New Delhi: India’s top carmakers are seeking alternative sources for lithium-ion cells that go into electric vehicle batteries as they seek to secure supply to counter China’s unpredictable curbs.
Mahindra and Mahindra Ltd, the country’s second-largest carmaker, has begun talks with Germany’s Volkswagen Group, which has a lithium-ion cell subsidiary PowerCo, for future supply, the company said at Kotak Institutional Equities’ Annual Investor Conference last week.
While Tata Motors Passenger Vehicles Ltd will depend on its group firm Agratas, Hyundai Motor India Ltd has inked a partnership with Exide Industries Ltd to procure locally made cells from the gigafactory under construction in Bengaluru.
Lithium-ion batteries account for more than a third of an EV’s cost. Diversifying cell supply is important after China imposed restrictions on the export of rare-earth magnets, another critical component used in building motors. China is also reducing tax incentives on exports of lithium-ion cells from 9% to 6% from 1 April, and eventually phasing it out over the year, which is expected to drive up prices.
Indian automobile companies import battery cells from China, Japan and South Korea. Major suppliers include BYD, CATL, Eve, LG and Panasonic, with more than three-fourths of it coming from China.
Diversifying lithium-ion supply chains away from China is a structural rebalancing of risk by automakers, said Harshvardhan Sharma, group head of automotive technology & innovation at Nomura Research Institute Consulting & Solutions India.
“Over the next three to five years, success will depend on execution discipline, yield management, chemistry selection aligned to vehicle segments, and sustained capital commitment,” Sharma said. “If done correctly, India can move from being a demand market for EV batteries to becoming a strategic manufacturing node within global supply chains.”
Battery cells are imported at a 5% duty, primarily utilizing blade technology, from China, according to a 24 February Kotak note based on what Mahindra’s management disclosed. “However, the company is in talks with Volkswagen for future cell supply starting in 2027 and is closely monitoring domestic battery developments in India.”
Queries emailed to Mahindra on further details remained unanswered.
Two years ago, Volkswagen Group and Mahindra signed a supply agreement on components of Volkswagen’s MEB (modular electric toolkit) for Mahindra’s purpose-built electric platform, a Skoda Auto Volkswagen India spokesperson said. “Volkswagen Group and Mahindra continue to explore multiple opportunities to expand the collaboration potential.”
Battery localization under works
Domestic manufacturing of lithium-ion cells is expected to pick up pace, with Agratas, Exide Industries, Amara Raja, Reliance Industries, JSW and Ola Electric working to develop gigafactories. Currently, only Ola Electric Ltd has a cell facility, with the capacity expected to reach 6GWh by the end of this month. It produces EV batteries for its scooters.
Localization of EV batteries can help reduce the upfront costs of electric passenger vehicles, which generally cost ₹2 lakh to ₹4 lakh more than their internal combustion engine (ICE) equivalents.
In 2024, Agratas announced that it would build a 40 GWh electric battery manufacturing plant in Somerset, UK. The firm is also building a 20GWh plant in Sanand, Gujarat, which is expected to begin production by December 2026.
“The project to set up giga factories in India and the UK is on track and will commence operations from FY27 in a phased manner,” a Tata Motors spokesperson told Mint earlier.
In 2024, Hyundai Motor India announced its partnership with Exide to localize the production of lithium-ion cells. Exide is constructing a gigafactory in Bengaluru with an initial capacity of 6 GWh, which can scale up to 12GWh.
“Product validation from the cylindrical cell line is ongoing, which is meant for 2-wheelers, while installation and commissioning is nearing completion in the other lines,” Avik Roy, chief executive and managing director at Exide Industries, said on 3 February during the third-quarter earnings call.
Maruti Suzuki India Ltd, India’s largest carmaker, has also hinted in the past that it will look to derisk the supply of lithium-ion batteries for EVs, but has not specified any plans.
Queries emailed to Maruti Suzuki remained unanswered.
Parent Suzuki Motor Corp. chairman Toshihiro Suzuki said on the sidelines of Japan Mobility Show 2025 in October that battery technology, which has not been localized effectively in India or Japan, remains the hurdle to launching small EVs in India.
"The question on batteries is whether it's going to be Indian technology or Japanese technology," Suzuki had said, suggesting it would be difficult to rely on Chinese imports. The company has a single EV offering, the eVitara, sold in India and abroad, powered by BYD’s blade cell.