Unlocking Supply Chains for Localizing Electric Vehicle Battery Production in India

India has aspirations to become a prominent player in the global battery industry. The national government’s launch of the Production Linked Incentive Scheme for Advanced Chemistry Cell Battery Storage (PLI-ACC scheme) in 2021 reflects the country’s desire to indigenize battery manufacturing. This aspiration is driven by several priorities such as bolstering energy security, promoting local value addition, and accelerating transport electrification and stationary storage deployment. However, to truly capture value across the battery supply chain, India will need to pursue backward integration with the high-value cell components segment as well as equipment manufacturing. Hence, there is a strategic imperative to identify the barriers to localizing the supply chain and recalibrate India’s industrial and trade policies to build a competitive battery ecosystem.

India has the potential to add value across the global battery supply chain. Its chemical sector expertise; technological prowess; favourable trade and geopolitical relations; and growing network of free trade agreements with mineral-rich countries offer several opportunities. As the fourth-largest manufacturer of automobiles, the transition from internal combustion engines to electric vehicles (EVs) provides a significant economic opportunity if India is able to indigenize battery manufacturing.

Based on the analysis undertaken in this report, we recommend that the government focuses on maximizing India’s comparative advantages in the battery supply chains, through the following steps:

• India should prioritize the localization of specific battery components such as synthetic anodes, electrolytes, and cell casings and pouches, through supportive regulations and trade and industrial policies. The presence of domestic suppliers, high cost competitiveness, and low intellectual property and tech reliance create an opportunity for India to scale up its production.
• The government should also incentivize the development of domestic cathodes since these are the highest-value components in a cell. Although India’s technology-agnostic approach can help build domestic capabilities for different battery types, it should prioritize the development of lithium ferro phosphate (LFP) cathodes, as they are lower cost and more suitable for India’s climatic conditions. The adoption of LFP cathodes can offset the need for increased imports of critical minerals such as cobalt and nickel.
• The government should support research and development efforts and incentivize commercialization of the next generation of battery technologies, such as sodium-ion and solid-state, to seize potential opportunities created by the next evolution of the battery industry.
• India must adopt clearer environmental, social, and government guidelines and targets, as well as establish robust reporting frameworks to enhance the export competitiveness of domestic battery companies.
• Increased public investment in setting up cell fabrication and testing centres with trained workers is essential to validate the quality of raw materials, components, and equipment.
• The government should incentivize a circular economy ecosystem by enabling the recycling of end-of-life batteries and improving the collection efficiency of used batteries.
• The government also needs to prioritize the localization of critical equipment used in cell manufacturing through technology partnerships and trade agreements with key allies.