There is a need to design subnational support measures that de-risk midstream and upstream battery investment, and provide dedicated policy support for R&D investments
The shift towards electric mobility presents India with a rare opportunity to build a globally competitive manufacturing ecosystem encompassing battery motors, power electronics and vast landscape of components and sub-assemblies. With its vast domestic market backed by consistent policy support, cost competitive manufacturing base and growing talent pool, India is uniquely positioned to gain maximum value out of the emerging EV value chain globally.
While national policy measures like the PM-E Drive, PLI schemes and various other incentives give broad national directions, state governments hold the key levers that shape manufacturing decisions. At the same time, the competitive dynamic among states has the potential to accelerate the pace of localization faster than any single national policy could.
“EV manufacturing requires an industrial configuration that is capital-intensive, electronics- and battery chemistry-driven, and significantly more exposed to global supply chains than conventional automotive manufacturing. Net localization for several high-cost EV components─such as batteries, motors, DC-DC converters, and on-board chargers─is increasing but remains low in India despite several central government and state government policies,” a latest study by the International Institute of Sustainable Development (IISD) has pointed out.
The study that examined the subnational policy landscape for EV and battery manufacturing across leading automotive states in India, found that at least 14 state governments “provide financial support through capital expenditure or operating expenditure-reducing measures for localizing EV and battery manufacturing, indicating a growing ambition among Indian states to attract investments in the sector.”
Fig 1: EV Manufacturing Unit/ Pic Reuters
Localisation Of EV Manufacturing: Key Highlights
The study titled States in the Drivers’ Seat found that supply-side EV and battery policies are beginning to translate into investments spanning across the EV value chain. “These investments reflect early but tangible progress on localization across the value chain but are leading to geographically dispersed manufacturing outcomes,” it said.
It argued that localization is also not only dependent on central policies but sub-national governments have a key role to play in it as they control critical levers like land acquisition, power tariffs, logistics infrastructure, and regulatory clearances. These in turn determine EV and battery manufacturing competitiveness and investment decisions, it said.
“Alignment between centre and state policies strengthens the overall incentive stack. State incentives can reduce location-specific costs, while central government incentives reward production and value addition. Targeted policy instruments that address specific cost barriers, especially for midstream (such as production of cathode active materials, precursor materials) and upstream (critical minerals mining or sourcing) segments of the value chain, are needed at the state level for deepening localization," the study pointed out.
The study also came out with its own set of recommendations for both the central as well as the sub-national governments. On one hand, it suggests designing subnational support measures that de-risk midstream and upstream battery investment, it also recommended providing dedicated policy support for research and development investments, patent filing, and strategic intellectual property creation in the battery value chain.
“Conduct fresh rounds for Production Linked Incentive Auto to increase industry participation as downstream manufacturing for EV original equipment manufacturers and component suppliers matures. Also develop project preparation facilities and plug-and-play industrial land infrastructure at the state level to further accelerate cell and battery manufacturing,” it said.
There is also a need to bridge the skill gap by establishing a dedicated skilled workforce development program for EV and battery manufacturing, it said, adding that introducing “clear public procurement and phased zero-emission vehicle mandates” will help in ratcheting up demand and reduce market risk for domestic manufacturers.
The states that will truly power India's electric future are those that see the EV transition not just as a shift in mobility, but as a holistic strategy for industrial growth. This strategy involves integrating manufacturing investment, workforce skill development, supply chain strengthening, and the expansion of clean energy.
About the Author
