India's EV penetration hinges on securing raw materials, key components

Rapid EV adoption has lifted sales, but India's dependence on imported minerals and components exposes deep supply chain vulnerabilities that could slow the electric mobility transition

If there is one exponential growth story for the Indian economy, with ramifications across infrastructure, transport and clean energy uptake, it is the rapid rise of electric vehicles (EVs) in the mobility space within the past five to six years. EV penetration in the country has risen sharply from just 0.5 per cent in 2019–20 to over 6 per cent last financial year (2024–25), with total sales reaching around 1.5 million units. And yet, this growth could trip on a crucial affliction: the raw material supply chain.

 

It is not difficult to understand the reasons behind the growth of EVs. These include economic benefits in the form of emerging cost parity with internal combustion engine (ICE) vehicles, policy incentives and infrastructure growth. It is not a surprise, therefore, that total EV sales in the country are projected to reach 22 million units within the next decade, through 2035.

 

“However, a critical underpinning of this growth is the supply chain for raw materials, especially lithium, cobalt, nickel, manganese and rare earth elements, which enable electric battery production and motor manufacturing. India currently depends heavily on imports of these critical minerals,” accounting and consultancy firm KPMG said in a report, adding that the global reserves and processing capabilities for these materials are highly concentrated, creating vulnerabilities to geopolitical risks, supply disruptions and price volatility.

 

For example, lithium is primarily sourced from Australia, Chile and Argentina. Cobalt and nickel are sourced mainly from Congo and Indonesia. And then, there is the China angle. That country alone accounts for 80 per cent of lithium and cobalt refining, 30 per cent of nickel processing and around 90 per cent of rare earth element separation. “This dominance extends to magnet production, making the EV value chain highly susceptible to supply shocks. Recent Chinese export restrictions on critical minerals and rare earths underscore these risks and could disrupt global automotive production, delaying India’s EV rollout and affecting cost competitiveness,” KPMG said. To add to the problem, the prices of lithium, cobalt and nickel have witnessed sharp fluctuations.

 

And yet, the issues around raw material security, and the over-reliance on imports, represent only half of the problem statement for EVs. The situation is equally grim on the front of critical components. “Raw materials represent the upstream supply chain. Even the midstream is missing in India,” says Shyamasis Das, research fellow, energy, natural resources and sustainability, at the Centre for Social and Economic Progress (CSEP), a Delhi-based think tank. “China has dominated not only the global critical mineral resource landscape; many of the EV components in India, including the critical sub-components, are currently procured from China and assembled into the final product here,” he said. 

 

This essentially highlights the need for India to secure the entire supply chain for EVs, and not limit its strategy to just obtaining the raw materials.

 

In order to address this problem and enhance domestic production of cells, a critical component, the government approved the Production Linked Incentive (PLI) scheme under the National Programme on Advanced Chemistry Cell (ACC) Battery Storage in May 2021, with an outlay of Rs 18,100 crore for 50 gigawatt hour (GWh) capacity for a five-year period after a gestation period of two years. 

 

The PLI ACC scheme aims to reduce reliance on imports and lower the overall costs of cell manufacturing. It is yet to meet the desired targets. Out of the total targeted capacity of 50 GWh, 40 GWh ACC capacity has been awarded to four beneficiary firms, but only one GWh capacity has been installed, with cumulative investment of Rs 2,878 crore achieved under the scheme till October 2025.

 

“The root cause of the problem is India’s apathy towards research and development (R&D). We have traditionally been very lukewarm when it comes to investing in R&D. For example, in my view, India has largely missed the bus as far as lithium-ion battery manufacturing is concerned due to lack of cost competitiveness,” Das said. 

 

He also added that while there is sufficient room for India to boost R&D to improve lithium-ion chemistry and drive down costs, it must urgently look beyond lithium-ion chemistry and diversify into other technologies like solid-state batteries or sodium-ion batteries.

 

KPMG analysts, too, make the same point, stating that technological innovation is the key to overcoming resource constraints. The surge of lithium iron phosphate (LFP) batteries from under 10 per cent market share in 2020 to 50 per cent by 2024 shows how material innovation addresses scarcity by reducing reliance on cobalt and nickel. 

 

The KPMG report states that India possesses mineral-bearing resources for lithium, cobalt and nickel but lacks proven reserves and large-scale processing capabilities. Its rare earth reserves are significant, and yet their production and refining remain minimal. 

 

“Building a fully integrated supply chain from mining to battery pack or magnet manufacturing is a long-term endeavour, requiring 10–15 years on average. To achieve its EV ambitions, India must adopt a multi-pronged strategy combining short-term measures for supply security with medium- and long-term initiatives to develop domestic capabilities,” the report said.