For an Indian EV manufacturer, foreign technology can solve an immediate problem: getting a competitive vehicle to market quickly and at lower cost. Battery cells, permanent magnets, power electronics, semiconductors and other components remain difficult to source domestically at comparable scale.
As the business scales, those dependencies become a strategic decision. Which foreign dependencies can it safely carry, which capabilities must it control, and what should trigger a switch?
Localize too aggressively before volumes justify it and the vehicle can become uncompetitive. Remain dependent too long and a short-term sourcing decision can become a strategic vulnerability.
Karthick Athmanathan, former head of electric vehicles and e-mobility solutions at Ashok Leyland, argues that manufacturers should treat those problems sequentially.
“The first priority is always to rush to market with a reliable, good branded product,” he says. “Having started, you build your team, you build your numbers, then you take control of the design side.”
That calculation includes China. “As of today, it’s convenient for me to buy certain components from China. I will buy it,” Athmanathan says. “Now do I look at him as a strategic partner? No.”
The more useful measure of dependence is not where a component comes from, but how difficult it would be to replace. Can the manufacturer change suppliers, redesign around another component or absorb a disruption without rebuilding the vehicle around the incumbent?
Own the Architecture Before You Localize the Parts
Athmanathan argues that the first capability a serious manufacturer should “take control of is the design and the software.”
A manufacturer can continue buying cells, magnets, semiconductors, motors or controllers from outside suppliers. But if it controls the product architecture, specifications and software, it is better positioned to redesign around another component, qualify additional vendors and move sourcing when the economics justify it.
Athmanathan points to electric-bus manufacturer PMI. The company initially relied heavily on its Chinese partner Foton, and then localized areas including its vehicle controller, frame components, and axles as production increased. In his assessment, that shift substantially reduced PMI’s technological reliance on its original partner.
The key distinction is therefore not imported versus local. It is between a manufacturer that can change its product without its original supplier and one that cannot.
Foreign sourcing and technological dependence are not the same thing. An OEM can import a component for years and still retain the ability to replace it. Another can source fewer foreign parts yet remain more exposed because a proprietary system is embedded too deeply to switch without a major redesign.
Scale Changes the Economics of Optionality
A new EV entrant may need to prioritize market presence before an optimized supply chain. Without sufficient volume or capital, smaller manufacturers may also struggle to persuade alternative suppliers to develop specialized components cheaply.
“There is significant, significant dependency on foreign suppliers, especially China,” Athmanathan says. “And the minute anyone reaches scale, they remove item-by-item from the foreign supply chain.”
But scale does not remove dependence automatically. It changes the economics of creating alternatives.
Higher volumes can attract a second supplier, spread tooling and validation costs across more vehicles, justify internal engineering teams and make dual sourcing less punishing. As production grows, the cost of a disruption can also become large enough that paying for redundancy makes commercial sense.
Those are better triggers than an abstract instruction to “localize after scale.” Scale should trigger a sourcing review when it makes an alternative economically viable and not simply when the company crosses an arbitrary production milestone.
Rank Dependencies By Switching Risk
India’s remaining foreign dependencies are concentrated in a handful of technologies, but the risk each creates varies depending on how difficult it is to substitute or redesign around.
“If you go to the crux of the problem,” Athmanathan says, “it’s either the power modules, power electronics and semiconductors; or it is the magnets; or it is the cells.”
The important variables are the number of credible alternatives, switching and validation time, how deeply the component is integrated into the vehicle, and whether suppliers are concentrated around the same geographic or political risk.
China’s 2025 rare-earth export restrictions showed why concentration matters. Beijing placed export controls on several medium and heavy rare-earth-related items, requiring licenses. The resulting supply constraints created a vulnerability for Indian automakers dependent on rare-earth permanent magnets. A relatively low-cost component can still become a production bottleneck when there is no ready alternative.
