India's chemical groups outpace its battery cell producers

India has built the wrong half of a battery supply chain first, and it is starting to show across production footrpints. Throughout Karnataka, Gujarat and West Bengal, Indian chemical companies have committed billions of rupees to plants producing the cathode, anode and electrolyte materials that go into lithium-ion cells. On paper, this looks like the sensible opening move in a country that has long depended on imports for everything battery related.

In practice, according to reporting by Nikkei Asia, these materials producers are racing ahead of a cell manufacturing base that was supposed to have absorbed their output by now, and largely has not. The result is an increasingly awkward mismatch, and India has, for the first time, a credible domestic capability in the chemistry that sits inside a battery. But what it does not yet have, in any meaningful volume, is a domestic customer for it.

A cell industry that never arrived

The gap traces back to Beijing, and over the past two years Chinese authorities have tightened export and technology transfer controls covering graphite, cathode precursors and the licensing know-how needed to run a modern gigafactory, formalising curbs first signalled in October 2025. For Indian carmakers that had built their cell manufacturing plans around Chinese licensing deals, the effect has been close to a stop sign.

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Reliance Industries, the conglomerate led by chairman Mukesh Ambani, offers the clearest example of this impact. Its Gujarat gigafactory, announced in 2021 to produce lithium iron phosphate cells, chemicals and packs domestically, had been in advanced talks with CATL and with Xiamen Hithium Energy Storage Technology to licence cell technology. Those talks collapsed after Xiamen withdrew from the partnership, and Reliance has since paused its cell manufacturing plans, according to a Reuters report carried by Deccan Herald, refocusing instead on assembling battery energy storage systems using imported components.

Ola Electric, founded by Bhavish Aggarwal, has faced a similar squeeze. The company announced plans to manufacture cells under the government's production-linked incentive programme, but Chinese restrictions have forced most of India's aspiring cell makers, Ola included, to delay or stall their timelines, Nikkei Asia reports.

An incentive scheme that undershot its own target

India's Production Linked Incentive scheme for advanced chemistry cells was approved in May 2021 with a target of 50GWh of domestic cell manufacturing capacity by December 2024. By October 2025, the country had commissioned just 1.4GWh, all of it from a single company, according to analysis by the Institute for Energy Economics and Financial Analysis. Not a single rupee of incentive payment had been disbursed under the scheme.

Government figures citing 178GWh of announced battery manufacturing capacity tell a more flattering story than the underlying reality supports. Much of that headline number reflects pack assembly lines that import finished cells from China, South Korea and Japan rather than cell production itself, a distinction that matters enormously in value terms. Cell manufacturing captures somewhere between 70% and 75% of a battery's value, against 25% to 30% for pack assembly, so an industry built around the latter is not the industry the PLI scheme was designed to create.

Money without a market

And this is the context within which India's materials investment looks increasingly lopsided. Epsilon Advanced Materials, headquartered in Mumbai, has become the country's most visible battery chemistry success story, having signed a memorandum of understanding with the Karnataka state government worth approximately $1.1 billion to scale up synthetic graphite anode production, with capacity plans reaching 30,000 tonnes per annum by 2027 and 100,000 tonnes by 2030.

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But roughly 90% of that Karnataka plant's output is destined for export to OEMs in the United States and Europe, not for an Indian cell industry that cannot yet absorb it, the company's managing director Vikram Handa told Mobility Outlook when the plant was first announced. Epsilon has since gone further, committing $650 million to a North Carolina anode facility of its own, an investment it describes as the largest ever made by an Indian company in the US electric battery industry.

On the electrolyte side, Neogen Chemicals has invested ₹100 crore ($11 million) into its subsidiary Neogen Morita New Material to develop electrolyte salts, while Neogen and Gujarat Fluorochemicals are both building out electrolyte salt capacity aimed at global as well as domestic customers, according to research from ORF America.

The same analysis points to a genuine structural advantage behind these bets: India's infrastructure costs for chemical manufacturing run as much as 70% lower than in competing markets, a cost edge that helps explain why materials producers are finding buyers abroad even as they wait for one to emerge at home.

None of this is necessarily bad news for the companies concerned, several of which have built profitable export businesses regardless of what happens to India's own cell ambitions. But it does mean the country's electrification strategy risks producing a chemicals export industry rather than the vertically integrated battery sector that policymakers originally intended, echoing the wider rebalancing away from China-dependent supply chains that has been reshaping automotive sourcing decisions globally since 2022.

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Building around the blockage

Not every Indian player is waiting for the technology transfer standoff to resolve itself. Ola Electric has taken the more difficult route of assembling a cell supply chain without Chinese input, sourcing cathode material from Umicore of Belgium, anode material from Epsilon within India, fast-charging research from StoreDot of Israel, and manufacturing equipment from Korea, according to reporting in Swarajya.

Its redesigned cell architecture has also allowed it to source ceramic separators and electrolytes from Indian suppliers and to eliminate the copper and aluminium current collectors that conventional wet-electrode production requires, cutting energy consumption by more than half in the process. Only the cathode and anode active materials remain imported, and even those are now under evaluation for domestic substitution.

The government's own hedge against Chinese dependence runs through Khanij Bidesh India, the state-owned entity tasked with securing offtake agreements for lithium, nickel and cobalt from mining operations overseas, feeding raw material back into whatever domestic cathode capacity does eventually scale.

It is, in effect, mineral diplomacy standing in for the technology licensing that Beijing will no longer provide.

Why manufacturers elsewhere should pay attention

For OEMs and tier suppliers watching India's electrification build-out, the practical takeaway is less about India's cell shortfall and more about where the country is already competitive. Its materials producers are qualified suppliers to dozens of global OEMs, its infrastructure cost advantage is real, and its chemistry expertise is no longer developmental.

That combination is drawing serious international capital into the region regardless of India's own cell timeline, as seen in projects such as Statevolt's $3.2 billion gigafactory in Ras Al Khaimah, designed explicitly to serve the wider Middle East, Africa and India market from outside China's orbit.

What India has demonstrated, somewhat by accident, is that a battery supply chain can be built out of order. Materials chemistry has scaled ahead of cell manufacturing, and cell manufacturing has scaled ahead of a genuine domestic demand base, largely because a government scheme assumed technology access that a geopolitical rival has since withdrawn.