India's electric vehicle (EV) dreams have long symbolised its aspirations for a cleaner, more self-reliant future. But today, those dreams risk stalling at the crossroads of geopolitics and supply chain fragility. With China's April 2025 export curbs on rare earth elements, a critical question looms: can India steer its EV revolution onto a resilient, independent path before it's too late?
The India EV revolution, which was running in high gear until some time ago, has now been thrown into turmoil, with manufacturers slashing their EV production targets across the board. Maruti, Tata, Mahindra, the two-wheeler giants - none has been spared. For the average Indian hoping to buy an affordable EV, these disruptions could soon mean higher prices, longer wait times and dwindling options. And with this, India's ambitious goal of 30% EV penetration by 2030 now hangs in limbo.
Importance of Rare Earth Elements
REEs are a group of 17 metallic elements, including samarium, dysprosium, and neodymium, which are critical to modern technology. They power everything from EV motors and missile systems to smartphones and wind turbines. China has achieved near-total dominance in this sector, not just by mining these elements but by mastering the far more complex process of refining them.
With an almost iron grip on global processing - controlling roughly 85% of the market - the latest curbs by the Red Dragon have restricted access to these elements, impacting not only the global defence sector but also commercial industries, such as clean energy and electric mobility.
A House of Cards
India's EV penetration has surged to 7.7% in 2024, a nearly fourfold jump from 1.75% in 2021. But this remarkable growth is marred by a heavy reliance on China. According to a CRISIL report, last year, India imported over 80% of its 540 tonnes of magnets, critical for manufacturing EV motors, from China. This dependency stems from the fact that domestic manufacturing has struggled to keep pace with sector demands, despite the government's Production Linked Incentive (PLI) push over recent years.
Ironically, India holds the world's sixth-largest deposits of rare earth elements - about 6.9 million metric tonnes - but has almost no domestic magnet production. The Economic Survey 2024-25 warned that EV production requires six times more minerals than conventional vehicles, with supply chains dangerously concentrated in a handful of countries, especially China. This stark reality exposes a brutal truth: India's electrification ambitions have outpaced its supply chain resilience planning. To make matters worse, Mint reports that the embargo and subsequent import hurdles could increase costs by as much as 8%, a burden likely to be passed on to customers. For India's cost-sensitive market, especially in the two-wheeler segment, this poses an existential challenge.
Supply Chain Disruption
The Centre for Science and Environment's State of India's Environment 2025 report highlights that component localisation has lagged due to a weak manufacturing base. Experts agree that building a full ecosystem - from mining to magnet production - demands sustained policy support, technical capacity, and major investment. Without swift action, India remains vulnerable to external shocks and geopolitical risks.
While many states have launched EV policies with strong demand incentives, few have addressed supply chain security. Most rely on the Centre, and no state mandates local sourcing of critical components like batteries or motors. The PM-EDRIVE scheme does include localisation criteria, but state policies generally focus on consumer subsidies over R&D.
Maharashtra stands out as an exception. Its policy explicitly promotes supply chain resilience and circularity, allocating ₹15 crore toward R&D in sodium-ion batteries, magnet-free motors, and recycling technologies. However, these efforts are still in early stages, and their outcomes will take time to unfold. Overall, sub-national policies have yet to fully grapple with the risks posed by global supply chain disruptions.
Reducing Dependency
Private participation in critical mineral mining became possible only after the 2023 amendment to the Mines and Minerals Act. Until then, IREL (India) Ltd held a monopoly, with rare earths classified as atomic minerals under the Atomic Energy Act. Following the reform, the government auctioned 13 exploration blocks in March 2025. Since then, progress has begun. Vedanta's subsidiary, Hindustan Zinc, recently announced plans to mine and process neodymium, a key input for permanent magnets. Sona Comstar - India's largest importer of rare earth magnets from China and a major supplier to Tesla and Stellantis - has also declared its intention to localise production and reduce dependence on Chinese imports.
However, the transition from exploration to actual production takes time. The lithium auction in Jammu & Kashmir illustrates this challenge: despite relaxed rules, both rounds failed due to limited geological data, small block sizes, and technical complexities. This gap between ambition and on-ground readiness remains a key hurdle. Still, the liberalisation of mining policy marks a crucial step toward reducing import dependence and building a resilient domestic rare earth supply chain.
A Bloomberg report indicates the government may temporarily ease localisation norms to allow imports of fully-built motors. While this offers short-term relief, it does little to advance long-term atma-nirbharta. What's needed is a strategic, well-resourced response.
First, KABIL's overseas mineral missions in Argentina, Australia, and Chile must be fast-tracked to shield India from future supply shocks. Second, a strong circular economy push is vital - scaling battery recycling can recover up to 90% of critical minerals like lithium and cobalt. Third, the Economic Survey 2024-25 calls for greater R&D investment in next-gen batteries like sodium-ion to further de-risk and secure supply chains, along with tech transfer agreements to share costs and diversify supply chains.
Fewer EVs today, Resilience Tomorrow?
The supply chain shock is already visible - Maruti has slashed production targets for its upcoming EV, an early warning sign. If rare earth shipments don't resume soon, Indian manufacturers may be forced to import fully built motors from China, raising costs by 5-10%. Ironically, this disruption may succeed where years of policy have fallen short: pushing India toward genuine automotive self-reliance.
While diplomatic outreach to China is underway, it remains a short-term fix. Meanwhile, the Hon'ble Prime Minister's recent visit to Ghana set the tone with a high-stakes agreement on rare earth mineral mining - an important step toward long-term resilience. As RMI notes, India's success in renewable energy proves that self-sufficiency is achievable when backed by coherent, risk-aware policy.
With global uncertainties mounting, India must accelerate efforts to localise its EV supply chain. The question isn't whether rollout will be slow - it will - but whether this crisis will finally drive the structural reforms needed to secure India's electric future.
(Shravan Engineer is a consultant with the Energy Policy Institute at University of Chicago)
Disclaimer: These are the personal opinions of the author
