Whalesbook
India's ambitious electric vehicle (EV) push is set to fundamentally reshape its import needs, shifting reliance from crude oil to batteries and critical minerals. This transition presents a significant financial challenge, as projections indicate that achieving just 20 percent EV penetration in passenger car sales could add approximately $13.7 billion annually to the import bill for batteries, cells, and related materials. This projected surge far outstrips the modest savings expected from reduced crude oil imports, estimated at less than $1 billion annually for the same EV penetration level. This creates a substantial imbalance, where dependence on external sources for energy is merely swapped for a new, potentially more complex, dependency.
China's Grip on Battery Supply Chains
The global production of EV batteries is highly concentrated, with China leading not only in battery cell manufacturing but also in processing the critical minerals required. China controls most of the world's refined lithium, cobalt, nickel, and graphite – key components for lithium-ion batteries. This dominance gives China significant influence over pricing and availability, making India's growing demand a source of geopolitical concern. Chinese policies, such as export controls on advanced batteries, also highlight the risk of supply chain disruptions and price swings, affecting Indian EV makers reliant on Chinese processing. Shifting from oil imports, largely from West Asia, to a battery supply chain heavily influenced by China introduces a new layer of strategic vulnerability.
Building India's Battery Production Capacity
India aims to build domestic capacity through initiatives like the Production Linked Incentive (PLI) scheme for Advanced Chemistry Cell (ACC) battery manufacturing. The goal is to attract investment and boost local output, supported by significant government funding. However, turning these plans into actual production has been difficult. As of late 2025, only a fraction of the targeted manufacturing capacity has been built. Companies face hurdles like strict requirements for domestic value addition, demanding installation schedules, and the need for foreign technical expertise. India has some mineral reserves but lacks advanced processing facilities, leading to over 90 percent import dependence for essential minerals like lithium, cobalt, and nickel. The auto sector itself struggles with localization, as most EV models don't meet domestic value-addition rules due to high import content for components like battery cells, motors, and power electronics.
Deepening Dependency on China Poses Risks
India's current path risks making it heavily reliant on Chinese supply chains for electric vehicles. Beyond the financial strain of increased imports, the geopolitical risks are substantial. Global EV adoption is surging, with China far ahead, supported by its integrated supply chains and massive battery production. India's own timelines to build domestic battery supply chains, estimated at five to ten years, mean continued reliance on current global dynamics. The slow pace of domestic capacity growth, combined with China's overwhelming dominance in mineral processing and battery manufacturing (over 50% of global capacity), creates significant risk. Failing to speed up local production, secure diverse mineral sources, and develop advanced manufacturing could leave India vulnerable to external pressures and trade disputes, potentially harming its long-term energy security and economic competitiveness.
Steps to Cut Battery Import Costs
To reduce the projected import surge and its associated risks, India must accelerate efforts in several key areas. This includes not only expanding domestic battery cell manufacturing but also developing a strong system for sourcing and refining critical minerals, possibly through international partnerships. Further incentives for producing components beyond battery cells, along with policy solutions for supply chain bottlenecks in essential equipment, are crucial. Using battery recycling technologies to recover valuable metals can also lessen the need for virgin materials. Ultimately, achieving a more balanced energy transition depends on rapidly developing local manufacturing, fostering technological innovation, and strategically diversifying supply chains to avoid reliance on any single nation.