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EV Industry Faces Short-Term Price Surge Amid 100% Domestic Content Mandate
Apr 03, 2025
The Ministry of Heavy Industries (MHI) has mandated a 100% domestic content requirement for 18 key EV components, including traction battery packs, battery management systems, and HVAC systems. This move aims to boost local manufacturing but is expected to increase EV prices in the short term.
Key Highlights of the Mandate:
- Applies to 18 critical EV components to qualify for subsidies under the PM E-DRIVE Program.
- Importing components in completely knockdown form from a single supplier is prohibited.
- Non-compliant OEMs will be ineligible for incentives under the Rs10,900 crore PM E-DRIVE initiative.
Industry Reactions & Impact:
- Short-Term Price Hike:
- Localizing production will increase costs initially due to setup expenses and lack of economies of scale.
- EV manufacturers anticipate price hikes, especially for four-wheelers and high-end vehicles.
- Long-Term Gains:
- Reduced reliance on imports will strengthen India's EV ecosystem.
- Lower logistics & customs costs will eventually make EVs more affordable.
- Supply Chain Challenges:
- Battery materials like lithium, cobalt, and nickel are still imported from China, Australia, and Chile.
- Semiconductors are largely sourced from Taiwan and South Korea.
Future Outlook & Industry Needs:
- Increased R&D and infrastructure investment is required to build local battery cell production capabilities.
- Strategic alliances with international players can accelerate technology transfer & domestic production.
- State-level support & additional incentives are crucial for scaling up local manufacturing.
While the mandate presents short-term challenges, experts believe it will lead to greater self-reliance, cost reductions, and faster EV adoption in the long run.