India's EV Future at Risk: Why China's Critical Mineral Grip Demands Immediate Action
Fri, 20 Jun 2025
By Archita Anand
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India's Electric Vehicle (EV) revolution faces a critical challenge, not from technology gaps or consumer reluctance, but from our heavy reliance on China for the minerals that power every EV battery and motor. As Beijing tightens its grip on critical materials, our growing EV industry faces a significant threat that demands immediate action.
China's strategic moves have effectively weaponized the global supply chain. In July 2023, export controls were placed on gallium and germanium. This was followed by restrictions on antimony in August 2024. December 2024 saw the implementation of stricter graphite controls, and April 2025 brought further significant restrictions on seven rare earth elements and their associated magnets creating severe supply chain disruptions. This severe impact has led around 35 Indian importers to consider invoking 'force majeure' clauses. This legal provision protects parties from penalties when unforeseen, uncontrollable events, like these restrictions, prevent contract fulfilment, as delivery failures now threaten production stoppages.
For India, with total EV sales surpassing 2 million units in 2024, the timing of these actions couldn't be worse. This EV surge means India's demand for crucial components, heavily reliant on these minerals, is peaking. This leaves the country exceptionally vulnerable to supply disruptions precisely when its green mobility transition accelerates.
Global Auto's Precarious Dependence
The global automotive industry is in a state of high alert due to its extreme dependence on China for critical minerals. Factories worldwide face the imminent threat of idling as shortages of rare earth minerals, vital for everything from EV batteries to essential car components like windshield-wiper motors and anti-lock braking sensors, become more acute. This crisis stems directly from China's near monopoly; it controls 60% to 70% of the world's rare earth production and an even more dominant 85% to 90% of the processing and refining capacity. Despite efforts by automakers to diversify supply chains or develop alternative technologies, these initiatives are years away from the scale needed, leaving the industry deeply vulnerable to China's leverage over these indispensable materials.
Can India's green mobility transition survive supply chain warfare? The U.S. has announced deals on critical minerals, but it's America First, leaving India to find its own solutions. The answer will determine whether India becomes a manufacturing powerhouse or remains forever dependent on Beijing's goodwill.
Mounting Pressure on India's EV Sector
The impact of these restrictions is widespread and deeply concerning for the Indian automotive sector. While some manufacturers may currently have short to medium term inventory, the broader industry faces the risk of significant production constraints as rare earth shortages could severely affect motor manufacturing. This can lead to delays in vehicle delivery schedules and put considerable pressure on profit margins across the industry. Production costs are spiralling, and there are warnings of seriously impaired vehicle output if critical mineral supplies do not resume swiftly.
Most concerning, the crisis poses a significant risk to manufacturers. Production of both conventional and electric models could be suspended. Near-term electric vehicle targets may also be cut due to rare earth shortages. This scarcity, notably, impacts the entire automotive sector, not just EVs.
What's truly ironic is how Chinese EV brands, backed by their integrated supply chains, sail through these disruptions. Yet, Indian companies, despite our 'Make in India' push, are left scrambling for basic parts. It's a scenario where we inadvertently enable our own market displacement.
India's Policy Response: Bridging the Gaps
India has taken important steps. It launched the National Critical Mineral Mission (NCMM) in 2025, identifying 30 critical minerals. Further efforts include the Phased Manufacturing Program (PMP), outlining EV component localization, and this approach is central to the upcoming FAME III scheme. FAME III aims to boost EV adoption and charging infrastructure for various vehicle types. While these initiatives show India recognizes the challenge, the current crisis highlights significant gaps needing urgent attention.
While we've announced a Critical Minerals Mission and aim to source 10% of annual critical mineral demand domestically by 2031, building strategic reserves remains a work in progress. Despite having the world's third-largest rare earth reserves (estimated at 6.9 million metric tonnes by the US Geological Survey Report), India currently lacks the requisite extraction and processing capacity at scale, relying heavily on imports for refined rare earths, including 100% import dependency for lithium, cobalt, and nickel.
The National Mineral Policy 2019 addressed traditional minerals effectively but needs expansion to cover critical materials that will define the 21st century economy. The regulatory framework, while robust for conventional mining, needs adaptation for the speed required in critical minerals. Environmental clearances, essential for responsible mining, require streamlining for strategic projects without compromising environmental standards.
