The Chinese whispers in India’s EV batteries

Akshara (0:04)

In today's episode, we'll do one deep dive and cover another story for the day. First, we'll talk about the Chinese whispers in India's EV batteries, and then we'll talk about why India's airlines want cheaper fuel.

Welcome back to The Daily Brief by Zeerudha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara. Today is Thursday, 8th October.

Coming to the first story. So this year, India's largest conglomerates tried to make a lot of noise regarding EV batteries. But somehow, each of their noises showed the same pattern. For instance, in early 2024, JSW announced plans for a 50 gigawatt hour cell gigafactory using technology from a Chinese partner. But this year JSW halted those plans because it hinted that acquiring such a license was too much trouble. Tata's battery arm, Agratas, also tried to license Chinese technology. But they realized they couldn't make it work and then decided to develop their own.

Meanwhile, a somewhat expected entrant in Reliance also announced that it was building a large cell factory in Janganagar, Gujarat. But as per Bloomberg, it turns out that they too had also hit a block with a potential licensing deal with a Chinese partner.

Now, it's no secret that India has been trying hard to move up the value chain in EV batteries. So, a year ago, we covered Ashok Lailian's Rs. 5000 crore deal with China's C-ALB, one of the world's largest battery cell makers. The long-term goal was to eventually build the cells within the batteries themselves. Similarly, Amararaja had struck a deal with another Chinese company, Goshin, and exiled with S-Volt. However, tech transfer deals have always been tricky to execute. More so if the foreign company giving the technology is based within the jurisdiction of a geopolitical rival. How we're trying to navigate this complexity is the story we'll be telling you today.

First, let's explore what it means to even make an EV battery. So an electric car battery is a pack made up of hundreds or even thousands of cells along with cooling systems, electronics and software to manage them. Making these packs isn't easy, but Indian companies already know how to do it. Tata, Mahindra and Aetha, for instance, make battery packs in India using cells bought from elsewhere. Ola is an exception, which we'll come to later. But even harder than the pack is making the cells that go inside it. And building a cell factory isn't the hardest part either. The real challenge is learning how to make millions of cells that perform the same way, last long and remain cheap. That requires a lot of trial and error, constant iterations on the factory floor and lots of practice. For every batch of cells you make, some will go to waste, and the purpose of those iterations is to reduce that. Chinese and Japanese companies have spent years, even decades, getting better at this, while we are only beginning. So merely buying the license to the technology isn't enough. Learning the actual know-how takes a lot more practical effort beyond the manual that explains how to make cells. This is called tacit knowledge, and we'll explain later with an example how crucial it is. So even if Indian companies learn to make cells, there's another problem. They still need the materials that go inside them, and India imports most of those too. India's rare earth dependence on China is well known, so we won't be discussing it this time. Now India has been trying to speed things up with incentives. We have an 18,100 crore rupee advanced chemistry cell PLI scheme that pays firms to set up large battery cell factories. The target is 50 gigawatt hours of capacity, which is enough cells to store 50 billion watt hours of energy. Of this, 40 gigawatt hours has been awarded and the remaining 10 gigawatt hour is being tendered. But as of June 2026, only 1.4 gigawatt hour was actually up and running, and all of it from Ola. Plenty of factories are planned, but very few are in operation. Which brings us back to the main problem Indian companies are stuck on, and the one country that we're dependent on to solve it. Now, most of the expertise required to make advanced cells at scale is held by Chinese companies. Today, China makes roughly 80% of the world's battery cells and more than 90% of its LFP cathode material. So unfortunately, getting access to their knowledge has only become much harder over the past year, at least partly because of China's own policies.

Now, it's not like China has stopped sharing battery technology altogether, but the restrictions are more selective than that. China appears to be drawing a line around some of its more advanced manufacturing know-how, while older technology is still more transferable. For instance, in July 2025, China added some parts of LFP cathode making technology to its restricted export list. And the rules use technical cutoffs to decide what exactly is restricted. So put simply, some of the know-how used to make the highest generation of LFP batteries now needs government approval before a Chinese company can share it abroad. But less advanced generations actually fall outside these restrictions. China went further in October announcing broader controls across industries. And then in November, it suspended those rules. But the restrictions introduced in July remained. Now another measure that China has used to hamper tech transfer is limiting the mobility of its engineers that we'd need to help us with setting up factory processes. Take Amararaja's deal with Chinese battery maker Goshan. So Chinese engineers were supposed to help Amararaja set up the machines, put quality control processes in place, and train its Indian employees. But one of the biggest bottlenecks they highlighted in that deal was the inability to court Chinese engineers. That hurt their ability to absorb the tacit knowledge embedded in manufacturing. Now if you'd recall, this is not very different from when China called back its engineers from Foxconn's factories in India last year. And on top of all of this, there's pressure from the Chinese state on Chinese companies to scale down licensing of technologies, not just in India, but to any other country. In 2024, China's Commerce Ministry reportedly held a meeting with their domestic automakers regarding the risks of making overseas investments. And it signaled India in particular, while also advising strongly against investing in Russia and Turkey. Beyond this, there's also the problem that all tech transfer deals face, regardless of which countries are involved. What is the incentive for a company with technology to teach us how to use it? After all, the moment you give the license away, you create a potential competitor. So, the licensing firm's incentive is to teach the license only as much as is needed to run a factory and no more. Meanwhile, the licensing firm also gains access to the market of the licensee, which is why they enter a deal in the first place. As we've covered before, given China's domestic sales plateauing, they have a particular interest in gaining access to the Indian market. Of course, our own policies with Chinese investments make things harder, which ensured that Chinese companies face an extra layer of scrutiny before investing here. BYD, for example, proposed a $1 billion EV plant in India in 2023, but the plan did not get government approval. So, India eased the rules slightly in 2026 for small Chinese stakes in Indian businesses, but bigger investments still need approval. Now, even within this context, different companies have taken very different routes to the same problem. We'll be looking at a few of those. First comes JSW. So, on 26th August this year, JSW paused its cell gigafactory, and it linked its inability to find a Chinese partner for LFP batteries to China's Tata controls. JSW was ready to build the factory, but couldn't get the know-how needed to make cells at scale.