Chinese curbs stall Indian firms’ EV battery-making push

In July, China added battery cathode production technology for lithium iron phosphate (LFP) batteries, among other EV battery technologies, to its export-control list, just as several Indian firms like JSW Group were looking to strike partnerships with Chinese players.

The curbs, which apply globally, mean that despite partnerships, Indian firms are unlikely to get access to the latest technology without the Chinese government’s approval.

Three companies—Reliance Industries Ltd (RIL), Exide Industries Ltd, and JSW Group—plan to start with the LFP technology in India. While RIL and Exide have started building plants, JSW’s bid has not yet officially begun.

The policy roadblock comes on top of Indian firms already facing delays from extensive paperwork in sourcing equipment and materials such as synthetic graphite—essential for LFP technology—according to two cell industry executives, who spoke on the condition of anonymity.

This stranglehold has even turned the decision of Tata Group’s Agratas Energy Storage Solutions Pvt. Ltd and Amara Raja Energy & Mobility Ltd earlier this year to prioritize nickel manganese cobalt oxide (NMC) technology over LFP into a non-starter, added the executives.

Agratas counts a Chinese-owned Japanese firm AESC as a shareholder, while Amara Raja has a collaboration with Gotion-InoBat-Batteries (GIB), a unit of China-based Gotion High Tech, for the LFP technology since 2024.

NMC and LFP are two dominant cathode chemistries in lithium-ion batteries. While NMC batteries have long been the preferred choice for EVs due to their high energy density, LFP batteries have gained rising interest over the past five years, especially in mass-market EVs.

The reason: NMC batteries rely on expensive and geopolitically sensitive metals like nickel and cobalt, making them costlier and more exposed to supply risks. LFP batteries, on the other hand, use abundant and inexpensive materials like iron and phosphate, making them a cost-effective alternative.

Ola Electric Mobility Ltd is the only Indian company to have begun cell production with just over 1GWh capacity—but with the NMC technology.

“There is no outright ban, but suppliers face problems in getting their documentation cleared. There are a lot of delays,” said one of the executives, working on sourcing cells for EVs.

Global analysts tracking the sector have voiced concerns over the Chinese stranglehold weighing on the future of battery tech.

“China’s export restriction policy on high-end LFP technology is ensuring it will remain in the hands of Chinese companies, while non-Chinese firms generally take longer to achieve and scale up similar cost and technical advancements for LFP,” said a 9 September report of London-based business intelligence firm CRU International Ltd.

Race against time

Most Indian players’ battery manufacturing plans are already running behind schedule.

In March, Ola Electric, RIL and Rajesh Exports Ltd faced penalties for delays in achieving the timelines laid out under the PLI Scheme for National Programme on Advanced Chemistry Cell (ACC) Battery Storage.

Mint reported on 19 August that the Centre was looking to reassess the utility of the scheme as companies have failed to meet investment milestones.

For instance, Amara Raja has delayed the commencement of production at its cell gigafactory to 2026-27 from 2025-26.

Analyst estimates show that the LFP technology will dominate the global markets for years to come, which is why Indian cell makers’ inability to gain technology access could jeopardize their mega gigafactory plans.

The technology’s share of global EV batteries in use rose to 50% by the end of 2024, up from less than 20% in 2020, according to energy research firm BloombergNEF, which also projects it will account for around 60% of electric-car demand by 2026.

The LFP technology evolves in generations, with Chinese players already offering third-generation batteries to customers and a lab-ready fourth generation poised for future rollout.

Due to the controls, Indian firms will largely have to rely on partnerships for second-generation cells, according to the two executives cited above.

Companies are developing cell capabilities both for captive use within their groups and for supplying other players. Agratas is building two gigafactories with a combined capacity of 60 GWh to serve the Tata Group’s key automobile companies, Jaguar Land Rover and Tata Motors.

Amara Raja and Exide have also entered partnerships with firms such as Ather, Piaggio, Hyundai Motor India, Kia and Atul Greentech. Some of these collaborations cover both NMC and LFP batteries.

However, even with partnerships in place, companies are unlikely to source these batteries if their performance doesn’t match current market standards.

“We are not going to compromise on the performance and safety of vehicles, as that would hurt consumer confidence. Indian firms must match the technology offered by competitors. Otherwise, auto firms will be reluctant to source cells—unless the government imposes import restrictions,” said one of the executives cited above.

Mint queries about the restrictions’ impact on Tata Agratas and Amara Raja remained unanswered until press time. RIL, Exide, and JSW did not respond to requests for comment on whether they have also considered problems of sourcing tech and material for LFP.

The rare-earth déjà vu

The situation mirrors the rare-earth magnet crisis, when Indian automakers were asked to get an end-use licence in April. While there is no outright ban on the export of rare earth magnets, Indian automakers have still not managed to get approvals despite submitting papers to the Chinese authorities.

“For cell manufacturers who want to get into the LFP manufacturing, there are some challenges in sourcing mature technology,” said Vikram Handa, managing director at lithium-ion battery material maker Epsilon Advanced Materials Ltd.

“Synthetic graphite, which is required for LFP, also requires an export licence. If you take two steps back and you just think about what has happened in rare earths, the same messaging is coming in synthetic graphite.”

Over five years ago, LFP technology lagged behind NMC in performance due to lower energy density. While LFP is at least 20-30% cheaper than NMC, the performance gap was high, which is why carmakers earlier preferred NMC, a technology mastered by South Korean players like LG Electronics as well.

However, with investments in technology and research, Chinese players managed to close that gap.

The inability to source advanced technology poses a challenge for large Indian corporations, which have traditionally relied on obtaining licenses from abroad and then scaling up production using their deep pockets.

“The truth of the matter is that Chinese players dominate the LFP technology and raw materials required for developing the tech,” said Praveen Pothumahanty, partner at consulting firm EY Parthenon.

“Even if firms source licences for the technology, the problem is that Chinese players may not give you the latest technology. So, by the time the factory is ready, the technology is already years behind Chinese players,” he added.

Jay Kale of investment bank and brokerage firm Elara Capital wrote in a 12 June note that LFP batteries are the main battery chemistry used in China, which are now close to 30% cheaper per kWh than NMC.

“In the European Union, the adoption of LFP grew by ~90% to reach >10% of the EU EV market. Note that nearly all the LFP batteries for EVs sold in the EU or the US were produced in China, indicating the country’s monopoly,” Kale wrote.

“In South-East Asia, and in Brazil and India too, the share of LFP reached >50% in 2024. In South-East Asia and Brazil, this was led by significant growth in BYD vehicles, while in India, this was led by Tata Motors,” he added.