India Should Seize the Opportunity to Build Local Manufacturing Ecosystem for EV Components

The increasing impact of climate change has forced nations to consider a transition towards sustainable mobility. With 1.4 billion people and a high concentration of population in urban centres, the problem is even more prominent for us. Thus, India is rightly on a path to adopt e-mobility. According to the Federation of Automobile Dealers Associations (FADA), EV sales in India crossed the 1.5 million units in FY 2023-24, a 50% jump over the previous financial year. Two-wheelers command 55% of total EV sales, followed by three-wheelers and electric cars. Moreover, the Government has stated a goal of achieving 30% EV penetration across categories by 2030. 

However, the dependence on imported components such as batteries, semiconductors, and advanced electronics is a big challenge for all local manufacturers. As per industry estimates, these imports make as much as 60% of the overall EV value. The problem goes manifold when we factor in a potential full scale global tariff war that may break down established global supply chains for critical input components. To ensure long-term sustainable growth of this industry, the country needs to take decisive steps to build a local manufacturing ecosystem. Here’s how it can be done. 

Strategic emphasis on local manufacturing

The first step towards building a local manufacturing ecosystem is to have a strategic goal, vision, and supportive policy regime. India has already made major leaps in this direction. Under the Atmanirbhar Bharat campaign and the resulting production linked incentive (PLI) schemes, EV component manufacturers are incentivized for their local investments. For example, under the PLI scheme for Advanced Chemistry Cell (ACC) batteries, the government has sanctioned Rs 18,100 crore for supporting local battery manufacturing capacities of 50 GWh.

Companies like Reliance New Energy, Ola Electric, and Tata Chemicals have already committed to investing in giga-factories to produce battery cells indigenously. Similar financial incentives are being provided to domestic manufacturers of motors, controllers, and other key EV components. These moves will reduce import costs and improve cost competitiveness.

Investing in R&D and Skill Development

The backbone of the Chinese, Japanese, and Korean EV industry (leading EV component manufacturers) is their robust R&D investment and talent pool. These two streams help them create cutting edge manufacturing processes, competent designs, and massive economies of scale. India needs to start working towards the same. 

To begin with, the Government has kicked off centers of excellence at institutions like IITs and IISc to support EV design and tech innovation, including next-generation battery chemistry, motor efficiency, and thermal management. 

Apart from this, initiatives such as the National Electric Mobility Mission Plan (NEMMP) can support industry-academia collaboration for research and real-world applications. NEMMP is also an opportunity to broadbase India’s EV talent pool and upskill the existing workforce from the traditional automobile industry to support the growth of EV manufacturing. 

Strategic partnerships for technology sharing and transfer 

India’s ICE based automobile industry started out on the back of strategic technology partnerships with Japanese, Korean, and American players. Indian EV manufacturers should also take a similar path to partner with global EV players for technology sharing and transfer. These collaborations bring critical knowledge, shorten the adaptation cycle, and make go-to-market strategies more effective. We can also expect Indian companies to co-develop technologies that can later be exported to global markets.

The mega opportunity ahead  

India’s transition to EV based mobility has started. According to a NITI Aayog and Rocky Mountain Institute report, the localized EV component manufacturing market is worth Rs 500,000 crore by 2030. It can also create millions of jobs.

Despite challenges such as securing raw materials like lithium and cobalt, ensuring quality standards, and scaling domestic capabilities, the concerted push across policy, investment, and innovation can build the foundation for an Atmanirbhar sustainable mobility. By reducing the dependence on imports, India can safeguard its energy and industrial security. At the same time, there is an opportunity to establish the country as a global EV manufacturing hub.
 

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