China Inside: How India can break China’s hegemonic hold on critical minerals

After the West Asia war reignited concerns over India’s energy security, Prime Minister Narendra Modi made an appeal to citizens: use electric vehicles more to reduce the country’s fuel import bill. Indian car buyers responded by revving up demand for EVs. Sales of electric cars and scooters hit a record high in the following months.

Yet, underneath the gleaming exteriors of these electric vehicles lies a supply chain that remains deeply intertwined with that of China: most critical components—from battery cells to rare-earth magnets—are imported and built using critical minerals not available in India.

India’s dependence on China for these components has grown at a rapid pace. India’s lithium-ion cell imports surged 64% year-on-year to `41,667 crore in FY26, according to the commerce ministry data. Imports of lithium-ion cells have gone up five-fold over the past five years. China accounted for 84% of India’s lithium-ion cell imports in FY26. For rare earth minerals or magnets, the dependence is even higher at 85–90%.

India can ill-afford to rely on China, whose chokehold on its critical mineral supply chain was evident last year when it exerted its dominance in rare earth minerals by imposing curbs on magnet exports, leading to production constraints at Indian automakers.  

To become self-reliant in battery cells, the government rolled out a `18,100-crore Production Linked Incentive (PLI) scheme for Advanced Chemistry Cells (ACC). While 40 GWh of battery cell capacity was awarded to beneficiaries, cell production has barely begun. Only Ola Cell Technologies, a subsidiary of Bhavish Aggarwal-led Ola Electric that won a 20 GWh allocation, has started commercial operations, with 2.5 GWh capacity. It plans to scale up to 6 GWh this year.

Mukesh Ambani-led Reliance Industries, which bagged 15 GWh of cell capacity, has promised to complete its cell gigafactory by 2026. However, the conglomerate plans to assemble battery packs initially rather than getting into cell manufacturing. In its annual report, RIL said its Battery Energy Storage System (BESS) gigafactory is in advanced stages of commissioning with civil construction complete and equipment installation underway. Production is set to be ramped up through the second half of 2026, focusing on LFP (Lithium Iron Phosphate) chemistry for utility-scale BESS and mobility applications.

The other 5 GWh was awarded to ACC Energy Storage, a subsidiary of Rajesh Exports, which has been under Sebi scrutiny for inflating revenues and rerouting funds. Due to delays, no cell maker has received ACC-PLI (Advanced Chemistry Cells- Production Linked Incentive) yet.

India’s two legacy lead-acid battery makers Amara Raja and Exide lost out on the ACC-PLI scheme but are moving ahead without government incentives.

Amara Raja plans to invest `9,500 crore to set up a 16 GWh cell capacity in phases by 2030-31. “Our first 2 GWh cell gigafactory is expected to be commissioned in June next year,” says Vikramadithya Gourineni, executive director, Amara Raja Energy & Mobility.

Gourineni admits that things have slowed down. “We are dependent on equipment suppliers outside the country. Qualified technicians are not able to easily come for installation and commissioning of equipment. It’s a big challenge. It delays things quite a bit,” he says.

“There is a bit of policy uncertainty and conditions from China. There have been export controls and restrictions on technology access. Our own tech partnership has not gone ahead. It’s become an in-house effort. There have been some stumbling blocks,” he adds.

India’s entire lithium-ion cell demand is met through imports, making EV makers vulnerable to supply chain shocks.

“China took decades to build this with substantial policy support and coordination across the value chain. We need to be faster than that. Every company needs to find its niche to focus within the value chain. You have to have companies that do raw material extraction, refining and components. There needs to be an end-to-end value chain, from materials to cells to packs,” says Gourineni.

While the government is helping the industry by driving downstream demand creation from schemes such as PM e-Drive, Gourineni says there is a need to mandate domestic value addition. “Localisation has to increase. If we are forced to compete with global economies of scale while we are just getting started, it will be difficult,” he says.

CV Manohar, Head of Cell Research and Development at Tata Group-owned Agratas, agrees. “Continued localisation of supply chains and greater access to critical raw materials will play an important role in strengthening resilience and supporting long-term competitiveness,” he says.

Competing with China’s overcapacity in battery cells is not going to be easy for Indian cell manufacturers. Even though Amara Raja is investing `9,500 crore, it has no clarity on the price its customers are willing to pay for the cells. “Made-in-China prices are not realistic on Day 1,” says Gourineni. “We are investing billions of dollars. If the customer is not going to pay a premium for a cell made in India, where industrialisation is just taking place, that’s our biggest concern,” he adds.

“I will have to charge a higher cost because my own industrialisation is just starting. If you add domestic raw materials to that, it all adds up,” says Gourineni.

Lessons from ACC-PLI

Clearly, the battery PLI scheme has not yielded results yet. “The PLI was well intentioned. But there are a couple of things in hindsight where you can say that there is some learning. Even companies that had PLI had challenges outside their control. Their projected capacities have not appeared,” Gourineni says, adding that “a fundamentally different approach has to be taken.”

Under a PLI scheme, companies must first deploy capital and absorb all execution risks before getting financial benefits. “If a project burns through all that capital and is not able to succeed, no PLI would come,” says Gourineni.

Drawing a comparison with the India Semiconductor Mission, where capital subsidy is given, Gourineni says the government is underwriting a lot of the risk through the execution of the project. “If we have to look at different ways to incentivise cell manufacturing, there needs to be a way that the government also takes some of the risk during the execution of the project,” he says.

