From imports to Made-in-India: Why localising EV manufacturing is key

One of the biggest shifts underway is the transition to electric vehicles (EVs), in alignment with 2030 Panchamrit goals. EV adoption is growing rapidly, fueled by government policies, gradually declining vehicle costs, and expanding charging infrastructure.

The Indian automotive industry, valued at approximately USD 240 billion (INR 20 lakh crore), is a crucial driver of the country’s economy, supporting nearly 30 million jobs. With India ranking among the top global manufacturers of two-wheelers (top 2), three-wheelers (largest manufacturer), passenger vehicles (top 4), and commercial vehicles (top 5), the sector is poised for significant transformation. One of the biggest shifts underway is the transition to electric vehicles (EVs), in alignment with 2030 Panchamrit goals. EV adoption is growing rapidly, fueled by government policies, gradually declining vehicle costs, and expanding charging infrastructure.

The share of EVs in Indian automotive market is expected to be over 40% by 2030, generating revenue of over USD 100 billion (current penetration levels stand at 6.6%). The industry attracted nearly USD 850 million in deal activity in 2024, with EV sector accounting for almost 50% of the automotive industry’s total deals. In the short term, electric two-wheelers and three-wheelers are driving this growth, while electric four-wheelers are expected to gain traction in the longer run.

Despite these advancements, India remains heavily reliant on imported components for EV production, posing a significant challenge to long-term industry growth. As per the recent economic survey, the import intensity of EV manufacturing is particularly high for components sourced from countries with which India has large trade deficits. Critical EV components such as batteries, traction motors, power electronics, integrated chips, and advanced PCBs are largely imported- increasing costs, supply chain vulnerabilities, and dependency on foreign players.

Even though the government has introduced policies like the Production Linked Incentive (PLI) scheme and state-level incentives to encourage domestic manufacturing, local component and vehicle production remains limited, making EVs costlier and less competitive in the global market.

The localisation of EV component manufacturing is crucial, yet several impediments make it challenging. One major hurdle is critical mineral dependency. EVs require rare minerals like lithium, cobalt, and nickel, which India currently does not mine or refine at scale.

Additionally, there is a limited domestic production of EV-grade materials such as high-purity steel, aluminum, copper, and thermoplastics, leading to hesitation among manufacturers to invest in local production due to uncertain demand. Another challenge is the shortage of locally manufactured EV components—most traction motors, advanced power electronics, and battery management systems are still imported, limiting India’s ability to build a self-reliant EV ecosystem.

Beyond materials and components, the high cost of R&D and testing further discourages investment in domestic EV manufacturing. Developing cutting-edge EV technologies requires substantial capital, and many companies remain hesitant due to the early-stage nature of the Indian EV market. Additionally, prohibitive costs of testing and validation increase overall time and expenses. Another challenge is the dependence on imported machinery—many of the specialised machines needed to manufacture EV components are sourced from overseas, further adding to costs and import reliance.

The lack of standardised charging infrastructure also poses a challenge. Without a uniform charging ecosystem, manufacturers struggle to align their product designs, making it harder to achieve scale. Moreover, there is a shortage of specialised talent in power electronics, control systems, and system integration, all of which are critical to EV innovation. Without skilled professionals, India risks lagging in advanced EV technology development. Components unique to EVs (battery, powertrain and power electronics) account for 65-80% of EV’s cost- with battery and related components making up the highest cost between 35-50%, across vehicle categories.

India participates in certain stages of the battery pack manufacturing eco-system. Currently, manufactured cells are imported from China, Japan and South Korea and assembled into modules and battery packs. This has led to higher costs of batteries and consequential increase in EV prices and keeping domestic EV market exposed to volatility of global supply chain. Given below is a granular picture of critical EV components and their localisation levels.

Currently, EV component manufacturing in India is still in its nascent stages, requiring significant industry-government intervention to scale up. Focus towards enhancing existing policies, expanding financial incentives, and supporting R&D efforts is required to encourage large-scale domestic manufacturing. At the same time, OEMs and auto component players need to increase investments in local production facilities and develop strategic partnerships for technology transfer. Building a robust supply chain, securing raw material sources, and investing in skilling initiatives will be key to establishing India as a global hub for EV component manufacturing.

Basis Grant Thornton Bharat’s analysis of 11 key EV components and their child parts, they are categorised based on their domestic dependency and investment/skills needed for assembly:

In the current global trade climate, where volatile supply chains pose significant risks, it is imperative for India to localise its EV value chain to achieve its penetration targets. Simultaneously, the global race for critical minerals—essential for EV batteries and semiconductor manufacturing—is intensifying.

While the U.S. has refrained from imposing new tariffs on these resources, India continues to face stiff competition in securing stable and affordable access. Given China’s dominance in refining over 60% of the world’s lithium, nickel, and cobalt, India’s reliance on external supply chains presents a strategic risk that must be addressed through policy support, global partnerships, and domestic capacity building. Strengthening domestic manufacturing will not only enhance technological growth but also position India as a globally competitive player in alternate fuel technologies, ensuring long-term industry resilience and leadership.

Astha Malik, Manager, Grant Thornton Bharat, also contributed to this article.

This article first appeared in ETManufacturing on 8 April 2025.