India’s push to build a self-reliant electric vehicle ecosystem continues to face structural challenges. While the government has announced multiple schemes to promote domestic manufacturing, progress on two of the most critical components of an electric vehicle, battery cells and rare earth magnets remains limited. This has created a dual vulnerability that could slow down both EV adoption and the broader goal of reducing import dependence.
Limited Progress Under the ACC PLI Scheme
The Production Linked Incentive (PLI) scheme for Advanced Chemistry Cells (ACC), approved by the Union Cabinet in 2021 with an outlay of ₹18,100 crore, aimed to establish 50 GWh of domestic battery cell manufacturing capacity. According to updates shared by the Ministry of Heavy Industries, around 40 GWh of capacity has been awarded so far. However, as of early 2026, only about 1.4 GWh has been actually commissioned, entirely by Ola Electric.
No incentives have been disbursed under the scheme till date. Several beneficiaries, including those from the first round of allocations, have faced delays in project execution. Rajesh Exports, which was originally allocated 5 GWh capacity (later transferred to its subsidiary), is now under review following regulatory issues. The slow pace of implementation has raised questions about whether the scheme will be able to meet its original targets within the stipulated timelines.
Dependence on Imported Rare Earth Magnets
At the same time, India remains heavily dependent on imports for rare earth magnets, which are essential for electric vehicle motors. These magnets, made using elements such as neodymium and dysprosium, are critical for achieving high performance and efficiency in EV powertrains.
Government data and industry assessments indicate that India imports a large share of its rare earth magnets and related materials from China, which controls the majority of global processing capacity. This dependence became more visible during recent global supply disruptions. While India has significant rare earth reserves, particularly in coastal states, domestic processing and magnet manufacturing capacity remains limited.
Government Initiatives on Rare Earths
To address this gap, the government has taken several steps. In the Union Budget 2026-27, provisions were made for the development of “Rare Earth Corridors” across select states to promote mining, processing, and value addition. Additionally, a dedicated scheme has been announced to support the development of domestic rare earth magnet manufacturing capacity.
Several large industrial groups have expressed interest in participating in these initiatives. However, translating policy announcements into actual production capacity will require faster project execution and stronger coordination between central and state governments.
A Combined Challenge for the EV Sector
The slow progress in domestic battery cell manufacturing under the ACC PLI, combined with continued reliance on imported rare earth magnets, creates a two-front challenge for India’s EV industry. Even as efforts are being made to localise battery production, the lack of domestic rare earth processing capacity means that a critical part of the electric powertrain will remain exposed to external supply risks.
This situation directly impacts the pace at which EV prices can decline, especially in the mass-market segment. Without meaningful progress on both fronts, the benefits of various government schemes aimed at promoting electric mobility may take longer to reflect in the market.
The Need for Coordinated Execution
India has announced ambitious targets for both battery manufacturing and critical minerals development. However, the gap between policy announcements and actual outcomes remains significant. Stronger project monitoring, realistic timelines, and better coordination between different ministries will be essential to address these vulnerabilities.
According to Reuters, major Indian industrial groups including Reliance, Vedanta, and Adani have shown interest in developing facilities to process rare earth minerals in Andhra Pradesh. The report states that around 10 companies have expressed interest in setting up rare earth processing units in the state. This development comes as the government is actively trying to reduce India’s heavy dependence on China for rare earth elements, which are critical for manufacturing permanent magnets used in electric vehicle motors. The move is part of a broader strategy to build domestic capabilities in critical minerals and strengthen the EV supply chain.
Sources
- Ministry of Heavy Industries - Updates on ACC PLI scheme allocations and progress (shared via PIB)
- Union Budget 2026-27 announcements on Rare Earth Corridors
- Government data on rare earth reserves and import dependence (Ministry of Mines)
- IEEFA & JMK Research reports citing official ACC PLI data (2026)
- Reuters Sources
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