Securing India's Mineral Future
Rapid Response & Diversification
By expanding the existing Critical Minerals Mission with emergency procurement capabilities and strategic reserve building, India can secure its immediate needs. Diversification agreements with partners like Australia and Chile (with whom India has signed MoUs through KABIL to secure lithium, cobalt, and nickel) should be accelerated, building on current diplomatic initiatives. Enhanced coordination mechanisms at the Cabinet level need to be established to ensure faster decision-making across ministries. The government should also explore expediting import approvals from China for the short term.
Strategic Capacity Development
To scale up, India should prioritize the National Critical Minerals Processing Mission in mineral-rich states like Odisha and Jharkhand, building on existing PSU infrastructure. It needs to focus on developing its domestic refining and processing capabilities, which are currently a key bottleneck. The country must also expand PLI incentives beyond downstream manufacturing to include upstream processing. Companies like Amara Raja Batteries and Exide Industries are already making strides in domestic lithium-ion battery manufacturing, and their efforts should be further supported. Finally, India should strengthen partnerships through QUAD, I2U2, and other platforms for technology transfer and supply diversification, including exploring new sources in Africa and Latin America.
Fostering Mineral Self-Reliance
India must heavily invest in next-generation solutions like sodium-ion batteries, magnet-free motors, and advanced recycling. There is a need to mandate ambitious battery recycling targets, supported by the government's proposed ₹1,500 crore incentive to attract mineral recycling centres and recover critical minerals from mining waste. This will help create the vital secondary supply streams, fostering a circular economy that could slash India's primary critical mineral demand by nearly 18% by 2030. Ultimately, India needs to build robust domestic capabilities across the entire critical mineral value chain, from exploration and mining to refining, processing, and recycling.
The Path Forward
India's commitment to clean energy is conspicuous. Now, the focus must shift to securing the supply chains that will make these aspirations achievable. The current challenge, while serious, also presents an opportunity to build comprehensive domestic capabilities. With the right policy adjustments and strategic investments, India can transform from a supply chain dependent economy to a manufacturing leader in the global clean energy transition.
The choice is clear: we can either remain dependent on external supply chains that leave us vulnerable or build the capabilities that position us as a global leader in clean technology manufacturing. Beijing has shown it will use economic leverage as a strategic tool. Our response will determine whether India's clean energy transition remains resilient and self-reliant.
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India's EV Future at Risk: Why China's Critical Mineral Grip Demands Immediate Action
Share on:
India's Electric Vehicle (EV) revolution faces a critical challenge, not from technology gaps or consumer reluctance, but from our heavy reliance on China for the minerals that power every EV battery and motor. As Beijing tightens its grip on critical materials, our growing EV industry faces a significant threat that demands immediate action.
China's strategic moves have effectively weaponized the global supply chain. In July 2023, export controls were placed on gallium and germanium. This was followed by restrictions on antimony in August 2024. December 2024 saw the implementation of stricter graphite controls, and April 2025 brought further significant restrictions on seven rare earth elements and their associated magnets creating severe supply chain disruptions. This severe impact has led around 35 Indian importers to consider invoking 'force majeure' clauses. This legal provision protects parties from penalties when unforeseen, uncontrollable events, like these restrictions, prevent contract fulfilment, as delivery failures now threaten production stoppages.
For India, with total EV sales surpassing 2 million units in 2024, the timing of these actions couldn't be worse. This EV surge means India's demand for crucial components, heavily reliant on these minerals, is peaking. This leaves the country exceptionally vulnerable to supply disruptions precisely when its green mobility transition accelerates.
Global Auto's Precarious Dependence
The global automotive industry is in a state of high alert due to its extreme dependence on China for critical minerals. Factories worldwide face the imminent threat of idling as shortages of rare earth minerals, vital for everything from EV batteries to essential car components like windshield-wiper motors and anti-lock braking sensors, become more acute. This crisis stems directly from China's near monopoly; it controls 60% to 70% of the world's rare earth production and an even more dominant 85% to 90% of the processing and refining capacity. Despite efforts by automakers to diversify supply chains or develop alternative technologies, these initiatives are years away from the scale needed, leaving the industry deeply vulnerable to China's leverage over these indispensable materials.
Can India's green mobility transition survive supply chain warfare? The U.S. has announced deals on critical minerals, but it's America First, leaving India to find its own solutions. The answer will determine whether India becomes a manufacturing powerhouse or remains forever dependent on Beijing's goodwill.
