States in the Driver’s Seat
Policies localizing electric vehicle and battery manufacturing in India
As the world’s fourth-largest automotive base, India holds the potential to create local manufacturing opportunities through the electric vehicle (EV) transition. State governments are at the forefront, controlling critical policy levers for deepening localization. This study examines the subnational policy landscape for EV and battery manufacturing across 14 major automotive states in India.
Key Findings
-
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.
-
Localization cannot be achieved through central policies alone. States control critical levers—land acquisition, power tariffs, logistics infrastructure, and regulatory clearances—that determine EV and battery manufacturing competitiveness and investment decisions.
-
Alignment between centre and state policies strengthens the overall incentive stack. State incentives can reduce location-specific costs, while central government incentivizes 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 global automotive industry is undergoing a structural shift driven by transport electrification and increasing EV adoption. Valued at nearly USD 240 billion, contributing about 7.1% of GDP and supporting over 30 million direct and indirect jobs, India's automotive sector holds the potential to create local manufacturing opportunities through the EV transition.
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 convertors, and on-board chargers─is increasing but remains low in India despite several central government and state government policies.
This report examines the subnational policy landscape for EV and battery manufacturing across leading automotive states in India. It finds 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. However, targeted policy instruments that address specific cost barriers shall be needed for deepening localization. State policies remain less differentiated for midstream (such as production of cathode active materials, precursor materials) and upstream (critical minerals mining or sourcing) segments of the value chain, demonstrating growing policy maturity for downstream segments such as vehicle/battery assembly but nascency in terms of an emerging integrated value chain strategy.
The study suggests six actions for central and state governments:
- design subnational support measures that de-risk midstream and upstream battery investments,
- provide 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,
- develop project preparation facilities and plug-and-play industrial land infrastructure at the state level to further accelerate cell and battery manufacturing,
- bridge the skill gap by establishing a dedicated skilled workforce development program for EV and battery manufacturing, and
- introduce clear public procurement and phased zero-emission vehicle mandates to boost demand and reduce market risk for domestic manufacturers.
You might also be interested in
Unlocking Supply Chains for Localizing Electric Vehicle Battery Production in India
This study aims to highlight the key supply chain barriers in localizing electric vehicle (EV) battery cell manufacturing in India. It summarizes consultations with 12 companies, as well as experts and policy-makers, to determine the crucial challenges and opportunities in localizing battery manufacturing in India.
India's Potential in the Midstream of Battery Production
This report summarizes consultations with over 25 companies and actors to determine what factors are crucial in the considerations of companies on where to invest in and expand battery cell manufacturing.
Mapping India's Energy Policy 2025
Mapping India's Energy Policy 2025 gathers the latest available data on energy-related government support and revenues in India, including fiscal year 2023–2024.
Investor Perspectives on Accelerating Growth in the Indian EV Ecosystem
This report takes stock of India’s current EVs ecosystem and where the sector may be heading in the future, with a focus on drivers of and barriers to investment.