By: Rahul Koul
Last updated : August 19, 2025 9:47 am
India’s electric vehicle sector is gaining momentum amidst growing consumer interest yet with challenges in infrastructure, affordability, and supply chains
As the world races toward decarbonization and digital transformation, the electric vehicle (EV) ecosystem has emerged as a focal point of innovation, investment, and policy reform. The backbone of this transformation lies not just in the vehicles themselves, but in the critical building blocks that power them: advanced semiconductors and battery chemicals. Together, these industries form a complex and interdependent value chain that is rapidly evolving under the pressures of global demand, supply chain shifts, and technological breakthroughs.
EV adoption is scaling rapidly across major global markets, driven by climate goals, rising fuel prices, and government mandates. In 2025, global EV sales are projected to surpass 17 million units, with key growth markets like China, Europe, and increasingly, India and Southeast Asia, expanding their EV infrastructure.
In 2024, India's passenger EV production surged by 22.5 per cent year-over-year, reaching approximately 125,500 units. This growth is primarily attributed to the rising demand for electric two-wheelers, which dominated the market with sales of around one million units in the financial year 2024. In India, ambitious initiatives like the FAME II scheme, PLI programs, and state-level EV policies are pushing both demand and manufacturing capacity. Major OEMs and startups alike are developing two-wheelers, three-wheelers, and passenger EVs, supported by growing investments in charging infrastructure and fleet electrification.
Semiconductors: Critical yet constrained
Semiconductors are the digital brains of EVs, enabling everything from battery management systems to autonomous driving capabilities. However, global chip shortages that began in the post-pandemic recovery continue to affect production cycles and cost structures. EVs require far more chips than ICE vehicles—nearly 2-3 times more—putting additional pressure on an already strained supply chain.
India is currently the world’s second-largest consumer of semiconductors, with demand expected to reach USD 110 billion by 2030, up from around USD 24 billion in 2022. This growth is driven by the rapid expansion of smartphones, automotive electronics, EVs, industrial IoT, telecom equipment (especially 5G), consumer appliances, and defense electronics. Despite this surging demand, India has historically had no commercial-grade semiconductor fabs, relying heavily on imports from Taiwan, South Korea, China, and the U.S.—a vulnerability highlighted during the global chip shortages of 2020–2022.
India is actively trying to localize part of this supply chain through the Semicon India initiative, attracting partnerships from global giants to build fabrication and ATMP (Assembly, Testing, Marking, and Packaging) units. The challenge lies in balancing capital-intensive chip manufacturing with long-term demand certainty.
While fabrication is nascent, India is already a global leader in semiconductor design, with over 20 per cent of the world’s chip design engineers based in the country. Nearly all major semiconductor companies—including Intel, Qualcomm, MediaTek, AMD, and Texas Instruments—have R&D and design centers in India. In terms of early movers in the segment, Micron Technology is setting up a $2.75 billion ATMP plant in Gujarat, marking the first significant foreign investment in India’s semiconductor ecosystem. Tata Electronics has signed a MoU with Powerchip Semiconductor Manufacturing Corp (Taiwan) to establish a semiconductor fab in Dholera, Gujarat, with an estimated investment of over $11 billion. Vedanta-Foxconn had initially announced plans for a large-scale fab, but the deal was restructured after Foxconn exited the joint venture. Sahasra Semiconductors has already begun chip packaging operations in Rajasthan. ISRO and DRDO are also pushing for indigenous chip development for defense and aerospace applications.
Battery Chemicals: The supply chain hotspot
Battery chemicals—particularly lithium, cobalt, nickel, and manganese—have become geopolitically sensitive and commercially critical. Prices of key materials have seen significant volatility, impacting cell manufacturing economics. At the same time, there’s an urgent push toward developing alternative chemistries, such as sodium-ion and solid-state batteries, to overcome sourcing and safety limitations.
The battery chemicals market, valued at approximately $1.2 billion in 2022, is expected to grow at a compound annual growth rate (CAGR) of 13-15 per cent from 2023 to 2030, driven by the increasing adoption of EVs. However, challenges persist, including reliance on imported raw materials and the need for technological advancements in battery production. Addressing these challenges is crucial for India to establish a robust and self-reliant EV and battery ecosystem.