Mounting Pressure on India's EV Sector
The impact of these restrictions is widespread and deeply concerning for the Indian automotive sector. While some manufacturers may currently have short to medium term inventory, the broader industry faces the risk of significant production constraints as rare earth shortages could severely affect motor manufacturing. This can lead to delays in vehicle delivery schedules and put considerable pressure on profit margins across the industry. Production costs are spiralling, and there are warnings of seriously impaired vehicle output if critical mineral supplies do not resume swiftly.
Most concerning, the crisis poses a significant risk to manufacturers. Production of both conventional and electric models could be suspended. Near-term electric vehicle targets may also be cut due to rare earth shortages. This scarcity, notably, impacts the entire automotive sector, not just EVs.
What's truly ironic is how Chinese EV brands, backed by their integrated supply chains, sail through these disruptions. Yet, Indian companies, despite our 'Make in India' push, are left scrambling for basic parts. It's a scenario where we inadvertently enable our own market displacement.
India's Policy Response: Bridging the Gaps
India has taken important steps. It launched the National Critical Mineral Mission (NCMM) in 2025, identifying 30 critical minerals. Further efforts include the Phased Manufacturing Program (PMP), outlining EV component localization, and this approach is central to the upcoming FAME III scheme. FAME III aims to boost EV adoption and charging infrastructure for various vehicle types. While these initiatives show India recognizes the challenge, the current crisis highlights significant gaps needing urgent attention.
While we've announced a Critical Minerals Mission and aim to source 10% of annual critical mineral demand domestically by 2031, building strategic reserves remains a work in progress. Despite having the world's third-largest rare earth reserves (estimated at 6.9 million metric tonnes by the US Geological Survey Report), India currently lacks the requisite extraction and processing capacity at scale, relying heavily on imports for refined rare earths, including 100% import dependency for lithium, cobalt, and nickel.
The National Mineral Policy 2019 addressed traditional minerals effectively but needs expansion to cover critical materials that will define the 21st century economy. The regulatory framework, while robust for conventional mining, needs adaptation for the speed required in critical minerals. Environmental clearances, essential for responsible mining, require streamlining for strategic projects without compromising environmental standards.
Securing India's Mineral Future
By expanding the existing Critical Minerals Mission with emergency procurement capabilities and strategic reserve building, India can secure its immediate needs. Diversification agreements with partners like Australia and Chile (with whom India has signed MoUs through KABIL to secure lithium, cobalt, and nickel) should be accelerated, building on current diplomatic initiatives. Enhanced coordination mechanisms at the Cabinet level need to be established to ensure faster decision-making across ministries. The government should also explore expediting import approvals from China for the short term.
To scale up, India should prioritize the National Critical Minerals Processing Mission in mineral-rich states like Odisha and Jharkhand, building on existing PSU infrastructure. It needs to focus on developing its domestic refining and processing capabilities, which are currently a key bottleneck. The country must also expand PLI incentives beyond downstream manufacturing to include upstream processing. Companies like Amara Raja Batteries and Exide Industries are already making strides in domestic lithium-ion battery manufacturing, and their efforts should be further supported. Finally, India should strengthen partnerships through QUAD, I2U2, and other platforms for technology transfer and supply diversification, including exploring new sources in Africa and Latin America.
India must heavily invest in next-generation solutions like sodium-ion batteries, magnet-free motors, and advanced recycling. There is a need to mandate ambitious battery recycling targets, supported by the government's proposed ₹1,500 crore incentive to attract mineral recycling centres and recover critical minerals from mining waste. This will help create the vital secondary supply streams, fostering a circular economy that could slash India's primary critical mineral demand by nearly 18% by 2030. Ultimately, India needs to build robust domestic capabilities across the entire critical mineral value chain, from exploration and mining to refining, processing, and recycling.
The Path Forward
India's commitment to clean energy is conspicuous. Now, the focus must shift to securing the supply chains that will make these aspirations achievable. The current challenge, while serious, also presents an opportunity to build comprehensive domestic capabilities. With the right policy adjustments and strategic investments, India can transform from a supply chain dependent economy to a manufacturing leader in the global clean energy transition.
The choice is clear: we can either remain dependent on external supply chains that leave us vulnerable or build the capabilities that position us as a global leader in clean technology manufacturing. Beijing has shown it will use economic leverage as a strategic tool. Our response will determine whether India's clean energy transition remains resilient and self-reliant.
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