India's ambitions to emerge as a global electric vehicle (EV) manufacturing hub could be undermined by a persistent cost disadvantage vis-à-vis Chinese suppliers, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analytics.

The report estimates that Indian component manufacturers face a 20-30% cost disadvantage compared with their Chinese counterparts, highlighting a key challenge in the country's efforts to deepen EV localisation and strengthen domestic value creation.

Scale is a challenge

According to the report, lower production volumes and fragmented demand have prevented Indian suppliers from achieving economies of scale comparable to those enjoyed by manufacturers in China.

While India's EV market has expanded nearly 14-fold since FY2020, domestic production volumes remain around 85% lower than those in China. The relatively small scale of manufacturing increases per-unit costs and limits the competitiveness of Indian suppliers in global markets.

China, by contrast, has built an integrated ecosystem spanning raw materials, components and final assembly, allowing manufacturers to lower costs through scale and vertical integration.

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Fragmented market

The report notes that India's EV ecosystem remains fragmented, particularly in the two-wheeler and three-wheeler segments, where manufacturers often rely on proprietary designs and component specifications.

The lack of standardisation across original equipment manufacturers (OEMs) has resulted in smaller order sizes and limited opportunities for suppliers to scale production efficiently. As a result, component makers are unable to spread fixed costs over larger volumes, reducing cost competitiveness.

Industry initiatives such as LEAF are attempting to address the issue by promoting standardisation, but broader adoption and policy support are still evolving.

Dependence on imports

India's EV supply chain also remains heavily dependent on imported semiconductors, rare-earth magnets and advanced materials. These imports expose manufacturers to global price fluctuations, currency movements and geopolitical risks.

The report highlights that around eight of the 12 key EV components studied contain subcomponents that are not currently produced in India. This dependence limits domestic value addition and raises production costs.

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Manufacturing transformation

The report argues that increasing scale and improving cost efficiency will be critical if India is to compete with established manufacturing hubs.

It recommends greater standardisation of components across OEMs and wider adoption of common charging standards to improve economies of scale. Converting existing internal combustion engine (ICE) facilities into EV component manufacturing units through brownfield projects could also accelerate capacity expansion and reduce costs.

The report further stresses the need for stronger domestic capabilities in semiconductors, rare-earth magnets and other upstream materials to reduce dependence on imports.

While recent investments in motors, power electronics and charging infrastructure point to growing confidence in India's EV ecosystem, the report suggests that long-term competitiveness will depend on more than localisation alone.

For India, the challenge is not merely producing EV components domestically, but doing so at costs that can rival the world's largest and most integrated manufacturing powerhouse.

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Published on: Jun 23, 2026 8:26 PM IST