In a strategic move on the geopolitical and economic front, Japan plans to invest in India’s electric vehicle (EV) and battery supply chain. It aims for substantial investments ranging from $100 million to $400 million ( ₹860-3,500 crore) in India's EV, battery manufacturing, and recycling sectors. A recent meeting regarding this brought together senior Japanese government officials, executives from major battery manufacturers, automobile companies, and private equity firms with India's largest conglomerates, EV producers, battery manufacturers, and recycling specialists.
In a strategic move on the geopolitical and economic front, Japan plans to invest in India’s electric vehicle (EV) and battery supply chain. It aims for substantial investments ranging from $100 million to $400 million ( ₹860-3,500 crore) in India's EV, battery manufacturing, and recycling sectors. A recent meeting regarding this brought together senior Japanese government officials, executives from major battery manufacturers, automobile companies, and private equity firms with India's largest conglomerates, EV producers, battery manufacturers, and recycling specialists. The potential capital deployment could support joint ventures (JVs), technology transfer agreements, and the creation of new processing facilities, potentially positioning India as a key part of Asia's diverse supply chain network. This article examines the business opportunities and collaboration between Japan and India to foster the growth of battery materials and electric mobility.
Trade representatives and investment agencies from Japan are actively seeking potential Indian partners across various sectors. This includes battery cell manufacturing, EV production, mineral processing, and recycling activities. Interest has been expressed in partnerships focused on catalytic converter recycling, which would provide access to platinum and palladium resources essential for hydrogen fuel cells used in EVs. It also highlights the sourcing and processing of key minerals, such as lithium, cobalt, and rare earth elements. These materials are crucial for producing advanced batteries and electronics, making them strategic assets in the pursuit of energy security and decarbonisation. The discussions have also covered funding, with Japanese private equity firms participating in the assessment process. This initiative aims to secure essential resources for the clean energy transition, as global demand for electric vehicles and renewable energy continues to rise.
While India is making significant strides toward achieving net-zero carbon emissions by 2070 through the electrification of vehicles, this includes an increasing adoption of EVs, which has led to a surge in demand for EV batteries. This transition is being driven by advancements in battery technology, charging infrastructure, and supportive government policies. To strengthen the Make in India initiative, the government is implementing various incentives and subsidies to promote the domestic manufacturing of EV components, especially battery cells. Meanwhile, the Japanese government has committed up to ¥350 billion (around $2.4 billion) in subsidies to support its domestic EV battery production. This initiative aims to increase Japan’s annual battery production capacity by 50%, boosting its supply chain and industry competitiveness. The plan is to reach 150 GWh of production capacity by 2030, and partnerships with India could help achieve these ambitious targets. Japan is particularly interested in India’s plans to develop 30 GWh of advanced chemistry cell battery storage.
India is quickly emerging as a key player in the global battery ecosystem, supported by its Production-Linked Incentive (PLI) and FAME schemes. Under the FAME India Scheme Phase II, the Phased Manufacturing Programme (PMP) promotes local manufacturing of electric vehicles and their components, increasing domestic value addition. Several government policies encourage the production of EV batteries in the country. The reduction in GST rates for electric vehicles from 12% to 5%, and for chargers and charging stations from 18% to 5%, has made EVs more affordable.
In 2021, the Indian government launched an ₹18,100-crore production-linked incentive (PLI) scheme to build 100 GWh of lithium-ion battery capacity. The PLI scheme for the Automobile and Auto Components Industry, with a budget of Rs. 25,938 crores over five years, aims to boost local production of advanced automotive technology goods and attract investments. The PLI scheme for manufacturing Advanced Chemistry Cells (ACC) will also help reduce battery prices and lower the costs of electric vehicles. These government initiatives aim to localise up to 60% of the EV and battery supply chain by 2030. Japan considers India a viable alternative to China and a strategic partner in securing stable battery supply chains.
China holds an estimated 80% of the global lithium battery market and controls 90% of the rare earth magnet supply. In April, China further tightened export restrictions on rare earths, deepening concerns for Indian manufacturers. The value chain from mining to refining remains largely under China's control. Current geopolitics create significant opportunities for India and Japan to collaborate on critical minerals and rare earth magnets. As a result, the recent investment reflects Tokyo's broader strategic effort to reduce dependence on China for global lithium-ion battery supply chains, critical mineral extraction, and rare earth magnet production — all essential for the transition to clean technology and EVs. This investment marks a significant shift in regional manufacturing strategies, with Japan aiming to establish alternative supply chain networks that reduce its reliance on Chinese-controlled resources and manufacturing. It will address growing concerns about supply chain reliability and seek joint solutions. The focus of discussions is on creating an alternative supply chain for lithium-ion batteries and key raw materials such as lithium and graphite, which China currently dominates.
Indian EV companies currently import more than 75% of their batteries from China. Other suppliers include Japan and South Korea, while India’s domestic battery capacity remains in its early stages. Indian companies are building their battery plants, but price competitiveness is still a significant challenge. Batteries made in India are expected to be 20–30% more expensive than Chinese alternatives due to high raw material import costs and limited local refining capacity. Japanese companies can assist with materials and technology. India will need substantial investments in raw material access and technology transfer to make significant progress. Japan’s expertise in chemical formulations, high-performance cell design, and production processes can help India overcome initial operational challenges.
Furthermore, India’s battery manufacturing sector is seeing a surge in Foreign Direct Investment (FDI), especially from major Japanese companies like Suzuki, Toshiba, and Denso. The Indian government has eased regulations, allowing up to 100% FDI through the automatic route for ACC battery production. This strategic move shows India’s commitment to becoming a major player in global manufacturing and leading the electric vehicle industry.
This bilateral effort reflects a growing China Plus One investment strategy adopted by Japanese firms, which are increasingly shifting supply chains to India. India is viewed not only as a manufacturing hub but also as a gateway to high-growth markets, such as the Middle East and Africa, supported by well-established business and talent networks across these regions. In 2023, Japanese FDI in India surpassed that in China, highlighting a strategic shift in regional economic priorities. Besides batteries, the two countries are exploring cooperation in electric vehicles, green hydrogen, and digital energy infrastructure. These efforts not only address energy and industrial goals but also strengthen geopolitical ties in the Indo-Pacific region. Additionally, collaborations with international entities are being encouraged to introduce cutting-edge technologies and promote innovation in the EV industry. However, to turn India into a competitive hub for EV battery manufacturing, challenges such as infrastructure development, land availability, raw material sourcing, and a skilled workforce need to be addressed. Through these collective efforts, India aims to position itself as a key player in the global EV battery manufacturing market while supporting its ambitious environmental goals.
With EV sales projected to reach two million units in 2024—a 27% increase over 2023—the pressure is mounting on Indian companies to secure stable and cost-efficient battery supplies. Furthermore, with the goal of electrifying 30% of India’s vehicle fleet by 2030 and the domestic EV market expected to grow at a compound annual growth rate of 49% between 2022 and 2030, reaching 10 million annual sales, forming partnerships becomes crucial. Currently, strategic collaborations with countries like Japan are considered essential for navigating the rapidly evolving global battery landscape. In line with India’s localisation objectives and Japan’s ¥350 billion EV initiative, the partnership aims to create resilient alternatives in the Indo-Pacific’s clean energy sector. The EV and battery industries are now at the heart of this developing relationship.
This article is authored by Varuna Shankar, research associate, Central Association for Private Security Industries.
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