A Strategic Bottleneck Emerges
Mukesh Ambani, the chairman of Reliance Industries and Asia’s richest person, is navigating a complex geopolitical landscape. After adjusting his massive oil refinery operations to comply with demands from Washington to stop purchasing Russian petroleum, he now faces a significant obstacle from Beijing. China has implemented stringent curbs on technology transfers, creating a formidable barrier for Indian conglomerates striving to establish self-reliant clean-energy supply chains.
This development highlights a growing vulnerability in India’s manufacturing strategy. While the nation has aggressively pushed for domestic production through initiatives like the Production-Linked Incentive (PLI) scheme, the reality of global supply chains means that access to critical technology often remains in the hands of a few dominant players. China’s dominance in the battery and rare earth sectors has effectively given it a veto power over the pace of India’s green transition.
The Reliance Setback
Reliance Industries had ambitious plans to manufacture lithium-ion battery cells domestically, a crucial component for electric vehicles and energy storage systems. The conglomerate aimed to commence cell manufacturing this year and was in advanced negotiations with Xiamen Hithium Energy Storage Technology Co., a prominent Chinese supplier. The goal was to license lithium iron phosphate (LFP) cell technology, which is widely regarded as cost-effective and stable for energy storage applications.
However, these discussions stalled when Xiamen Hithium withdrew from the partnership. The withdrawal was directly linked to Beijing’s tightened controls on overseas technology transfers in strategic sectors. This move forced Reliance to pause its cell manufacturing plans and refocus its near-term efforts on assembling battery energy storage systems (BESS). These containerized storage units are primarily intended for Reliance’s own renewable power projects rather than for broader commercial sales.
Despite this setback, a spokesperson for Reliance maintained that the company’s broader strategy remains intact. The company stated that BESS manufacturing, battery pack manufacturing, and cell manufacturing are all part of their energy storage plans and are progressing according to their timelines. Nevertheless, the inability to secure proven Chinese technology presents significant execution risks and cost challenges.
The Economics of Technology Transfer
Internal assessments at Reliance concluded that proceeding without established Chinese cell technology would drastically increase costs. Alternative technologies from Japan, Europe, and South Korea were evaluated, but they were found to be substantially more expensive for large-scale deployment in the price-sensitive Indian market. This economic reality underscores the difficulty of decoupling from Chinese supply chains without incurring heavy penalties.
The situation at Reliance is not an isolated incident. Other major Indian industrial houses, including the Adani Group and JSW Group, are facing similar dilemmas. Both companies have outlined aggressive clean-energy expansion plans but are currently prioritizing battery pack and container assembly over full-scale cell manufacturing. They are scouting for viable technologies that can be scaled economically, a task made harder by the new export restrictions.
“We would like to categorically affirm that there has been no change in our plans for creating a world leading battery storage manufacturing ecosystem from cell to containerised ESS and they are progressing well in line with our target timelines.”
Impact on Government Incentives
The Indian government’s PLI scheme for advanced chemistry cell manufacturing was designed to catalyze domestic production by offering subsidies tied to project milestones. In 2022, Reliance New Energy was among the winners of bids under this program. However, the company was penalized earlier this year for missing deadlines. This failure points to a critical gap between policy aspirations and the ground realities of technology access.
The influx of cheaper Chinese batteries into the market has further complicated the business case for local manufacturing. Without the ability to license cost-effective Chinese technology or access subsidized inputs, Indian manufacturers struggle to compete with imported finished goods. This dynamic suggests that financial incentives alone may be insufficient if the fundamental technology and supply chain access are restricted.
China’s Broad Regulatory Offensive
The restrictions affecting Reliance are part of a wider regulatory offensive by Beijing. In October 2025, China’s Ministry of Commerce and General Administration of Customs announced export controls on a range of lithium-ion battery components and the technologies used to manufacture them. This list includes cathode material compositions such as lithium iron phosphate, nickel, cobalt, and manganese hydroxides, as well as graphite anode materials and related production technologies.
These controls specifically target high-performance applications. For instance, only lithium-ion battery cells or packs with a weight energy density greater than or equal to 300 Wh/kg require a license. While this exempts batteries used in most mainstream electric vehicles and consumer electronics, which typically operate in the 100-280 Wh/kg range, it directly impacts the setup of manufacturing facilities. Indian manufacturers planning to build plants in collaboration with Chinese firms are now blocked from accessing the necessary production technologies.
Effective November 8, 2025, Chinese exporters must obtain a license from the State Council to transfer these restricted technologies. This bureaucratic hurdle creates uncertainty and delay, effectively halting partnerships that were previously seen as the fastest route to industrialization. The controls apply not only to the materials but also to the specialized manufacturing equipment, such as winding machines, lamination machines, and liquid injection machines.
Restricting Human Capital
The technology curbs extend beyond physical materials to include human capital. Reports indicate that Chinese officials have verbally encouraged regulatory agencies to curb the movement of specialized employees and equipment to India and Southeast Asia. This is viewed as an attempt to prevent companies from shifting production bases in anticipation of higher tariffs from the United States.
