Whalesbook
India's reliance on imported lithium compounds has surged, rising tenfold from ₹3,532 crore in fiscal year 2018 to ₹37,624.6 crore in the first eleven months of fiscal year 2026. This jump is driven by the accelerating adoption of electric vehicles (EVs), energy storage systems, and consumer electronics. While India's EV sales are projected to reach 202,000 units in 2025, representing about 4% of new light-duty vehicle sales, the country's global EV production share remains under 1%. The market for EV batteries is set for rapid growth, with demand expected to climb from 20 GWh in 2025 to 200 GWh by 2032. However, India's domestic capacity for advanced battery cells and critical mineral processing remains underdeveloped, creating a significant gap between demand and local supply. Lithium imports alone hit $1.2 billion in 2025, with key suppliers being China and Chile.
To build a domestic battery ecosystem, India has launched major initiatives like the ₹18,100-crore Advanced Chemistry Cell (ACC) Production-Linked Incentive (PLI) scheme, the ₹34,300-crore National Critical Mineral Mission, and the ₹1,500-crore Critical Mineral Recycling Incentive Scheme. However, progress has been notably slow. By October 2025, only 2.8% (1.4 GWh) of the 50 GWh target capacity under the ACC PLI scheme was commissioned, exclusively by Ola Electric. Even this partial commissioning has not yet met the domestic value addition requirements needed to claim incentives. As a result, no incentives have been paid out to any beneficiary against the ₹29 billion target by October 2025.
Beneficiaries such as Ola Electric, Reliance New Energy, and Rajesh Exports have requested one-year extensions on their PLI targets. They cite supply chain disruptions, particularly delays in obtaining equipment from China, and have faced penalties for missing December 2024 deadlines. Ola Electric has reduced its expansion plans to 5 GWh by FY2029 from the awarded 20 GWh, while Rajesh Exports has only completed land acquisition for its planned facility. These significant delays in scaling up domestic production mean India remains heavily dependent on imported lithium and battery components, often sourced through supply chains linked to China.
India's investments in battery manufacturing capacity are dwarfed by global leaders. Projected investments for 2025-2026 show India at $1.7 billion (0.9% of the global share), while China leads with $130.6 billion (71%), followed by Europe ($20.2 billion, 11%) and the US ($18.4 billion, 10%). Globally, China dominates battery production with over 70% of manufacturing capacity, powered by major companies like CATL and BYD. South Korea holds about 15% of global capacity. This concentration of mining, processing, and manufacturing in a few countries exposes India to significant geopolitical risks, price volatility, and potential supply disruptions. China also controls 75-80% of global lithium refining capacity.
India has identified substantial domestic lithium reserves, estimated at 5.9 million tonnes in Jammu & Kashmir, ranking it among countries with significant global holdings. However, commercially viable extraction faces hurdles, and the process from discovery to production typically takes four to seven years, requiring substantial policy support and investment.
The country's battery recycling sector is still developing but shows promise. India currently recycles only about 1% of its used lithium-ion batteries. However, effective policies could help the recycling industry reach a value of $3.5 billion by 2030. Current capacity stands at 60,000 tonnes, but is underutilized due to underdeveloped supply chains for recovered materials. Projections indicate capacity could grow to 117,000 tonnes by 2030 from an estimated 44,000 tonnes in 2026. This sector is vital for managing raw material price fluctuations and securing local materials for cell manufacturers.
India's current path risks trading its dependence on imported crude oil for a significant reliance on imported critical minerals such as lithium, cobalt, and nickel, for which it is 100% import-dependent. The nation's import bill for these materials is substantial and growing, worsened by the slow development of domestic manufacturing. Relying on China-linked supply chains creates vulnerabilities to geopolitical tensions, export controls, and potential price manipulation.
The persistent delays in establishing domestic ACC capacity under the PLI scheme, with beneficiaries seeking extensions and facing penalties, highlight considerable execution challenges and potential misjudgments of policy effectiveness. Experts warn that this growing import dependence, without a parallel rise in local capabilities, will keep import bills high and undermine the strategic independence India aims for through EV adoption. Failing to secure a stable, local supply chain for battery components leaves India exposed to global market shifts and supplier concentration risks, jeopardizing its energy transition goals.
India's EV battery demand is expected to increase tenfold by 2032, requiring a massive expansion of local manufacturing and supply chain infrastructure. Successfully meeting this demand depends on overcoming current policy execution issues, speeding up domestic production of critical minerals and battery components, and strengthening the recycling ecosystem. Failure to address these challenges could perpetuate high import dependency, hindering the growth of India's EV sector and its broader clean energy objectives. Faster localization efforts and more effective policies are crucial for India to transform from an import-reliant market into a global manufacturing hub.