China’s Growing Profits from India’s EV Expansion
India’s electric vehicle (EV) industry is witnessing rapid growth, fueled by government incentives, rising consumer adoption, and a push toward sustainability. In 2023-24, India sold 1.9 million EVs, accounting for 7.46% of total automobile sales, as per a report by The Print.
However, this growth comes with a significant downside—India’s heavy reliance on Chinese imports for essential EV components, especially lithium-ion batteries, rare earth metals, and permanent magnets. Over the past five years, India has imported over $7 billion worth of EV components from China, raising concerns about economic dependence and strategic vulnerabilities.
China’s Dominance in the Global EV Industry
China is a global powerhouse in EV manufacturing, controlling over 53% of the world’s EV battery production in 2024. The Chinese government has heavily invested in the sector, enabling local companies like BYD and CATL to establish a dominant presence worldwide, including in India, the US, and the EU.
Chinese firms such as BYD and MG Motor are expanding their foothold in India, with predictions suggesting that one in three EVs on Indian roads could soon be manufactured by Chinese companies. This raises economic and geopolitical concerns, as China holds significant influence over India’s EV supply chain.
India’s Dependence on Chinese EV Batteries
Despite efforts to boost local EV production, India lacks large-scale battery manufacturing capabilities. Key Indian EV manufacturers like Tata Motors, Mahindra & Mahindra, Ola Electric, TVS, and Ather do not produce their own battery cells. Instead, they import lithium-ion cells primarily from China, while companies such as Exide Energy and Amara Raja assemble these cells into battery packs in India.
The lack of a domestic supply chain has led to a sharp rise in battery imports, which have more than doubled since 2019. Currently, China supplies over 75% of India’s lithium-ion battery imports, making India heavily reliant on its neighbor for this critical component.
Rare Earth Metals: Another Bottleneck
Beyond batteries, rare earth metals play a crucial role in EV production. Permanent magnets made from neodymium-iron-boron (Nd-Fe-B) are essential for EV motors and controllers. Unfortunately, India has no significant domestic production capacity for these materials, forcing manufacturers to import them mainly from China.
China dominates the global supply of rare earth metals, strengthening its grip over India’s EV sector. Even smaller EV components, such as battery insulation materials and power contractors, are largely sourced from China, further deepening India’s dependence.
India’s Policy Measures to Reduce Import Dependence
Recognizing the risks of over-reliance on China, India has introduced high import duties on completely built EVs, ranging between 70% and 100%. However, in March 2024, the Indian government reduced import duties to 15% for foreign EV manufacturers willing to invest $500 million in local production.
This move is expected to attract global players like Tesla, which has been exploring the Indian market. Additionally, Germany has surpassed China as the largest EV exporter to India, with brands like Audi, Mercedes, Volkswagen, BMW, and Skoda increasing their market share.
While these steps aim to diversify India’s EV supply chain, China’s deep-rooted presence in the sector remains a major challenge.
Challenges and the Road Ahead
Experts argue that India must ramp up research and development (R&D) efforts to reduce its dependency on foreign imports. Currently, Indian battery companies allocate less than 2% of their net sales to R&D, whereas Chinese firms like BYD invest at least 10%.
Some analysts suggest that India should focus on developing next-generation battery technologies, rather than competing with China in mass production of lithium-ion cells, which may become obsolete in the coming years. Emerging technologies, such as solid-state batteries and sodium-ion batteries, could provide a more sustainable and self-reliant alternative for India’s EV industry.
Without indigenous alternatives for batteries, motors, and rare earth materials, India’s EV industry risks becoming an assembly operation rather than a self-sufficient ecosystem. While domestic efforts are underway, it will take years to establish a strong local supply chain that can compete with China’s dominance.
Balancing Growth with Self-Sufficiency
India’s EV revolution is accelerating, but its economic and strategic dependence on China is a growing concern. The $7 billion spent on Chinese imports over the last five years highlights the urgent need for India to develop its own battery manufacturing capabilities, secure rare earth supplies, and invest in research-driven innovation.
While policy shifts and trade diversification efforts are in progress, true self-reliance in the EV sector will require long-term investments in technology, infrastructure, and supply chain development. Until then, China remains a key player in India’s EV boom, reaping significant financial benefits while holding crucial leverage over India’s automotive future.
(With inputs from agencies)
