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Powering the future: Why India must localise EV battery production

In this article, Pradeep Karuturi, Head of the Centre for Clean Mobility at OMI Foundation, discusses the need to localise electric vehicle battery production in India and how the associated challenges can be addressed.

The global transition to electric vehicles (EVs) is accelerating, driven by the urgent need to address climate change and air pollution. At the heart of this transformation lies the lithium-ion battery (LiB), which powers EVs and accounts for nearly 40-50% of their cost. However, India’s ambitions for EV adoption face a significant roadblock: a heavy reliance on imported battery components. This dependence, particularly on China, which supplies over 75% of global anodes, cathodes, and battery cells, exposes India to geopolitical and economic vulnerabilities. To achieve self-reliance and energy security, India must focus on localising the production of critical battery components.

India’s dependence on imports is staggering. In the financial year 2023-24, lithium-ion battery imports surged by 69% compared to 2021-22, reaching ₹24,346 crores. As illustrated in Figure 1, over 84% of these imports came from China and Hong Kong. This growing dependency poses risks, as disruptions in supply chains—like those witnessed during the COVID-19 pandemic and the Russia-Ukraine war—can derail the nation’s clean energy ambitions. Moreover, China’s dominance in the battery supply chain is unparalleled. It processes 60% of the world’s lithium, 69% of nickel, 75% of cobalt, and all natural graphite. Additionally, China accounts for over 90% of anode and 80% of cathode production. These advantages give China a stronghold over global prices and supply, leaving countries like India at a competitive disadvantage.

Source: Karuturi, P. (2024, September). EV-Ready India: Localising Anode Production for greener Tomorrow

Localising battery production is not merely about reducing dependency; it is also a significant economic opportunity. As the fourth-largest automobile manufacturer globally, India’s transition from internal combustion engines to EVs could create jobs, boost GDP, and enhance the country’s global competitiveness. Localisation ensures supply chain resilience by reducing exposure to external disruptions. Furthermore, manufacturing locally helps lower emissions associated with transporting materials across continents, aligning with India’s sustainability goals. By integrating Environmental, Social, and Governance (ESG) standards into its processes, India can also enhance its export potential in a market increasingly driven by responsible sourcing.

China’s strategy offers valuable lessons. Through extensive planning, it has created an ecosystem that supports battery production across the value chain. The government’s policies focus on long-term strategic stockpiling of raw materials, workforce upskilling through specialised education programs, and significant investments in research and development (R&D). The European Union has followed suit, investing €1.7 billion in grants and €6 billion in state aid to establish a robust battery manufacturing ecosystem. Similarly, the U.S. Inflation Reduction Act offers tax credits of up to $45 per kWh for battery cell production and 10% of the production cost for critical minerals. These examples underscore the importance of government intervention and public-private collaboration in creating a thriving domestic battery industry.

However, localising battery production in India comes with its challenges. Mining projects, crucial for sourcing raw materials, have long lead times—averaging 12-16 years from discovery to production. These delays are exacerbated by permitting issues, environmental regulations, and local opposition. Capital costs in India, though lower than in the U.S. or the EU, remain 20-90% higher than in China, adding another layer of complexity. Additionally, the lack of advanced testing facilities and skilled manpower makes it difficult to ensure the quality of raw materials and components.

To overcome these challenges and realise its EV potential, India must adopt a multi-pronged approach. Policy support will be critical. The government should introduce tax credits for battery cell production and subsidies for critical mineral processing, similar to global best practices. Strategic investments are essential to expand domestic processing capacity and establish recycling facilities to reduce dependence on virgin materials. R&D efforts should focus on discovering alternatives for critical battery materials, supported by Research, Development, Demonstration, and Deployment (RDD&D) programs. Collaboration with industry and academia is necessary to identify workforce needs and introduce specialised courses on advanced battery technologies. Public investment in cell fabrication and testing centers will further validate the quality of components, while strategic stockpiling during the current low-price environment will help secure future supplies.

Additionally, India must strengthen its international partnerships to secure a steady and diversified supply of raw materials. Establishing a dedicated cell under the Ministry of External Affairs (MEA) could play a pivotal role in forging stronger ties with mineral-rich countries such as Australia, Chile, and the Democratic Republic of Congo. This would help ensure a stable, cost-effective supply of critical minerals for battery production, mitigate geopolitical risks, and promote sustainable mining practices aligned with ESG standards. Such partnerships will be key to unlocking India’s full EV potential.

India’s EV aspirations hinge on its ability to indigenise battery production. By localising key components like anodes and cathodes, fostering innovation, and building a skilled workforce, India can significantly reduce its import dependence and position itself as a global leader in clean energy. This is not just an economic necessity but a strategic imperative to power the nation’s sustainable future.

Pradeep Karuturi, Head, Centre for Clean Mobility, OMI Foundation

Also read: How major OEMs are attempting to secure the EV battery supply chain

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