Economic Survey Calls For Self-Reliant EV Supply Chain For India

India's EV supply chain is likely to remain shackled to China until there is a conscious effort to push local manufacturing of battery cells and promote newer chemistry.

"Initiatives such as the PLI scheme for advanced chemistry cell manufacturing and setting up of Khanji Bidesh India Ltd. have been undertaken to deal with such (China) risks," the Economic Survey 2024-25 stated. "Going forward, policies for electric vehicles must focus on de-risking supply chains by promoting a more self-reliant ecosystem."

EV sales in India, unlike in the west, are on an upswing. Nearly 100,000 electric cars were sold in the country last year — a growth of 20% year-on-year — while more than a million electric two-wheelers were registered, according to data from Federation of Automobile Dealers Associations. Electric three-wheelers and commercial vehicles are increasingly becoming commonplace for the transport of people and cargo alike.

But none of them, not one, is powered by battery cells made in India. Nearly 100% of India’s li-ion battery needs are fulfilled by imports.

Manufacturing of an electric vehicle, relative to a conventional car, requires nearly six times more minerals to produce, the survey stated citing the International Energy Agency. 

China controls a significant share of critical mineral processing and production globally. It processes a third of the global output of nickel, cobalt and lithium — minerals crucial for the manufacturing of lithium-ion batteries, demand for which is likely to grow at a compounded annual growth rate of 23% by 2030. There is no viable alternative at present.

Additionally, EV components are still getting imported, more often than not from China. Leading EV manufacturers in India have noted an increased proportion of Chinese imports in their total material expenditures, reflecting a significant dependence on China for resources and technical knowhow.

"What the country now needs is increased R&D in advanced battery chemistry — sodium-ion and solid-state — as acquiring intellectual property can prove invaluable," the survey stated. "Facilitating investment in battery recycling can yield long-term gains for the Indian automotive sector."

"Furthermore, India must aim to establish technology transfer agreements with the nations that are also seeking to diversify their supply chains."

Schemes like the PM E-Drive for EV subsidy, a production-linked incentive scheme for manufacturing of EV components, and an EV policy to attract global carmakers to make in India show that the Modi government is aware of the need to build domestic supply chains.

"These are good foundations. Future policies will have to broaden their scope of coverage in a manner that adapts to the growing need of the EV industry," the survey stated.