This policy has tangible impacts on the ground. Apple assembly partner Foxconn, a key player in India’s electronics manufacturing push, has recalled hundreds of Chinese engineers from its factories in India. The recall of staff from Yuzhan Technology, a Foxconn component unit in Tamil Nadu, underscores the reliance on Chinese technical expertise for high-precision manufacturing. While Foxconn has begun flying in Taiwanese engineers to replace them, the disruption highlights the fragility of the current localization efforts.
Rare Earths and Strategic Minerals
Adding another layer of complexity is China’s dominance over rare earth elements (REEs) and critical minerals. In April 2025, Beijing imposed export restrictions on seven rare earth elements, including samarium, gadolinium, terbium, and dysprosium. These materials are essential for defense technologies, electric vehicles, and wind turbines.
China currently accounts for the vast majority of global heavy rare earth processing. The new licensing requirements for these exports create potential supply chain choke points for Indian manufacturers trying to build motors for electric vehicles or permanent magnets for wind turbines. The United States and other Western nations face similar vulnerabilities, but the impact is acute for India, which is in the early stages of building its industrial base.
The restrictions on critical minerals like lithium, gallium, and graphite further complicate the picture. Graphite is a crucial component for battery anodes, and China’s control over its processing and export gives it significant leverage over the global battery supply chain. For Indian companies trying to secure raw materials for battery production, these restrictions pose a severe bottleneck.
India’s Response and Future Path
Facing these multifaceted challenges, the Indian government is reportedly considering a recalibration of its stance on Chinese investment and procurement. Sources suggest that New Delhi may ease some of the strict curbs imposed on foreign direct investment from countries sharing land borders with India. The focus appears to be shifting towards a more nuanced approach where investment is judged by its economic impact and potential for technology transfer, rather than solely by the nationality of the investor.
Senior government sources have indicated that investments which create jobs and build domestic capacity should be welcomed, provided they do not compromise sensitive sectors like telecom, defense, and strategic infrastructure. There is growing recognition that if Indian manufacturers are forced to import finished goods because they cannot access the necessary technology or machinery for local production, the country misses out on valuable employment opportunities.
Industry leaders are also calling for a calibrated, sector-specific approach to easing restrictions. In sectors like textiles and engineering, where dependence on Chinese inputs for machinery and intermediate goods is high, controlled access to technology partnerships is seen as essential for maintaining global competitiveness. The argument is that while long-term self-reliance is the goal, short-term flexibility is needed to bridge the technology gap.
Exploring Alternative Technologies
Despite the hurdles, there are signs of adaptation and innovation within India. Some companies are exploring alternative battery chemistries and technologies that rely less on Chinese inputs. Research into sodium-ion batteries and solid-state batteries offers a potential long-term strategic advantage by utilizing raw materials that are more abundantly available domestically or from friendlier nations.
Companies like Ola Electric have announced the successful indigenous development of lithium-ion battery cells, planning to integrate them into vehicles by 2026. Similarly, Mahindra has developed an automated assembly line using patented processes, although even these efforts often rely on Chinese cells for the immediate term. These developments indicate a slow but steady move towards greater technological self-sufficiency.
The export controls imposed by China may ultimately serve as a catalyst for India’s research and development ecosystem. By necessitating a reduction in reliance on Chinese suppliers, these policies force Indian firms to address the challenges of uncertainty and invest in local innovation. Continued investment in academic institutions and research partnerships across the battery value chain will be crucial for expanding India’s capabilities.
The Bottom Line
The intersection of geopolitical strategy and industrial ambitions has created a complex hurdle for India’s manufacturing sector. China’s decision to restrict technology transfers and critical mineral exports is a clear exercise of its market dominance, posing immediate challenges for tycoons like Mukesh Ambani and policymakers in New Delhi alike.
While India’s green energy ambitions are momentarily stalled, the situation is driving a necessary re-evaluation of supply chain dependencies. The path forward likely involves a mix of strategic diplomacy, targeted easing of investment barriers, and a renewed focus on domestic research and development. Navigating this landscape will require careful balancing to ensure national security without sacrificing economic growth.
- Reliance Industries paused lithium-ion cell manufacturing after failing to secure technology from China’s Xiamen Hithium.
- China implemented export controls on lithium battery components and technologies requiring state licenses.
- Foxconn recalled Chinese engineers from Indian plants, impacting Apple’s manufacturing expansion.
- India’s government is considering easing investment curbs on China to boost technology transfer.
- Reliance refocused on assembling battery energy storage systems for internal use.
- China restricted exports of seven rare earth elements essential for defense and clean energy.
- Indian companies face higher costs without access to Chinese production technology.
- Adani Group and JSW Group are also prioritizing battery assembly over cell manufacturing.
- PLI scheme beneficiaries have faced delays due to technology access and equipment sourcing issues.
- Domestic firms are researching alternative technologies like sodium-ion batteries.
