India’s Battery Manufacturing Race: Can Domestic Production Meet Growing EV Demand

India's electric vehicle (EV) market is poised for significant growth, with projections indicating an increase from $3.21 billion in 2022 to $113.99 billion by 2029.

December 27, 2024. By News Bureau

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Pratik Kamdar

Neuron Energy

Electric Vehicles

Battery Manufacturing

EV demand

Lithiumion battery

Energy Systems

As the global energy landscape shifts towards sustainability, India is racing to establish itself as a leader in battery manufacturing to meet its surging demand for electric vehicles (EVs). Projections indicate that the country’s battery needs will skyrocket, rising 19-fold from 13 GWh in 2024 to a staggering 244 GWh by 2035. This explosive growth, driven by diverse segments ranging from two- and three-wheelers to commercial EVs and stationary energy systems, reflects a unique demand profile compared to global markets. But can India’s domestic production keep pace with this surge?

A Strategic Pivot to Local Production
India's electric vehicle (EV) market is poised for significant growth, with projections indicating an increase from $3.21 billion in 2022 to $113.99 billion by 2029. Similarly, the EV battery market is projected to grow from $16.77 billion in 2023 to $27.70 billion by 2028. To capitalise on this expansion, India is focusing on becoming a global leader in battery manufacturing.

A key element of this strategy is the government’s strong push for local production, particularly in the lithium-ion battery sector. The introduction of the Production Linked Incentive (PLI) scheme for Advanced Chemistry Cells (ACC) in 2021 has been a major catalyst for this shift. By offering subsidies of nearly $24 per kWh, the scheme incentivises manufacturers to increase domestic value addition and make substantial investments. This has resulted in a sharp rise in domestic manufacturing capacity, with many companies setting up plants in the country. This is expected to help India become a leading exporter of ACCs in the next few years.

In 2019, the Indian government, alongside the PLI scheme, increased the import duties on lithium-ion battery packs for electric vehicles from 0% to 5%. This further strengthens the case for local production, as manufacturers can benefit from lower costs and avoid reliance on imported components. Together, these measures form the foundation of India’s broader strategy to reduce dependence on foreign suppliers and position itself as a competitive hub for battery production, especially in the growing lithium-ion or lithium-iron-phosphate (LFP) segment.

Cost Competitiveness
India has several advantages that position it favourably in the global battery race. Domestically manufactured Li-ion or LFP cells could be as much as 50% cheaper than their Chinese counterparts, thanks to a combination of government subsidies, lower labour costs, and production efficiencies. This cost advantage is significant, as China currently dominates the global market.

Building a Resilient Supply Chain
While policy incentives have created a foundation for local production, India’s ability to meet its growing EV demand will depend on addressing key supply chain challenges. Currently, the country relies heavily on imported raw materials such as lithium, cobalt, and nickel, which makes it vulnerable to geopolitical and price fluctuations. Exploring domestic resource extraction, recycling technologies, and forging partnerships with resource-rich countries could help India reduce its dependence on imports. Additionally, the expiration of critical import tariffs in 2026 may present challenges. Without continued or alternative policy support, domestic manufacturers could face difficulties competing with cheaper imports, which might hinder progress toward self-reliance.

Can India Meet the Demand?
India’s battery manufacturing ambitions are bold but achievable. With its diverse EV demand profile and strong policy framework, the country is well-positioned to scale its production capabilities. However, bridging the gap between planned capacity and actual production will require sustained government support, industry innovation, and infrastructure development.

The answer to whether domestic production can meet India’s growing EV demand lies not just in building factories but in building an ecosystem—one that integrates supply chain resilience, cost efficiency, and technological leadership. If India succeeds, it won’t just meet its demand; it could emerge as a global leader in the clean energy revolution.

- Pratik Kamdar, CEO and Co- Founder, Neuron Energy