EV supply chain means India faces economic and strategic risks, if we don’t come up with domestic alternatives.”
Lamba, however, had another view. “The EV manufacturing segment needs to grow, but alongside the EV market. If we stop subsidies and stop encouraging consumers to buy EVs, why would anyone manufacture them? Where’s the demand?” he asked. “It needs to happen parallelly.”
[With inputs from Sneha Yadav]
(Edited by Mannat Chugh)
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