Electric Vehicle Push May Exacerbate Import Bill Despite Crude Oil Reduction Gains

India's Electric Vehicle Push May Create a New Dependence on China

Prime Minister Narendra Modi's initiative to transition away from petrol and diesel vehicles has the potential to significantly reduce India's dependence on crude imports. However, a swift shift to electric vehicles (EVs) may lead to a new vulnerability, as India could become reliant on China for battery imports.

According to a Moneycontrol analysis, if electric vehicles account for 20 percent of passenger car sales, India's imports of batteries, cells, and related materials could increase to an estimated $17.6 billion, compared to approximately $3.9 billion at the current EV penetration level of 4.4 percent. This would imply an additional import requirement of around $13.7 billion.

The estimate assumes that 80 percent of India's battery and battery-material imports are used in automobile manufacturing, and that 75 percent of those imports are consumed by electric four-wheelers. Currently, EVs remain a small part of India's passenger vehicle market, with out of 42.7 lakh passenger cars sold, only 1.88 lakh were electric, translating into a penetration rate of 4.4 percent.

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In contrast, two-wheelers are more advanced in adoption, with sales of electric scooters and motorcycles reaching 12.9 lakh units, or 6.3 percent of the 2.04 crore two-wheelers sold in the country.

If EV penetration in passenger cars rises to 30 percent, the battery-related import bill could increase to $26.4 billion. At 50 percent penetration, the figure could approach $44 billion, while a full transition to electric cars could require as much as $87.9 billion in imports.

The savings in crude oil imports, while meaningful, are much smaller in the early stages. At 20 percent EV penetration, around 6.66 lakh conventional cars would effectively be displaced. Assuming each vehicle travels 10,000 kilometres annually, India could save an estimated $747 million in crude oil imports. At 30 percent penetration, annual crude savings could rise to $1.23 billion, while a 50 percent shift could generate savings of about $2.18 billion.

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However, the arithmetic highlights a sharp near-term mismatch. A 20 percent EV share could add $13.7 billion to battery-related imports while saving less than $1 billion in crude oil. This suggests that, at least initially, electrification may substitute one form of import dependence for another unless domestic battery manufacturing scales up rapidly.

That does not weaken the strategic case for EV adoption. Over time, localisation of cell manufacturing, battery recycling, and integration with renewable energy could reduce the import burden and improve the economics of electrification. In the short run, however, India's shift away from internal combustion engines may create a new external-sector vulnerability even as it seeks to reduce its reliance on imported oil.