Origin also matters when it adds political or regulatory risk. Buying a semiconductor from Taiwan is still foreign sourcing, but it can reduce exposure to a China-concentrated supply chain without increasing domestic content.
India’s rules on investment from countries sharing a land border add another consideration. The government partially eased those rules in 2026, including allowing some non-controlling investments of up to 10% under the automatic route and faster decisions for selected manufacturing investments. But China-linked investment remains subject to additional conditions and scrutiny.
That’s because India-China tensions can flare quickly, and previous border confrontations have already spilled into commercial relationships. After the deadly Galwan clash in June 2020, shipments from China faced additional customs clearances at Indian ports, disrupting supply chains for manufacturers dependent on Chinese inputs, while India tightened restrictions on Chinese companies in areas including government procurement. For an EV manufacturer, the lesson is that a commercially reliable supplier can become harder to use because of a deterioration in the bilateral relationship rather than any failure by the supplier itself. Chinese sourcing may still offer the best combination of cost, scale and availability, but manufacturers need to account for the possibility that political tensions can change the terms of that access with little warning.
That does not make Chinese sourcing inherently wrong. It means ‘foreign’ and ‘Chinese’ are not interchangeable measures of risk.
Do Not Plan Around Localization Dates Alone
Athmanathan estimates that imported-cell dependence could decline substantially within three to five years, permanent-magnet dependence in roughly three years, and semiconductor dependence over a longer period of seven years or more.
Those are operating assumptions, not guaranteed exit dates.
India’s Advanced Chemistry Cell production-linked incentive program targets 50 GWh, with 40 GWh awarded. But only 1.4 GWh had been installed under the program as of May 2026—a reminder that announced capacity is not the same as qualified supply.
Permanent magnets are even more exposed to policy execution. India currently lacks industrial-scale capacity for key stages of sintered NdFeB magnet production. A ₹7,280 crore (roughly US$761 million) government scheme approved in late 2025 aims to establish 6,000 metric tonnes a year of integrated domestic capacity and envisages a two-year setup period.
Semiconductor dependence will take longer to unwind. India is investing in domestic fabrication through the India Semiconductor Mission, but its first chip fabrication plant at Dholera was still being built in 2026.
For an OEM, announced domestic capacity should not become a procurement assumption until it is operating, qualified and commercially viable. Maintain an interim sourcing strategy in case capacity arrives late, remains too expensive or cannot meet the required specification.
Own Selectively, Preserve Alternatives
Nor should every component eventually be developed internally.
“Generalizing like this is what is dangerous,” Athmanathan says. “A decision on motors will be different from your decision on a controller, which will be different from a decision on a cell.”
Software may be relatively straightforward to bring under internal control. Semiconductor fabrication is not. A local magnet supplier may charge more than a Chinese competitor, but the added cost can be acceptable if magnets account for a small share of vehicle cost and the second source materially reduces supply risk.
“Owning every single layer is an option that I retain but not necessarily exercise,” Athmanathan says. “That’s what successful supply-chain management would be.”
That can mean dual sourcing rather than full localization: keep most volume with the lowest-cost supplier while maintaining a qualified second source. What matters is whether that second source can actually keep production running or scale up when needed.
Industrial policy can build domestic alternatives. The OEM’s job is narrower: identify which dependencies could stop production or prevent redesign, and create alternatives when the cost is justified.
Give Every Critical Dependency An Exit Path
The same logic extends beyond India. Asian manufacturers can benefit from foreign technology and established supply chains without allowing those relationships to become permanent constraints.
A better metric is whether the manufacturer gains more freedom to change suppliers and technologies as the business matures.
For every critical foreign component, an OEM should be able to answer a short set of questions: Who else could supply it? What would trigger a switch? How long would qualification take? How much redesign would be required? At what scale does one viable source stop being acceptable?
A company does not need an immediate answer that ends with domestic production. It instead needs an answer that preserves its ability to change course.
Foreign sourcing does not always need an exit date. But every critical foreign dependency should have an exit path.
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