In a strategic move on the geopolitical and economic front, Japan is planning to invest in India’s electric vehicle (EV) and battery supply chain. It aims to make substantial investments ranging from $100 million to $400 million ( ₹860-3,500 crore) in India’s electric vehicle (EV), battery manufacturing and recycling sectors. A recent meeting in this regard brought together senior government officials from Japan, executives from major battery manufacturers, automobile companies and private equity firms along with India’s largest conglomerates, EV producers, battery makers and recycling experts. Potential capital deployment could support the creation of joint ventures (JVs), technology transfer agreements and new processing facilities, potentially establishing India as an important part of Asia’s diverse supply chain network. This article examines business opportunities and cooperation between Japan and India to promote the development of battery materials and electric mobility.
Japan’s trade representatives and investment agencies are actively looking for potential Indian partners in 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 needed 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 critical to the production of advanced batteries and electronics, making them strategic assets in the pursuit of energy security and decarbonization. Funding has also been included in the discussions, with Japanese private equity firms participating in the evaluation process. The initiative aims to secure the resources needed for a clean energy transition, as global demand for electric vehicles and renewable energy continues to grow.
While India is making significant progress towards achieving net-zero carbon emissions by 2070 through electrification of vehicles, this also includes increasing adoption of electric vehicles, which has led to increased demand for EV batteries. This transformation is being driven by advances 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 domestic manufacturing of EV components, especially battery cells. Meanwhile, the Japanese government has committed subsidies of up to 350 billion yen (about $2.4 billion) to support its domestic EV battery production. The initiative aims to increase Japan’s annual battery production capacity by 50%, thereby boosting the competitiveness of its supply chain and industry. The plan is to reach 150 GW of generation capacity by 2030, and partnership with India can help achieve these ambitious goals. Japan is particularly interested in India’s plan to develop 30 GW of advanced chemical cell battery storage.
India is rapidly emerging as a major 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 Program (PMP) promotes local manufacturing of electric vehicles and their components, thereby increasing domestic value addition. Several government policies encourage the production of EV batteries in the country. Reduction in GST rates from 12% to 5% for electric vehicles and from 18% to 5% for chargers and charging stations has made EVs more affordable.
In 2021, the Government of India launched a ₹PLI scheme worth Rs 18,100 crore to create 100 GWh lithium-ion battery capacity. PLI Scheme for Automobile and Auto Component Industry with Budget ₹The target of Rs 25,938 crore over five years is to promote local production of advanced automotive technology items and attract investment. The PLI scheme for manufacturing of Advanced Chemistry Cells (ACC) will also help in reducing battery prices and cost of electric vehicles. These government initiatives aim to localize 60% of the EV and battery supply chain by 2030. Japan considers India a viable alternative to China and a strategic partner in securing a stable battery supply chain.
China holds an estimated 80% share 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, raising concerns for Indian manufacturers. The value chain from mining to refining is largely under China’s control. Current geopolitics creates important opportunities for India and Japan to cooperate 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 the global lithium-ion battery supply chain, critical mineral extraction and rare earth magnet production – which are essential to the transition to clean technology and EVs. The investment marks a significant shift in regional manufacturing strategies, with Japan aiming to establish alternative supply chain networks that reduce its dependence on Chinese-controlled resources and manufacturing. It will address growing concerns about supply chain reliability and explore joint solutions. The focus of the discussion is on creating an alternative supply chain for lithium-ion batteries and key raw materials such as lithium and graphite, which are currently dominated by China.
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 is in its early stages. Indian companies are building their own battery plants, but price competition is still a significant challenge. Batteries made in India are expected to be 20-30% more expensive than Chinese alternatives due to high import costs of raw materials and limited local refining capacity. Japanese companies can assist with materials and technology. India will need substantial investment 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.
Additionally, India’s battery manufacturing sector is seeing an increase in foreign direct investment (FDI), especially from major Japanese companies such as Suzuki, Toshiba and Denso. The Government of India has eased the rules, allowing 100% FDI through the automatic route for ACC battery production. This strategic move reflects India’s commitment to become a major player in global manufacturing and lead the electric vehicle industry.
This bilateral effort reflects the growing “China plus one” investment strategy adopted by Japanese companies, which are increasingly shifting supply chains to India. India is seen not only as a manufacturing hub but also as a gateway to high-growth markets such as West Asia and Africa, supported by well-established business and talent networks in these regions. In 2023, Japanese foreign direct investment in India overtook that of China, highlighting a strategic shift in regional economic priorities. Apart from batteries, both 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 relations in the Indo-Pacific region. Additionally, collaboration with international entities is being encouraged to introduce cutting-edge technologies and promote innovation in the EV industry. However, to transform 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 establish itself as a major 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 – an increase of 27% compared to 2023 – there is increasing pressure on Indian companies to secure stable and cost-effective battery supplies. Additionally, with India aiming to electrify 30 percent of its vehicle fleet by 2030 and the domestic EV market expected to grow at a compound annual growth rate of 49% between 2022 and 2030 to reach 10 million annual sales, it becomes important to form partnerships. Currently, strategic collaboration with countries like Japan is considered essential to navigate the rapidly evolving global battery landscape. In line with India’s localization objectives and Japan’s ¥350 billion EV initiative, the partnership aims to create flexible options in the Indo-Pacific’s clean energy sector. The EV and battery industries are now at the center of this growing relationship.
This article is written by Varun Shankar, Research Associate, Central Association for Private Security Industries.