Unlike Amara Raja, being part of the Tata group gives Agratas several strategic advantages as it scales its business. Tata’s passenger vehicle and commercial vehicle businesses will be its anchor customers.

“Together, these strengths enable Agratas to accelerate execution, enhance resilience, and help build an integrated mobility and energy ecosystem,” says Manohar.

Agratas’ 20 GWh cell unit in Gujarat’s Sanand is expected to start production in 2027.

 

No customers

Developing a domestic ecosystem for upstream materials such as cathode and anode is turning out to be a chicken-and-egg situation as raw material producers await cell manufacturing to start.

“My customers are struggling because they don’t have their own technology and are getting bits and pieces. Increasingly, Chinese are restricting partnerships for technology. They don’t want to give anything. Across anode, cathode and cell, the Chinese government is not allowing partnerships with Indian companies,” says Vikram Handa, founder and managing director of Epsilon Advanced Materials.

Manohar says the greatest challenge arises when moving from promising laboratory results to reliable industrial-scale production during which safety, consistency, degradation control and cycle life are the key to success. “The toughest manufacturing challenge in battery cell production is achieving consistent yield at scale. Due to the extremely precision-intensive process, every step must be tightly controlled. Small deviations can quickly translate into defects, safety concerns and lower yields,” says Manohar.

For the Indian climate, the ideal chemistry is LFP because of lower overheating risk. “The challenge remains in technology. LFP today is only concentrated in China,” says Handa. LFP also reduces the country’s dependence on nickel and cobalt.

“Technology know-how is lacking. You can buy equipment from Japan and Korea with longer lead time. From China, it was available off the shelf. It’s a solvable problem. What’s not a solvable problem is how to run the factory, how to make a good cell,” says Handa.

India’s EV ambitions are vulnerable, says Handa. “Graphite is one thing that is totally China-centric. Tomorrow, if they say no graphite for the rest of the world, it’s not like I can pay $1 more and buy it from other countries. It’s just not available. Its processing technology and capacity don’t exist. If I was putting `4,000-5,000 crore into building a gigafactory in India, I would ensure multiple sources for the material that is most concentrated in China. I can buy lithium from five different places, only the price varies This is something for which I don’t have sources,” he says.

According to the International Energy Agency (IEA), China has also established a near monopoly on battery components production, supplying almost 85% of cathode active materials, including NMC (Nickel, Manganese, Cobalt) and LFP chemistries, and over 90% of anode active material production, predominantly graphite.

Cell manufacturers have to keep costs low for automakers and ESS (energy storage system) players. India-made cells are expected to be 25-30% costlier than China. “If cell makers buy everything from China at the cheapest price that they get and not buy anything locally, they are still 25% more expensive than a Chinese cell,” says Handa.

Without Indian customers, Epsilon is targeting 80% sales from exports to the United States. In the short term, the US is the real market because of energy storage and data centres. Korean giants like LG and Samsung have also set up cell manufacturing capacity in the US.

Epsilon currently makes graphite anode in India at its 2,000-tonne plant, which can cater to 2 GWh of cell capacity. It is looking to scale it up to 30,000 tonnes by mid-2028. “Even by that time, India will not be producing 30 GW of cells, so we will export a lot of it to customers in the US,” says Handa.

The company has also started a pilot line for cathode in Germany. “We are looking to build a 30,000-tonne plant in Karnataka. That will break ground before the end of the year and commission by early 2028. The 30,000 tonnes of cathode that we plan to make will cater to 15 GWh of cell making. For that, we will require 5,000 tonnes of lithium carbonate,” says Handa, adding that Epsilon will source lithium from China, Australia and South America.

Recycling to the rescue

Battery recycling can reduce India’s dependence on critical minerals in a meaningful manner. In base metals such as aluminum, copper and iron, anywhere between 30% and 50% of the production comes from recycled materials, says Lohum CEO Rajat Verma. Over the long term, anywhere between 30% and 50% production of critical minerals will come via recycling in the country, he says.

It’s already being seen in the lead-acid battery industry where most of the lead that is required for manufacturing comes from recycling, says Amara Raja’s Gourineni. “Recycling is dominating that value chain.”

Recycling can eventually provide a meaningful supply of critical minerals like lithium, nickel, cobalt and rare earths. “For a metal like cobalt, we can meet 60% demand from recycling. For metals like lithium carbonate, it is 70%, and for rare earths, 75%,” says Nitin Gupta, co-founder and CEO of battery recycler Attero.

According to NITI Aayog, India will have 92,000 tonnes of end-of-life lithium-ion battery from mobility, ESS, consumer electronics and production scrap by 2030.

The battery recycling market will be $10 billion by 2030, says Attero’s Gupta. “Even today, globally, 80% of batteries coming back for recycling are from production waste, where these batteries are manufactured. Every gigafactory globally has 10% to 25% of capacity as production waste,” he says.

Under the government’s `7,280 crore Rare Earth Permanent Magnet scheme, both Attero and Lohum have plans to get into magnet production as demand for rare earth magnets is projected to double from 4,000 tonnes in 2025 to 8,000 tonnes by 2030. Unlike lithium, where India is entirely dependent on imports, the country has reserves of rare earths. State-owned IREL (India) Ltd, the sole domestic producer of rare earth magnets, runs an extraction plant in Odisha and a refining unit at Aluva in Kerala. Another state-run firm KABIL (Khanij Bidesh India Ltd) has secured five lithium blocks in Argentina.

“India can break China’s hegemony globally by becoming a big battery recycling market,” adds Gupta.

 

@karandhar