India’s EV Localisation Drive Faces Rare Earth Curbs

India’s push for electric vehicle (EV) localisation under the Production Linked Incentive (PLI) scheme aims to reduce import reliance and boost domestic manufacturing. However, restrictions on rare earth imports, critical for EV batteries, pose challenges. The government’s focus on self-reliance aligns with its 30% EV adoption target by 2030, but supply chain hurdles must be addressed.

The PLI scheme for EVs, launched in 2021, offers incentives to manufacturers achieving 50% localisation by 2027. Companies like Tata Motors and Ola Electric have expanded local production, with India’s EV market growing 70% in 2024. The scheme supports battery manufacturing, aiming for 50 gigawatt-hours of domestic capacity by 2030. However, rare earth elements like lithium and cobalt, essential for batteries, are largely imported, with China controlling 60% of global supply.

In 2024, India imposed curbs on rare earth imports to encourage domestic mining and recycling. While this aligns with the Atmanirbhar Bharat initiative, it has disrupted supply chains, raising costs for manufacturers. Domestic lithium reserves are limited, and recycling efforts remain underdeveloped, with only 5% of batteries recycled in 2024. The government is exploring partnerships with Australia and Chile for raw material access, but these are yet to scale.

Technological innovation is critical. Indian firms are developing sodium-ion batteries, which use abundant materials, but these are not yet commercially viable. The PLI scheme has attracted $2 billion in investments, creating 50,000 jobs, but skill gaps in battery technology persist. Infrastructure challenges, like insufficient charging stations, also hinder EV adoption, with only 12,000 stations operational in 2025.

India’s EV push supports its goal to reduce transport emissions, which account for 14% of total emissions. Overcoming rare earth dependency and scaling infrastructure will determine the sector’s success.

Source: Outlook Business