India is investing in domestic refining capacity for battery materials and exploring overseas mining partnerships, particularly with countries in South America and Africa. To meet the escalating demand, India's lithium-ion battery manufacturing capacity is projected to expand from 18 GWh in 2023 to 145 GWh by 2030. This expansion is bolstered by the government's Production-Linked Incentive (PLI) scheme, which aims to establish 50 GWh of battery cell capacity by 2026. Notable corporate initiatives include Reliance Industries securing a bid to produce up to 10 GWh of advanced chemistry cells under the PLI scheme, and Amara Raja Energy and Mobility's licensing agreement with China's Gotion High Tech Co. to produce lithium-ion batteries in India.
Fast paced dynamic deals
Tata Motors, India's leading EV manufacturer, is focusing on locally produced EV batteries to maintain its competitive edge amid intensifying competition. The company's EV market share declined to 62 per cent in 2024 from 73 per cent in 2023 as competitors like JSW MG Motor gained ground. Other automakers, including Mahindra & Mahindra, Hyundai, Maruti Suzuki, and Tesla, are also entering the Indian EV market. Tata Group plans a $1.5 billion investment in a battery gigafactory in India, expected to start production by 2026, to integrate its supply chain further. This move aims to secure the supply of the most costly component of EVs—lithium-ion battery cells—by 2028. Tata Motors is leveraging funding from U.S. private equity firm TPG and India's EV incentive program to support its investments.
In a significant joint venture, India's largest steel producer, JSW, and Chinese carmaker SAIC Motor have established a $1.5 billion partnership to produce and market MG-brand electric vehicles in India, with plans to invest $5 billion by 2030. They aim to reduce costs by sourcing locally, including batteries from a new plant in Odisha. JSW will hold 51 per cent of the joint venture, with SAIC holding 49 per cent. The venture, JSW MG Motor India, plans to release new models every three to six months starting in October. This partnership highlights the shift towards electric vehicles in India, despite challenges such as higher costs compared to combustion-engine cars. Amid regulatory hurdles due to geopolitical tensions, Indian partnerships like this are crucial for Chinese companies. India's EV market, currently led by Tata, is gradually expanding with new entrants like VinFast, Tesla, and Suzuki. The Indian government recently reduced import tariffs on EVs for companies investing in local production, further encouraging market growth.
Amara Raja Energy and Mobility has entered into a licensing agreement with Gotion-InoBat-Batteries, a unit of China-based Gotion High Tech Co., to produce lithium-ion batteries in India. Under this agreement, Amara Raja will access Gotion's lithium iron phosphate technology and receive support to establish gigafactory facilities, integrating into Gotion's global supply chain. Gotion, with German automaker Volkswagen as its largest shareholder, specializes in lithium-ion batteries for new energy vehicles. Indian automakers currently import batteries mainly from China and South Korea but are increasingly investing in domestic lithium-ion battery production. Amara Raja's competitor, Exide Energy Solutions, partnered with SVOLT to build a lithium-ion battery plant expected to start operations this year. Additionally, Hyundai and Kia signed an MOU with Exide to supply batteries for their electric vehicles. Earlier this year, Amara Raja, Reliance Industries, and JSW Neo Energy were among companies that submitted bids to set up battery manufacturing gigafactories in India.
Reliance Industries has secured a bid under India's incentive program to produce electric vehicle (EV) batteries. The company will manufacture up to 10 gigawatts of advanced chemistry cells (ACCs), essential for EV production, in order to support the country's goal of increasing electric car usage. The production-linked incentive (PLI) scheme, aimed to enhance local battery manufacturing, has allocated $434.4 million.
Hyundai Motor Group has announced a partnership with three premier Indian Institutes of Technology (IITs)—IIT Delhi, IIT Bombay, and IIT Madras—to establish a collaborative research framework focused on batteries and electrification.This initiative aims to revolutionize the development of electric vehicle (EV) technologies tailored for the Indian market. The partnership's centerpiece, the Hyundai Center of Excellence (CoE), will be established at IIT Delhi and will operate with sponsorships from Hyundai Motor Group. The CoE will spearhead advancements in battery technology and electrification while also fostering talent development and academic-industrial cooperation. Hyundai Motor Group plans to invest USD 7 million over five years (2025-2029) to conduct research in battery technology, electrification, and future technologies, including software and hydrogen fuel cells.
