Indian Battery Components Face Up to 61 Percent Cost Gap: Study

Indian battery component manufacturers face a cost disadvantage of 18 percent to 61 percent compared with imported products, highlighting challenges in building a domestic supply chain for advanced cell materials, according to a new study released by the Ministry of Heavy Industries.

The report, titled Accelerating India’s ACC Component Manufacturing Ecosystem, was prepared by the Netzero Energy Transition Alliance (NETRA) in collaboration with ARCI, CSIR-NCL, IIT Madras and Deloitte. Released in New Delhi, the study draws on data from more than 20 Indian companies and outlines policy support options as the government considers a dedicated scheme for battery component manufacturers.

The study identifies significant cost differences across key battery components, including cathode and anode materials, electrolytes, separators and copper foil. Indian manufacturers face cost disadvantages ranging from 18 percent to 61 percent against imported equivalents, with the reasons varying across components. High raw material prices account for much of the cost gap in cathode materials, electrolytes and copper foil. For graphite anodes, conversion costs, energy expenses, depreciation and financing contribute to higher production costs. Separator manufacturing faces challenges arising from capital-intensive facilities, imported technology and low initial capacity utilisation.

The report also highlights China's dominance in the global battery component supply chain. In 2025, China accounted for 99 percent of global lithium iron phosphate (LFP) cathode material supply, 90 percent of anode material, 93 percent of electrolytes, 85 percent of separators and 74 percent of copper foil, according to data from JP Morgan and Nomura. Although China's export restrictions on key battery materials and technologies, introduced in October 2025, have been suspended, the possibility of future restrictions remains a supply-chain concern.

Capital expenditure and financing costs further affect the competitiveness of Indian manufacturers. Establishing cathode or anode manufacturing facilities in India costs more than twice as much as in China. Borrowing rates for Indian manufacturers range between 8.5 percent and 16 percent, compared with approximately 3.1 percent in China. The report also notes that new suppliers typically require 18 to 24 months to complete qualification processes with battery cell manufacturers, resulting in lower capacity utilisation during the initial years of operation.

According to the study, battery cell components account for approximately 76 percent of the total cost of cell manufacturing. India's battery demand is projected to increase from around 33 GWh in 2025 to 236 GWh by 2032 and nearly 600 GWh by 2037. However, existing domestic manufacturing capacity can meet less than 3 percent of the projected 2032 requirements for cathode materials, anodes and electrolytes. The country also has no known domestic production capacity for battery separators or battery-grade copper foil.

To address the cost disadvantage, the report proposes three incentive structures for government consideration. The first involves a 25 percent capital subsidy combined with a sales-linked operating incentive covering approximately 30 percnet of the cost gap, with component-wise support ranging from 5 percent to 18 percent. The second proposes an operating incentive alone, covering around 60 percent of the cost gap, or 11 percent to 37 percent depending on the component, for a period of five to seven years. The third option recommends a 50 percent capital subsidy, released alongside the investor's own expenditure, following the funding approach adopted under the Semicon India programme.

The proposed incentive structures are designed to ensure that manufacturers continue to bear a portion of the cost disadvantage, encouraging operational efficiency and cost reduction rather than dependence on government support.

The report further recommends establishing a national network of laboratories for battery component testing, certification and supplier qualification. Other proposals include supporting domestic processing of battery-grade raw materials, encouraging local manufacturing of specialised plant and machinery, and developing integrated battery material manufacturing clusters.

It also points out that the existing Electronics Component Manufacturing Scheme supports battery components primarily for digital device batteries, despite electric mobility and grid-scale energy storage expected to account for more than 90% of India's future battery demand.

NETRA Co-Founder and Executive Director Debi Prasad Dash said the cost differences varied across battery components and therefore required differentiated policy support rather than a uniform incentive. The report provides component-specific incentive rates under three proposed structures, with manufacturers expected to retain a meaningful share of the cost burden.

NETRA Founder and President Dr Rahul Walawalkar highlighted the importance of developing domestic capabilities in battery-grade material processing, quality control and research and development, beyond establishing battery cell manufacturing facilities. He said decisions taken by March 2027 would be important in determining whether cell manufacturing facilities expected to become operational by March 2029 could source qualified materials domestically.

The study was endorsed by CSIR-NCL Director Dr Ashish Lele and ARCI Director Dr R. Vijay, who highlighted its relevance for evidence-based policymaking and its technical assessment of the domestic manufacturing ecosystem.

NETRA commissioned the study, with Deloitte leading the analysis. The report does not disclose individual company-level data.