India’s EV Future is Being Rewritten in the Strait of Hormuz

For over two decades, automakers have been pitching electric vehicles (EVs) as a serious pathway away from fossil fuels. However, the Iran conflict has not only made everyone realise that oil still remains essential to our energy needs, but also uncovered how tightly the EV ecosystem is knitted to shipping routes, petrochemicals, metals, and energy markets.

For India, one of the world’s fastest-growing EV markets, the ripple effects of instability in West Asia may not immediately halt production but could reshape the industry's economics. Rising fuel prices, disruptions in maritime trade routes, volatility in raw material markets, and pressure on battery supply chains may impact the industry one way or another in the case of an extended conflict in the region. 

“For India’s electric vehicle sector, the impact will likely be indirect but meaningful, particularly through logistics costs, manufacturing inputs, and supply chain uncertainty,” Mahak Agrawal, India Lead at Riding Sunbeams, tells AIM.

For companies operating on tight margins, particularly emerging EV startups, these disruptions can significantly affect financial planning and operational efficiency.

Import Dependence in India’s EV Ecosystem

India’s electric mobility sector has expanded rapidly over the past decade—from 2,600 in 2014 to 2.34 million units in 2025, per Vahan portal data—supported by government incentives, private investment, and rising consumer adoption. Yet critical components in the EV supply chain continue to rely heavily on imports.

According to NITI Aayog’s Electric Mobility Index 2024, approximately 85% of battery cells used in India in 2024 were imported.

Battery cells typically account for a substantial share of EV manufacturing costs, making the sector particularly sensitive to disruptions in international trade routes or global price volatility. Higher oil prices can also jack up container shipping costs, while global logistics companies also have to factor in rising insurance premiums for vessels navigating conflict-prone regions. If geopolitical tensions disrupt shipping lanes or increase freight costs, manufacturers may face higher input costs and longer delivery timelines even if global battery prices remain stable.

“Electric vehicles may not consume oil directly, but the ships that carry their components, the factories that assemble them, and the materials that go into batteries are all part of the same global energy system,” Agrawal comments.

The issue is not limited to batteries alone. Semiconductors, power electronics, and specialised components also move through global supply chains before reaching Indian manufacturers.

Rising Freight Costs

This isn’t the first time a geopolitical event has impacted logistics networks. Among the more recent incidents, during the Israel-Hamas war, many vessels avoided the Suez Canal and rerouted around the Cape of Good Hope, significantly increasing travel distances and shipping costs.

Abhijeet Sinha, National Program Director, India Middle-East Europe Corridor (IMEC), Program at Ease Of Doing Business, tells AIM, “The India Middle-East Europe Economic Corridor (IMEC), launched at the 2023 G20 New Delhi Summit by India, UAE, the US, Saudi Arabia, Israel, Jordan, France, Germany, Italy, and the EU, aimed to create a resilient sea-rail-energy-digital corridor linking India to Europe, bypassing traditional chokepoints like Suez and Hormuz for 40% faster and 30% cheaper trade.”

However, the Israel-Hamas war disrupted the momentum. Despite this, around 75% of the IMEC corridor work was completed in Saudi Arabia and the UAE by 2025, he says.

Additionally, Rohit Gupta, Product Manager - Mobility at EV solutions company Inverted, says geopolitical developments have increasingly become a direct cost variable for energy and battery projects.

“Geopolitics is no longer a background risk; it is an active line item in project cost,” he highlights. 

Gupta also notes that falling battery prices do not always translate into lower project costs once freight and other expenses are added. While the International Energy Agency reported a roughly 20% decline in lithium-ion battery pack prices in 2024, these figures represent ex-factory prices. When freight, insurance, duties, and financing costs are factored in, the final price in markets such as India can remain significantly higher, he analyses.

Shipping disruptions caused by geopolitical tensions can therefore offset gains from falling battery prices.

Currency Volatility

Geopolitical conflicts often trigger currency fluctuations that can further complicate supply chains. The Indian rupee has slid 1.6% since the start of the war, trading at ₹92.48 against the dollar on March 16.

Most EV battery components, including cells, inverters, and power conversion systems, are priced in US dollars. When the Indian rupee weakens against the dollar, the cost of importing these components rises even if global prices remain unchanged.

“Most BESS (battery energy storage systems) components are dollar-priced, so when the rupee weakens, landed costs rise even if global prices haven't moved,” Gupta explains.

