India's EV supply chain faces urgent graphite shortage

India's efforts to establish a domestic battery industry face a critical challenge due to the lack of local synthetic graphite and anode material production capacity.

While India's electric vehicle (EV) industry has gained attention for its expanding vehicle production and charging infrastructure, the upstream supply chain, particularly the materials within battery cells, has not received the same focus. This oversight poses a significant risk to the industry's future.

Over the past five years, India has developed the visible components of its EV ecosystem. The Production Linked Incentive (PLI) scheme for Advanced Chemistry Cells has initiated domestic cell manufacturing, while the PLI scheme for automobiles and components has extended this momentum. Policies such as FAME and state-level EV initiatives have stimulated demand, moving India from an assembler of imported technology to an emerging cell manufacturing base.

However, the strength of cell manufacturing depends on the materials used, and geopolitical factors have influenced the industry's options. China's dominance in battery materials, including anode-grade graphite production, is a result of decades of investment. With over 90% of global capacity, China's control presents a structural risk to the global battery ecosystem, particularly in synthetic anode material production.

This issue is crucial for India. The anode, primarily made from synthetic graphite, accounts for 10 to 15% of a battery cell's cost and affects performance characteristics such as cycle life, charging speed, and thermal stability. The layered crystalline structure of graphite, achieved through high-temperature graphitization, provides the electrochemical stability and capacity needed for long-lasting batteries. For EVs, this translates into range and power; for energy storage systems, it ensures dependable cycle life.

The graphitization process, requiring temperatures above 3000°C, demands expertise and reliable power, which China has developed over decades. Achieving process consistency at commercial scale is crucial for translating pilot performance into reliable supply as volumes increase.

Building domestic synthetic graphite-based anode material capacity is essential for India's EV ambitions. A gigafactory reliant on imported anode material is merely an assembly operation. To ensure a resilient battery industry, India must integrate backward into active materials, including anode production.

The government has recognized part of this challenge by including graphite in India's critical minerals list and directing attention to securing upstream supply. However, the focus has been on natural graphite, while synthetic graphite is the primary driver of battery demand, accounting for over 80% of global anode demand.

Recognizing the distinction between natural and synthetic graphite is vital, as they require different capital, technology, and policy support. The Ministry of Heavy Industries is reportedly developing a new PLI scheme for components, which could support domestic synthetic graphite anode production. Faster industrial clearances and policy stability over the long term are also needed to de-risk investments.

India doesn't need to match China's scale but must develop the materials science, processing capability, and intellectual property underlying cell production. The future of India's EV industry will depend on securing upstream capacity for synthetic graphite anodes.