Trump Tariffs and Indian auto: Will it boost EV growth or hamper "Make-In-India" plans?

US President Donald Trump’s slew of international trade tariffs have sent shockwaves through the global economy. While the dust is yet to settle, it appears that the fallout would have both benefits and setbacks for India’s still burgeoning EV space. With the possibility of international battery manufacturers dumping batteries in India, there’s plenty of speculation as to how this is likely to affect India’s own battery manufacturing plans, local battery manufacturers and the OEMs collaborating with them.

According to Gaurav Dolwani, Founder and CEO, LICO Materials, a lithium-ion recycling outfit “I think India is a great alternative for a China plus one strategy. I think the economic costs of battery manufacturing are considerably lower in India than China, Korea and Japan where they’re currently being built"

At present India is importing 100% of its lithium-ion cells. While the last few years have led to the discovery of local lithium reserves, when it comes to cell manufacturing, India continues to remain at the starting point. At present, there are three major lithium-ion battery plants nearing completion, with operations expected to begin next year. There’s Reliance Industries’ gigafactory in Gujarat which plans to expand to a production capacity of 100 GWh by 2030, Exide Industries 6 GWh lithium-ion battery plant, expected to see completion by the end of FY26 and Ola Electric which has already commenced the production of its cylindrical cell and intends to install it in its upcoming slew of e-scooters and motorcycles.

Nitin Gupta, CEO and co-founder of Attero Recycling the tariffs imposed on China aren’t likely to halt the wheels already set in motion. “I don’t think there will be a substantial slowdown given that the market can absorb much more than what the giga factory expansion in India anyhow was, right? We are already running late compared to where we should be two years ago" However, “further investments will definitely slow down" he cautions.

The BYD Sealion 7 is the latest EV that the brand has launched in the Indian market. It has a starting ex-showroom price of ₹48.9 lakh, and it will be available across two variants, Premium and Performance.

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The BYD Sealion 7 is the latest EV that the brand has launched in the Indian market. It has a starting ex-showroom price of ₹48.9 lakh, and it will be available across two variants, Premium and Performance.

There are clear pros and cons to witnessing an influx of subsidised, ready-to-use lithium-ion cells. At a time when EV sales in India are struggling, much like the overall passenger car market, and at a time when demand for cheap, entry-level cars in rural sectors is witnessing a slowdown, the temptation for OEMs to utilise in-bound lithium-cells to produce cheaper EVs, is a strong one. However, it also opens the market to direct imports from US and China, with the latter’s BYD brand rumoured to be setting-up shop in India.

“EVs will definitely become cheaper, because given the competitive situation that India is in, they will agree to a sort of path with the US, wherein the US will push for lower tariffs on cars like Tesla. The same benefit will have to be passed on to other foreign EV brands. ". Whether from lowered production costs, or lowered duties on CBU imports, the EV consumer in India only stands to benefit from the tariff impositions on China, even when Trump has frozen all other tariffs for a 90-day period.

Experts have pointed out that cashing-in on redirected battery supply to boost EV sales is a short-term market strategy, which will potentially hamper supply chain localisation “The EV supply chain is very sticky" says Vikram Handa, MD, Epsilon Group. According to Handa, if the Chinese battery suppliers are entrenched in the India EV ecosystem, “There will be no local supply chain. Once the Chinese supplier enters six years you can’t change it." Trump’s 90-day tariff freeze on other global markets suggests an unprecedented volatility on which no long-term negotiations must be made. “what can happen is that in a year or two, the Chinese can double the price and Indian companies will be even more uncompetitive than they would be today". “The Indian government has reduced duty on lithium and critical minerals, but I don’t see what that can do if nobody is manufacturing anodes and cathodes" says Handa, whose company Epsilon Advanced Materials is shaping-up to be the largest anode supplier outside of China. “Last year, India imported, approximately, $ 3 billion worth of cells," says Handa. “Even the PLI winners continue to buy from China and are not really wanting to buy from local suppliers or develop a supply chain. The clear goal should be to manufacture in India whether it’s a lithium-ion cell or battery material".

“If one market closes (the US, for China), and if that happens to be the largest market then all kinds of goods will start looking for alternative markets. With India’s automotive sector on a strong growth trajectory, we must be prepared to manage and channel these shifts strategically." says Vijay Chauhan, Executive Director, Tax at Deloitte India.

Chauhan, a former IRS officer who worked at the Customs department, points out that there are inherent safeguards to prevent the flooding of cheap imported goods which can hamper local battery makers. According to him “The phenomenon of “dumping" has a very precise and nuanced meaning in international trade laws. If there was a significant jump in the imports of lithium batteries into the country, and there was an injury to the domestic industry, if these facts can be proven then on the recommendation of what is called the Director General of Trade Remedies, will recommend an imposition of duty to negate this dumping".

For a truly thriving battery ecosystem the Indian government needs to pull a tightrope act which enables short-term EV sales growth, while also safeguarding the long-term interests of the “Make in India" movement. While doing so, it must also take cognizance of its resource scarcity when it comes to critical minerals, and provide incentives to battery makers, working on alternative battery chemistries utilising more abundant sources like sodium, calcium etc – what Chauhan calls multi-ion batteries. “India doesn’t have the luxury of time. We need to simultaneously support lithium-ion imports to drive EV growth now, while accelerating multi-ion battery innovation. The challenge lies in harmonizing these efforts without one stalling the other—boosting demand for multi-ion batteries will be key."

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