In such scenarios, companies may face margin compression if exchange rate assumptions used in project bids prove inaccurate.

Raw Materials and the Global EV Race

The rapid growth of electric mobility worldwide has triggered intense competition for critical minerals used in EV batteries, including lithium, cobalt, nickel, graphite, and copper.

According to a KPMG analysis, global demand for these minerals is expected to rise sharply as EV adoption accelerates across major markets. Without significant expansion in mining and refining capacity, supply constraints could lead to price volatility and increased competition for resources.

Copper is particularly critical to the EV ecosystem because it is used in motors, battery connections, and charging infrastructure. Around 40,000 tonnes per month of copper cathode were disrupted instantly by the closure of the Strait of Hormuz, according to Fastmarkets.

EV manufacturing also relies on a range of petrochemical derivatives used in plastics, insulation materials, adhesives, and electronic components. West Asia remains a major supplier of petrochemical intermediates used in global manufacturing.

“A significant share of the EV ecosystem relies on metals and chemicals whose supply chains intersect with energy and petrochemical markets,” Agrawal notes.

Battery production involves energy-intensive processes, including mineral extraction, refining, chemical processing, and cell assembly. Rising global energy prices during geopolitical crises can therefore increase costs. Brent Crude Oil prices have significantly shot up from around $65 per barrel before the war to $99 on March 16.

Satendra Shukla, Chief Business Officer at Maxvolt Energy Industries, says tensions involving Iran are already influencing global logistics and manufacturing costs. The main concern, he says, is not necessarily the availability of materials but the indirect impact on shipping routes and transportation costs.

Government Efforts to Build Domestic Supply Chains

Recognising the strategic importance of EV supply chains, the Indian government has introduced several initiatives to strengthen domestic manufacturing.

According to Automotive World, India is considering a new EV supply chain incentive scheme to encourage local production of critical EV components. The initiative would complement existing policies such as the Production-Linked Incentive (PLI) scheme for advanced battery manufacturing and the PM E-Drive programme promoting EV adoption. These policies aim to reduce import dependence by building domestic manufacturing capacity for batteries, components, and related technologies.

“India has a strong opportunity to build resilient ecosystems for advanced battery technologies, reducing long-term exposure to global geopolitical disruptions while supporting the country’s rapidly expanding EV market,” Shukla notes.

Localising key parts of the EV supply chain could also make the industry more resilient to geopolitical disruptions.

EV Adoption and Innovation Opportunities

While geopolitical tensions create challenges for supply chains, they can also reinforce the long-term economic case for electric mobility, given the steep spike in fuel prices.

Vineet Asthana, Co-founder and CEO of EV charging startup EzyCharge, believes the current crisis makes a case for India to accelerate the transition to electric mobility.

“Whenever instability hits oil-producing regions, the entire world feels the impact through rising petrol and diesel prices,” he adds.

India’s crude oil imports hit $137 billion in FY25, but Asthana says expanding EV adoption could reduce this dependency and improve the country’s energy security. “The transition to electric mobility is not just a technological shift; it is a strategic move toward a stronger, self-reliant India.”

Periods of global uncertainty often reshape investment priorities and accelerate innovation. While geopolitical tensions can temporarily slow funding cycles, they can also create opportunities for startups developing solutions in energy efficiency and clean mobility.

Kriti Singh, Associate Director at the policy think-tank The Dialogue, says rising fuel and electricity costs can have ripple effects across multiple sectors. “When tensions rise even in certain parts of today’s globalised world, the impact is felt far and wide… Higher fuel and electricity costs can squeeze margins for sectors such as mobility and logistics.”

However, she notes that such disruptions can also create opportunities for innovation in EV charging infrastructure, battery recycling, and advanced energy storage systems, which could play a key role in strengthening domestic supply chains.

Building a Resilient EV Ecosystem

The Iran conflict underscores the importance of building resilient and diversified supply chains for emerging industries such as electric mobility.

While India’s EV market remains exposed to global supply chain disruptions, investments in domestic manufacturing, recycling technologies, and mineral partnerships could gradually reduce dependence on imports.

Agrawal believes the long-term response to geopolitical volatility should focus on strengthening local ecosystems while remaining connected to global markets. “Building resilient, localised EV supply chains is important, not from an inward-looking mindset, but to improve resilience amid rising geopolitical tensions.”

As India accelerates its EV transition, such strategies will be critical in balancing global integration with domestic supply chain resilience.