Overcoming challenges
A major hurdle is the heavy dependence on imports for critical battery materials such as lithium, cobalt, and nickel. Despite the government’s efforts to secure overseas lithium blocks, over 70 per cent of India’s lithium-ion cell requirements were met through imports in 2024, primarily from China, South Korea, and Japan. This dependence exposes the industry to global price fluctuations and geopolitical risks.
Another significant challenge is the lack of a well-developed domestic battery manufacturing ecosystem. While India has announced plans to reach 145 GWh of battery manufacturing capacity by 2030, the current operational capacity in 2024 stood at less than 20 GWh. Most of this capacity is in the early stages of setup, and delays in land acquisition, infrastructure, and technology transfer are common.
Cost is also a major barrier, with EVs priced 20 per cent to 40 per cent higher than their internal combustion engine counterparts. Battery costs, which constitute 35 per cent to 45 per cent of an EV’s total cost, remain a key contributor to this price differential. The slow pace of technology indigenization further aggravates this cost disparity, making EVs less attractive in the mass market despite subsidies under the FAME II scheme and state-level incentives.
Charging infrastructure remains sparse and unevenly distributed. As of mid-2024, India had around 12,000 public charging stations, with more than 60 per cent concentrated in urban centers. This inadequacy in infrastructure hampers EV adoption in Tier 2 and Tier 3 cities, where growth potential is significant.
On the environmental front, concerns are growing over the future disposal and recycling of used batteries. India lacks a comprehensive battery recycling policy and has limited recycling capacity for lithium-ion batteries, posing a potential ecological risk as volumes grow. Additionally, the energy-intensive nature of battery production raises questions about the overall sustainability of the supply chain, particularly when reliant on coal-powered grids.
Workforce skill gaps and limited R&D capacity also hinder industry innovation. While global automakers and battery makers are entering the Indian market, domestic firms are still catching up on advanced cell chemistries such as solid-state batteries and lithium iron phosphate (LFP) technologies. Without robust investments in research, partnerships with global technology providers, and upskilling of the technical workforce, India risks lagging in the global EV transition.
Building synergy for a sustainable tech future
India's EV industry is poised for significant expansion in 2025 and beyond. In 2025, production of battery-powered passenger vehicles in India is projected to increase by 140.2 per cent year-over-year, reaching approximately 301,400 units, which would constitute about 6 per cent of the estimated 5.16 million passenger vehicles produced that year. This surge is attributed to heightened consumer awareness, favorable government incentives, and advancements in EV technology. Major industry players are making significant investments to strengthen the domestic supply chain. For instance, Tata Group plans to invest $1.5 billion in a battery gigafactory in India, expected to commence production by 2026, aiming to secure the supply of lithium-ion battery cells by 2028.
India is actively seeking technical assistance from countries such as Australia, the United States, and Bolivia to develop domestic lithium processing capabilities and reduce reliance on imports. Additionally, companies like Vedanta are expanding nickel sulfate production to meet the growing demand for battery materials.
With strong government backing, private sector investments, and increasing global interest in a China+1 strategy, India has the opportunity to carve out a significant role—especially in chip packaging (OSAT), legacy node fabrication (28nm+), compound semiconductors, and automotive-grade chips. The real inflection point will come when the first fabs begin operations and India can demonstrate reliability, scalability, and cost-effectiveness. As the world seeks resilient semiconductor supply chains, India is positioning itself as not just a market, but a maker.
The transformation of transportation is not happening in silos. The EV industry’s growth is critically dependent on robust semiconductor supply chains and reliable access to battery-grade materials. Governments and companies are now working more collaboratively across these sectors to ensure long-term competitiveness and sustainability. For India and other emerging markets, the opportunity lies in creating integrated ecosystems where innovation, policy, and manufacturing capabilities converge. Cross-sector synergy will be the defining force that determines who leads the next phase of the global mobility and clean energy transition.
Strategic investments, international collaborations, and supportive policies are expected to drive substantial growth, positioning India as a significant player in the global EV market in the coming years.