Long read: India’s shift to EV is making China richer. Over $7 bn paid in 5 years

“Last year, India sold a record 1.9 million electric vehicles, which made up 3.6 percent of the total automobile sales in the country. But the deepening EV penetration also darkened the dragon-shaped shadow looming over the country’s EV shift.

For every EV that the country manufactures and sells, it has to contend with the massive import reliance on China that made this possible. India wholly depends on imports, mainly from China, for lithium-ion batteries—the key component in making electric vehicles, accounting for almost 80 percent of the product’s value.

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 is interesting to understand the differential impact of subsidies on the Chinese and Indian EV industries. The Chinese were the first off the block in giving subsidies to their EV industry: “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.”

Now, India – a late comer to the EV party – is giving subidies for EV manufacturing: “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.”

By doing so, India is fuelling the import of Chinese components for EV manufacturing in India: “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…

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…

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.””

Just in case you have the impression that barring the battery the rest of the EV is actually made in India, Ms Mishra clarifies the situation:

“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.”

As ever in India, we live in the hope that tomorrow will be better than yesterday: “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.”