Economy
Economic Survey: Local tech, components for EV manufacturing
Summary
- India seeks to curb reliance on China’s EV supply chain by prioritizing local manufacturing and battery technology. Public transport emerges as a key pillar of the country's clean mobility strategy.
New Delhi: India is pushing to localize technology and raw materials used in electric vehicle (EV) manufacturing, as China’s grip on the global EV supply chain remained firm through the last fiscal year, the Economic Survey for FY25 revealed Friday.
"Indigenizing technology and raw materials for electric mobility is an urgent task," wrote Chief Economic Advisor (CEA) V. Anantha Nageswaran in the annual report, released ahead of the Union Budget.
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The survey underscores the need to kick-start the energy transition with public transportation, rather than focusing solely on private EV adoption.
"Given India’s vast size and limited land availability, public transportation is a more efficient alternative for a viable energy transition. National-level policies and local nudges must promote and facilitate its use, going beyond focusing on tailpipe emissions from private transportation choices," the Economic Survey said.
Expanding public transit networks could also reduce India’s dependence on imported EV components, the survey noted. Currently, only 37% of India’s urban population has easy access to public transport—lagging behind Brazil and China, where over 50% of city dwellers enjoy well-connected transit systems.
"To replicate the success of other nations, India must focus on developing integrated transport systems that efficiently connect buses, metro rails, and other modes of transit. Investing in making public transportation more efficient, reliable, comfortable, accessible, and safe will also be a significant step towards achieving Net Zero goals while reducing our dependence on imports," the report emphasized.
The government’s PM E-drive scheme, India’s flagship EV subsidy programme, reflects this priority, with 40% of its ₹10,900 crore allocation dedicated to electrifying intra- and inter-city buses.
Supply chain challenges
Despite India’s EV ambitions, China’s dominance across the supply chain remains a key concern.
"China's vertical integration across the entire electric vehicle supply chain, from mining to EV manufacturing, has enabled it to retain its global dominance in this sector," the Economic Survey stated.
India’s biggest challenge lies in securing critical minerals like lithium, nickel, and cobalt, essential for EV battery production. China processes 65% of global nickel, 68% of cobalt, and 60% of lithium, cementing its supply chain dominance.
"The lack of viable alternative battery technologies reinforces China’s stronghold on lithium-ion batteries," the survey noted, adding that lithium-ion batteries are expected to remain the primary energy source for EVs “for quite some time."
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The CEA emphasized the need for advanced R&D in alternative battery technologies such as sodium-ion and solid-state batteries. Securing intellectual property in this domain can prove invaluable, the report stated.
EV market: India vs China
China remains the global EV powerhouse, accounting for 60% of all electric vehicle sales in 2023, according to the International Energy Agency (IEA). The country sold 10 million EVs last year, while its EV exports surged 80% to 1.2 million units in 2023 from 2022. China also became the world’s largest auto exporter, with 4 million units sold abroad.
By comparison, India’s EV sales in 2024 totaled 1.9 million units, up 21% from the previous year. Like China, India has started phasing out EV purchase subsidies under the PM E-drive scheme, a shift that mirrors China’s 2023 decision to withdraw direct subsidies after a decade of market support.
While India has long relied on subsidy-driven EV adoption under schemes like FAME (Faster Adoption and Manufacturing of Electric Vehicles, 2015–2024), policymakers are shifting towards domestic manufacturing incentives.
The government has introduced Production-Linked Incentive (PLI) schemes for advanced automotive technology (PLI-AAT) and battery manufacturing (PLI-ACC). These policies signal a focus on building indigenous supply chains and reducing reliance on imports of key components such as DC motors, e-motor magnets, and electrical parts.
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The survey also highlighted the need for battery recycling infrastructure to maximize long-term gains for India's EV sector.
“In the interim, PLI Schemes can also reward the making of EV cells (Lithium-ion cells), as most manufacturing and value addition happens up to the cell-making stage," the survey noted.
Future roadmap
The survey urged technology transfer partnerships with countries also seeking to diversify supply chains, suggesting that collaborative investments could help nations reduce dependency on China’s battery and mineral processing industries.
"Partnerships with other aspiring nations can help distribute the high costs of securing a comparative advantage in the global market," the report concluded.
Also read | Battery parts may get a ₹9,000 crore push
India’s EV industry stands at a crossroads—balancing public transport expansion, supply chain localization, and technological advancement—as it aims for a greener, self-reliant future.
