The economic survey 2024-25, tabled in the parliament on January 31, has raised concerns over the country’s dependency on electric vehicle imports from China. This comes at a time when the government is pushing automakers towards mixed-powertrain options such as electric vehicle and flex-fuel vehicles to achieve net-zero emissions target.
“Electric mobility makes economic sense in a country which imports most of its oil and has abundant renewable energy and coal. However, it raises important challenges that need addressing. The import intensity of E-Vehicle production – especially from countries with whom India has persistent and large trade deficits- is very high. The extent to which electric mobility is incentivised in the short run needs to keep this factor in mind,” says the economic survey.
The development comes at a time when US President Donald Trump has reversed the Joe Biden administration’s decision on electric vehicles including funding and disbursements for charging infrastructure.
Notably, like US and European automakers, domestic automakers are heavily dependent on China for lithium-ion battery cells, and other raw materials, which are crucial for manufacturing of electric vehicles (EVs). Between April to October 2024, China was India’s top import market. Chinese imports surged 9.8% to $65.89 billion, as per the ministry of commerce. According to the economic survey, “India sources 75 per cent of lithium-ion batteries from China.”
“China commands a significant share of critical mineral processing and production globally. Across key commodities such as Nickel, Cobalt, and Lithium, China alone is responsible for processing 65%, 68% and 60% of the global output, respectively. Similarly, in the case of Rare Earth Minerals, China contributes to 63% of global mining and 90% of global processing output,” says the survey.
The economic survey expects the demand for lithium-ion battery to grow at a CAGR of 23% by 2027. “The lack of viable alternative battery technologies reinforces China’s dominant position in Lithium-ion batteries,” as per the economic survey.
Meanwhile, the economic survey, drafted by the by chief economic advisor V Anantha Nageswaran and his team, has called localisation of raw materials and technology for electric vehicle production as an urgent task. “Indigenising the technology and raw materials for electric mobility is an urgent task. Given India’s vast size and limited land availability, public transportation is a more efficient alternative for viable energy transition. Therefore, national-level policies and local nudges must promote and facilitate its use, going beyond the focus on tailpipe emissions of private transportation choices,” says the economic survey.
The government has allocated Rs 3,500 crore for the production-linked incentive scheme for the automobile and auto components in FY25. The government has also introduced the PM-E Drive scheme, which is an extension of FAME (faster adoption for manufacturing of electric and hybrid vehicles), with an outlay of Rs 10,900 crore till March 31.