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Aspiring to become a ‘developed’ nation by 2047 under the Viksit Bharat vision, India must balance its growth trajectory with difficult sustainable development commitments. India’s dual objectives of achieving net-zero emissions by 2070 and reducing carbon intensity by 45 percent by 2030 have underscored the critical importance of driving an energy transition within the urban sector. Among various alternative energy sources, electric vehicles (EVs) have emerged as a fundamental pillar of this transformative strategy. However, the shift towards e-mobility signifies more than mere technological progress; it necessitates a comprehensive restructuring of India’s energy security architecture, integrating sustainable mobility with clean energy generation, distribution, and infrastructure planning.
The positive trends in India’s EV penetration are dependent on the availability of critical minerals to meet its energy transition targets. For instance, the lithium-ion batteries that drive this revolution require a combination of essential minerals, including lithium, cobalt, nickel, graphite, and rare earth elements, which form the foundation of contemporary e-mobility. These are the vital strategic assets that determine the sustainability of industrial systems and the self-sufficiency of national development trajectories.
India must also adopt robust policy and regulatory frameworks to sustain and augment incentives for indigenous manufacturing and R&D initiatives, while considering the imposition of anti-dumping duties to mitigate distortive competitive practices.
In this scenario, China’s methodical consolidation of control over the critical mineral supply chains poses significant challenges. Unless addressed urgently, India’s resource dependencies may jeopardise its strategic autonomy, posing vulnerabilities well beyond straightforward business concerns.
India’s EV Policies
India launched its National Electric Mobility Mission Plan (NEMMP) 2020 in January 2013, aiming to establish national fuel security through the adoption of e-mobility. The plan laid the groundwork for India’s EV ecosystem, targeting 6 to 7 million electric and hybrid vehicle sales annually by 2020, while working to reduce energy dependence and lower vehicle emissions.
Two years later, the NEMMP received further momentum with the launch of the FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme. FAME-I (2015), with a budget outlay of INR 895 crore, aimed to promote technological development, demand generation, pilot projects, and charging infrastructure. Over the course of its four-year implementation phase, FAME-I supported 278,000 EVs, sanctioned 425 electric and hybrid buses, and 520 charging stations.
FAME-II was launched in 2019 with an increased outlay of INR 11,500 crore to scale up India’s e-mobility sector, with 86 percent of the funds earmarked for demand incentives. By March 2024, FAME-II supported over 15.4 lakh EVs, sanctioned 2,877 charging stations across 68 cities, and supported 6,300 electric buses. The government launched the PM E-DRIVE scheme in September 2024, aiming to facilitate 28.8 lakh EV sales and 72,300 charging stations by 2026.
However, despite such supportive policies and investments, India faces a formidable challenge in achieving self-reliance. China satisfies more than 85 percent of India’s lithium-ion battery imports. Over the last five years, India has purchased more than US$7 billion worth of Chinese batteries, raising concerns that the country is fast transforming into an ‘ EV colony’ controlled by its regional competitor. The challenge exacerbates because India lacks sufficient access to essential raw materials, which account for more than 80 percent of the battery’s cell cost.
China’s Control of the Critical Mineral Market for EV Batteries
China’s dominance over critical minerals needed for EV batteries demonstrates its strategic heft in this space and poses a significant strategic challenge to the global clean energy transition. Chinese control spreads across various value chain dimensions, creating multiple layers of dependency that transcend simple market statistics.
India must adopt a pivotal strategy to enable the strategic diversification of supply routes for acquiring critical minerals for Ev sector.
While China controls over 90 percent of global graphite refining operations, it also processes 60 percent of the world’s lithium, 73 percent of cobalt, 68 percent of nickel, and 90 percent of magnet production. The international overdependence on China for the processing of these minerals has created critical supply chain bottlenecks. However, the challenge extends far beyond reliance on China for processing. China produces 61 percent of global natural graphite and 98 percent of the final processed material, preventing other countries from independently manufacturing batteries without Chinese participation. Consequently, the world has yet to duplicate China’s expertise in the tedious rare earth separation process, which involves up to 15 stages to achieve the 99.9 percent purity required for EV batteries. This situation has led to the weaponisation of critical minerals by China, allowing Beijing to use supply chain dependencies as a tool to assert its geopolitical dominance. For India, currently grappling with the dual challenge of maintaining steady economic growth and its international climate commitments, China’s dominance poses a significant threat to its domestic EV development plans.
China’s weaponisation of critical minerals became evident when it imposed export controls in 2023, which peaked in April 2025, with export restrictions on seven rare earth elements, including samarium, gadolinium, terbium, dysprosium, and lutetium. Additionally, China has made export licensing a laborious process, contributing to customs delays and further disrupting global supply chains, thereby enabling its control through the selective approval or denial of exports to suit its political agenda.
India’s Critical Vulnerability
India possesses 6.9 million tonnes of rare earth reserves but lacks the necessary advanced processing facilities to transform these resources into battery-grade materials. The country imports more than 90 percent of its lithium, cobalt, and nickel requirements from foreign sources, yet it operates without any magnet production facilities. The Indian Rare Earths Limited (IREL) produced 531,000 tonnes of rare earth elements (essential for EV battery production) in 2024. However, this figure represents only basic extraction, as rare earth separation and refining require a high level of expertise, which no other country currently possesses, except China. Experts forecast that developing domestic processing capabilities will require up to seven years to establish commercial supply chains, leaving India vulnerable to Chinese supply disruptions during its crucial EV transition phase.
The Way Forward
To mitigate India’s strategic vulnerability to external supply disruptions, particularly concerning critical minerals essential for EV batteries, it is imperative to enhance indigenous extraction and processing capabilities substantially. This enhancement requires focused capital deployment across the entire value chain, from geological prospecting and extraction to advanced refining processes. Furthermore, the government should accelerate the operationalisation of the proposed INR 5,000 crore incentive framework for rare earth minerals and magnet production, streamlining regulatory clearances, facilitating financial assistance, and actively engaging the private sector.
For India, currently grappling with the dual challenge of maintaining steady economic growth and its international climate commitments, China’s dominance poses a significant threat to its domestic EV development plans.
It must adopt a pivotal strategy to enable the strategic diversification of supply routes. Such diversification can be achieved through the cultivation of international alliances and collaborative ventures with resource-abundant nations, including Australia, as well as various countries in South America and Africa, thereby securing alternative critical mineral supplies. Enhanced cooperation with aligned geopolitical entities, such as Japan, the United States (US), and the European Union (EU), is crucial for fostering technology exchange, jointly developing advanced extraction and processing methodologies, and collectively reinforcing supply chain resilience.
Parallel efforts in advancing research and development (R&D) are paramount. Fostering R&D into novel battery chemistries, including sodium-ion, aluminium-based, and manganese-based alternatives, will serve to diminish dependence on conventional materials such as lithium, cobalt, and nickel. Moreover, incentivising innovation in environmentally benign mining practices, such as green mining and bio-mining, alongside the development of more efficient extraction technologies, can significantly bolster the sustainability profile and curtail the ecological footprint of indigenous mineral processing activities.
India must also adopt robust policy and regulatory frameworks to sustain and augment incentives for indigenous manufacturing and R&D initiatives, while considering the imposition of anti-dumping duties to mitigate distortive competitive practices. Furthermore, reducing customs duties on 25 designated critical minerals and decreasing the basic customs duty on silicon materials are crucial to enhancing the cost competitiveness of domestic manufacturing and fortifying supply chain resilience.
Veer Puri is a Research Assistant at the Observer Research Foundation.
Nandan H Dawda is a Fellow with the Urban Studies programme at the Observer Research Foundation.
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