Assembling EVs is not the same as building an EV industry

Smartphones became India's single largest exported commodity in 2025, pushing electronics production to ₹11.3 lakh crore, a six-fold increase over a single decade. As the world’s second-largest mobile producer, India has captured significant manufacturing scale, export momentum and employment. This achievement is one of the most consequential industrial scale-ups in India's recent history.

The next frontier is deepening the value that stays within India, in components, design, and technology ownership. Domestic value addition in electronics manufacturing stood at 18-20 per cent due to reliance on imported core components like chipsets and displays. This is not a shortcoming of ambition but a structural reality of how global technology value chains develop. Every major manufacturing economy has had to address this transition: from assembling the product to owning the technology inside it.

The EV transition offers India a distinct opportunity to leapfrog directly into technology ownership. With India spending approximately ₹11.5 lakh crore importing crude oil every year, electrifying the two-wheeler fleet, which accounts for approximately 60 per cent of India's total petrol consumption, directly reduces that bill. But the full benefit of this transition is realised only when India owns the technology inside the vehicle, the cells, the magnets, and the software, rather than assembling them from imported components.

The difference between being an assembly hub for EVs and a technology nation that designs them lies in owning the vehicle's five critical systems – the cell, the battery management system (BMS), the motor, the vehicle control software, and the platform architecture. The Auto PLI successfully targeted physical manufacturing, and the ₹18,100-crore ACC PLI reflected the ambition to go deeper into cell capacity. However, with only 1.4 GWh commissioned so far according to IEEFA and JMK Research, the results have not yet matched that ambition.

If volumes and sales quotas alone continue to drive India's policy goals, we risk building a massive consumer market that remains structurally dependent on foreign technology blueprints. With a market of 2.14 crore two-wheelers annually, this is India's opportunity to ensure that the transition builds indigenous capability, not just indigenous assembly.

The design question now is whether the next phase of incentive architecture extends equally to IP creation and R&D investment. Manufacturing without innovation produces assembly. India has demonstrated in electronics that it can scale assembly. The EV opportunity requires it to go further.

Where Indian EV firms have built ground-up platforms, they have successfully developed proprietary battery management systems and connected vehicle software. However, the most critical gap is in motors and magnets. Every EV motor contains 1-3 kg of rare earth permanent magnets, and India imports nearly 100 per cent of them from a supply chain where a single country controls over 90 per cent of global production. This vulnerability was sharply exposed in April 2025, when Beijing imposed strict export controls on seven categories of rare earth metals and magnets, including samarium, leaving Indian manufacturers navigating supply approvals and price volatility for a component with no domestic alternative. The message was unambiguous: control over rare earth magnets is a tool of economic statecraft.

The government’s ₹7,280 crore allocation for domestic magnet manufacturing under the National Critical Mineral Mission was a structured response. India holds the world's third-largest rare earth reserves, an estimated 6.9 million tonnes according to the United States Geological Survey, but produces almost none commercially. The strategic case extends well beyond EVs to wind turbine generators, drone motors, and missile guidance systems, making domestic magnet manufacturing both viable and strategically essential. The EV market is the demand anchor that makes domestic magnet manufacturing viable, and the capability, once built, generates strategic self-reliance across multiple sectors.

Global EV leaders started with a clean slate and built dominance without inheriting manufacturing capability. BYD alone employs approximately 110,000 R&D engineers, the highest of any automotive manufacturer in the world. Tesla became a global leader in a segment previously owned by Mercedes, Volkswagen, Ford, and General Motors. Their success was built on IP. When India began its automotive journey, Japan had already mastered the internal combustion engine. That did not prevent India from building Hero, Tata, Bajaj, and Mahindra into globally competitive manufacturers. EVs represent the same opportunity. And this time, Indian companies are already at the frontier.

The opportunity extends beyond India's domestic market. Electric two-wheeler adoption is accelerating across Asia, Africa, and Latin America – markets where India already has established automotive export relationships. India has built a global position in pharmaceuticals and software. The EV sector offers the same trajectory, provided the IP is Indian.

India files among the fewest patents per capita of any major economy. China files the highest. That gap explains the difference between assembly and ownership more than any other single metric. The choices made in the next three to five years will determine whether India leads the next industrial era or assembles it for someone else.

The author is founder of Gateway Consulting