India’s effort to electrify its road transport is running into headwinds – availability of raw materials. In April 2025, China announced controls on the export of seven rare earth elements, crucial for the production of high-power magnets used in electric vehicles. Exporters must apply for a license for each shipment of magnets containing these elements, which will require detailed documentation including end use, and end user information.[1] These restrictions have started to pinch, with Maruti Suzuki, India’s largest auto manufacturer, cutting down the production of its electric vehicles by two-thirds.[2] India has engaged with Chinese authorities to facilitate rare earth exports, but with little impact so far.[3] China enjoys a near monopoly on the mining and production of rare earth magnets, and it is not possible for India to find alternative suppliers in the short term.
Rare earths are just one of the elements needed for electric vehicles (EVs). They also require lithium, cobalt and nickel, all primarily used in vehicle batteries. In case of cobalt, most of the mining is done in the Democratic Republic of Congo, while refined cobalt is produced primarily in China, where it is used in lithium-ion batteries. China is a major producer of lithium batteries, and Indian automakers import these batteries from China. India imported batteries worth over $3 billion during 2022-23, mostly from China.
India’s dependence on China for various EV minerals, and China’s monopoly or near monopoly on many of these, are both risks for India’s proposed shift to electric vehicles. Moving to EVs without tying up supply chains gives China leverage over one of India’s key manufacturing industries. In June 2025, it was reported that China has also restricted exports of phosphatic fertilisers to India.[4] In July 2025, Taiwan-based Foxconn Industries – which manufactures the iPhone in India – withdrew 300 of its Chinese engineers at Beijing’s abrupt demand.[5] These actions may be part of a larger pattern to disrupt India’s industrialisation.
So far, India has not been able to create any meaningful local supply chains for lithium, cobalt or rare earths. Even if the country seeks to build secure supply chains by investing in resource-rich third countries such as Australia and Chile, it will be very difficult to fully meet India’s large and growing needs. Nor has India’s experience of doing the same with a more widely available resource like petroleum, seen much success. India’s state-owned oil companies have been investing in overseas assets for over two decades and these investments yield a little under 5% of India’s total oil imports. Critical minerals such as rare earths, lithium and cobalt are geographically less widely distributed compared to oil. Moreover, competition for these resources will be fierce, as several countries find themselves in a situation similar to India and will rush to buy what’s available. Acquiring overseas assets can, at best, only meet a part of India’s large and growing requirements.
India will need a multi-pronged strategy for critical minerals, including making policy choices that reduce the need for these minerals.
The use of hydrogen for energy storage, and for the transport sector, can be one such choice. Instead of using a lithium battery for energy storage, a fuel-cell electric vehicle (FCEV) uses hydrogen to store energy, where the hydrogen combines with oxygen in a fuel cell to generate energy. The only emission from this reaction is water vapour. Hydrogen is produced by splitting water into its components – hydrogen and oxygen – through electrolysis (splitting water by use of electricity). If this electricity is sourced from renewable sources, the hydrogen produced is termed as green, and therefore non-polluting. Hydrogen is abundant – water is 11% hydrogen by weight. Compared to a lithium battery, hydrogen can store about 100 times more energy for the same weight.[6] Hydrogen’s shortcomings are that it is hard to liquefy and has to be stored as a gas at a high pressure (250-700 atmospheres).
Hydrogen is an important industrial gas – it is used in the manufacture of urea fertiliser and in petroleum refining. Hydrogen has been traditionally produced from natural gas at a cost of $0.5-1.7/kg, while green hydrogen cost ranges from $3-8/kg. Worldwide production in 2023 was 97 million tonnes, of which less than 1% was green hydrogen.[7] With increasing use of renewable energy, there is a push to create green hydrogen capacity. Given the large existing demand for hydrogen, new investments in green hydrogen have a lower risk as there is a ready market for their product. The use of hydrogen as a vehicle fuel is at a nascent stage: fewer than 100,000 vehicles globally, and some trains in China and Europe. Toyota, Hyundai and Honda have all developed cars and trucks that run on hydrogen. While these demonstrate the technical feasibility of hydrogen as a vehicle fuel, commercial challenges such as the cost of gas and supporting infrastructure prevail.
