India Braces For EV Battery Dumping By Nations Hit By US Tariff Hike

China, of course, is the largest player, with companies like CATL and BYD dominating the global market, and has already been slapped by a 25 per cent tariff hike, on which another 10 per cent will come into effect from Wednesday.

Japan and South Korea, which also have a significant number of battery manufacturers, including Panasonic and LG Energy Solutions, will face the brunt of the 25 per cent tariff increase on their exports to the US from Wednesday.

If the Americans make it difficult for EV battery imports, then the big players will look to dump it on other markets, and India, which reported a healthy 27 per cent growth to some 2 million units in 2024 is an obvious target.

USA, which has been investing in its battery manufacturing capabilities, is now the world's second largest EV battery manufacturing giant and is poised to grow further. Analysts point out that it makes sense for it to impose tariffs and ramp up its production lines.

India's imports of lithium-ion cells are huge, with about 75 per cent sourced from China and the remainder from Japan and South Korea. However, of late India has also been investing in battery-making capacity and now accounts for 3 GWh or 0.2 per cent of global battery making capacity. If more batteries rain in at cheaper rates, then those who have invested which includes the likes of Tatas, hero MotorCorp, Ather Energy and Eveready, may face huge problems, argue industry ministry officials in New Delhi.

"With the new US tariffs, manufacturers from China, Japan, and South Korea might look for other markets to avoid higher costs and stay competitive," officials said. There is a possibility that India may start taking defensive action by thinking up countervailing duties on imports beyond a point. 

India's Growing EV Market And Strategic Initiatives

In the past five years, India has rolled out several initiatives to boost local manufacturing and cut down on imports. The government recently even scrapped import duties on 35 key materials for EV battery production, like lithium-ion cells, to encourage homegrown manufacturing and make exports more competitive.

Major Indian companies are also making significant investments in battery production. Tata Motors, for instance, plans a US$ 1.5 billion investment in a battery gigafactory, expected to commence production by 2026. This initiative aims to secure a stable supply of lithium-ion battery cells, the most expensive component of EVs, by 2028.

Major companies like Maruti Suzuki, Tata Group, and Hero Motors have also entered the lithium-ion battery manufacturing space.

"Now, this is a very positive sign. You have existing battery players like Exide and Amara Raja, but getting into this big business means they are serious about making sure that they are able to produce their electric vehicles with a steady supply of electric vehicle batteries," Punnoose Tharyan, founding editor of Motown India Magazine, told The Secretariat.

“In an electric vehicle, the electric battery comprises as much as 60 per cent of the total cost. Now, the government and every player doing business in India is aware (of this). So it's all the more important that you protect this industry and this manufacturing outlet," added Tharyan.

While more imported batteries could help India's EV industry in the short term, it could make things harder for local manufacturers trying to grow.

But Tharyan believes that these countries dumping their EV batteries in India may not work out.

"Just because Trump has increased tariffs for imports of automobiles and auto components into its country, it doesn't mean that India will just be twiddling its thumbs," Tharayan said.

But if the dumping happens and succeeds, increased competition from big global producers (and their existing production cost advantages) might make it tough for Indian companies to keep up with price and technology. Flooding of the markets with cheap imports could slow the growth of local battery production: not good news for "Make in India".