EV Localisation Surges in India, With Chips and Rare-Earth Magnets Remaining Key Challenges

India could achieve 90–100 percent localisation across several high-value electric vehicle (EV) component categories, excluding batteries, by 2030, according to a new report released by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analytics.

However, the report cautions that deeper domestic value creation will depend on the country's ability to develop upstream capabilities in semiconductors, rare-earth magnets, specialised materials, and electronics supply chains.

The report, titled, 'Beyond Battery Packs: Localisation in Manufacturing EV Components,' highlights India's growing progress in building a domestic EV manufacturing ecosystem as electric vehicle sales have increased nearly 14-fold since FY2020. The surge in demand has created significant opportunities for local manufacturing across the EV value chain.

According to the study, EV-specific systems other than batteries, including traction motors, power electronics, thermal management systems, chargers, vehicle control units, and other electronic components, represent a substantial portion of an electric vehicle's value and offer major opportunities for localisation. Recent announcements related to the manufacturing of powertrain systems, power electronics, and charging equipment indicate that several of these non-battery component categories could achieve near-complete localisation by the end of the decade, provided announced manufacturing projects are commissioned successfully and supplier ecosystems continue to mature.

The report notes that India has already made strong localisation gains in areas aligned with its traditional automotive manufacturing strengths. Structural components, wiring harnesses, suspension systems, braking systems, and other mechanical parts are increasingly being manufactured domestically. However, localisation remains uneven across the EV supply chain, with critical components such as traction motors, power electronics, vehicle control units, and charging systems still dependent on imported subcomponents and raw materials.

The study found that approximately 60 percent of recent announcements related to EV component manufacturing have come from companies approved under the Production-Linked Incentive (PLI) Scheme for Automobile and Auto Components. Despite this momentum, implementation challenges remain. Of the INR 25,938 crore (USD 2.98 billion) allocated under the PLI Auto scheme, less than 10 percent had been disbursed by early 2026, according to the report.

Researchers emphasised that high localisation percentages do not automatically translate into high domestic value creation. While components may be assembled within India, many still rely heavily on imported semiconductors, rare-earth magnets, electronic chips, and specialised materials. This dependence limits the overall economic value retained within the country.

Rahul Maity, Consultant at JMK Research & Analytics and lead author of the report, said that several EV component categories are likely to be manufactured domestically over the coming years. However, he noted that the degree of domestic value creation will depend on the development of upstream materials industries, electronics manufacturing capabilities, and component supply chains.

The report identifies semiconductors and rare-earth magnets as two of the most significant barriers to deeper localisation. These materials are critical for EV motors, power electronics, charging infrastructure, and vehicle control systems. Global production of both remains highly concentrated in China and Taiwan, creating supply-chain vulnerabilities for manufacturers worldwide.

Charith Konda, Energy Specialist at IEEFA and co-author of the report, said that future localisation outcomes will be influenced by several factors, including access to critical materials, supplier scale, cost competitiveness against established manufacturing hubs, component standardisation, and the development of domestic technology capabilities.

To accelerate localisation, the report recommends strengthening domestic semiconductor and rare-earth magnet supply chains, expanding participation of EV startups in localisation programmes, promoting greater component standardisation across the industry, and increasing investments in indigenous research and development.

Prabhakar Sharma, Senior Consultant at JMK Research & Analytics and co-author of the report, said that  that faster development of semiconductor and rare-earth magnet ecosystems, combined with stronger support for innovation and standardisation, would play a crucial role in advancing India's EV manufacturing ambitions.

Jyoti Gulia, CEO of JMK Research & Analytics and co-author of the report, noted that recent investments in motors, power electronics, and charging equipment reflect growing industry confidence in India's EV component ecosystem. She added that these investments could substantially expand the country's domestic manufacturing capabilities over the next five years.

The report concludes that while India is on track to significantly increase localisation across multiple EV component categories by 2030, achieving meaningful domestic value creation will require a stronger upstream manufacturing base and reduced dependence on imported critical technologies and materials.