India’s National Green Hydrogen Mission, launched in 2022, envisages a capacity of 5 million tonnes of green hydrogen with associated renewable energy capacity of 125 GW by 2030.[8] The Solar Energy Corporation of India (SECI) has awarded projects for production of green hydrogen, as well as construction of electrolyzer manufacturing capacity. Two petroleum refiners, Indian Oil[9] and Hindustan Petroleum.[10] have just been awarded projects for producing green hydrogen at their petroleum refineries. The first green hydrogen projects are projected to be operational by 2027.
For India, there are three interlinked challenges. First, it needs to bring down the cost of green hydrogen, which will require production at scale. The projected cost of green hydrogen from current pilot projects is pegged at roughly $4/kg , which needs to be in the $1-2 range to be competitive. Second, it needs a fleet of hydrogen-powered vehicles that will generate the demand for this gas and create the scale that is needed. Three, it needs distribution infrastructure for hydrogen, without which adoption of hydrogen-fuelled vehicles will not pick up. If India is able to shift to hydrogen-based transport, it will be able to cut down its transport sector emissions while limiting its dependence on lithium, a mineral in short supply.
Amit Bhandari is Senior Fellow for Energy, Investment and Connectivity.
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References:
[1] “China’s 2025 Rare Earth Export Controls: A Comprehensive Guide for Importing Sintered NdFeB Magnets” mainrichmagnets.com, July 1, 2025. https://mainrichmagnets.com/chinas-2025-rare-earth-export-controls
[2] Aditi Shah “Exclusive: India’s Maruti Suzuki Cuts near-Term EV Production amid Rare Earths Crisis | Reuters.” July 11, 2025. https://www.reuters.com/business/autos-transportation/indias-maruti-suzuki-cuts-near-term-ev-production-amid-rare-earths-crisis-2025-06-10/
[3] “Transcript of Weekly Media Briefing by the Official Spokesperson.” Ministry of External Affairs, June 26, 2025. https://www.mea.gov.in/media-briefings.htm?dtl/39718/Transcript_of_Weekly_Media_Briefing_by_the_Official_Spokesperson_June_26_2025
[4] “China Stopped Exporting Specialty Fertilisers to India, Raising Concern For…” Agri News, June 26, 2025. https://agrinews.in/china-stopped-exporting-specialty-fertilisers-to-india-raising-concern-for/
[5] Sankalp Phartiyal, Debby Wu, and Mark Gurman. “Foxconn Pulls Chinese Staff from India in Hurdle for Apple (AAPL).” Bloomberg, July 2, 2025. https://www.bloomberg.com/news/articles/2025-07-02/foxconn-pulls-chinese-staff-from-india-in-hurdle-for-apple-aapl
[6] “How Do the Energy Densities of Hydrogen and Batteries Compare.” NenPower, January 12, 2025. https://nenpower.com/blog/how-do-the-energy-densities-of-hydrogen-and-batteries-compare/
[7] “Hydrogen Production – Global Hydrogen Review 2024 – Analysis.” IEA, 2024. https://www.iea.org/reports/global-hydrogen-review-2024/hydrogen-production
[8] “National Green Hydrogen Mission.” National Portal of India. https://www.india.gov.in/spotlight/national-green-hydrogen-mission
[9] “IndianOil Finalises India’s Largest Green Hydrogen Project at Panipat” Indianoil, May 30, 2025. https://www.iocl.com/NewsDetails/59411
[10] “OCIOR Bags Green Hydrogen Contract for HPCL Refinery” Chemical Industry Digest, July 16, 2025. https://chemindigest.com/ocior-bags-green-hydrogen-contract-for-hpcl-refinery/