India is accelerating its electric mobility push, but a critical supply chain gap is beginning to show. To avoid slowing down the rollout of electric buses and trucks, the government has extended the deadline for importing rare earth magnet traction motors under the PM E-Drive scheme until September 2026. This move highlights India’s continued dependence on nations like China, which dominates rare earth processing and magnet manufacturing, as demand for commercial EVs scales rapidly.
The deadline extension offers some temporary reprieve and ensures EV adoption is not derailed by magnet shortages, but it also points to a deeper structural challenge: the lack of domestic manufacturing capacity for critical EV components. As policy support drives EV production higher, this shortage could open up an opportunity for smallcap companies to step in and fill the gap in India’s EV ecosystem.
The missing link in India’s EV chain
India can assemble and sell EVs, but still cannot fully build out EVs, because of what lies at the heart of an EV: the traction motor. At the center of every electric vehicle sits a traction motor, and in most high-performance EVs, this relies on rare earth permanent magnets, which are embedded in the rotor. These motors define an EV’s efficiency and range per charge, their performance (torque and acceleration) and energy density optimisation. The better the traction the motor, the better the EV.
The dependency problem comes in here, which we have written about before: a bulk of global rare earth mining, processing and manufacturing happens in China. So even if India builds the EV, the core technology that it runs on depends on Chinese (and other) imports. If India can handle the manufacture of this component domestically, the EV ecosystem can scale faster and will be less exposed to global supply shocks.
Where smallcaps come in
The government’s move to allow imports till 2026 is a relaxation, but also a sign that India’s EV ecosystem is scaling faster than its supply chain can handle, which means it may be time for India to step up and fill the rare earth magnet/traction motor gap domestically.
Sona BLW Precision Forgings: Motors and Magnets
Sona BLW Precision Forgings (Sona Comstar) focuses on highly engineered EV drivetrain and motor systems for OEMs across India, Europe, the US, and China.
- What they do: The company designs and manufactures mission-critical drivetrain components such as differential assemblies, gears, EV traction motors, and motor control units, supplying to global OEMs across conventional and electrified platforms.
- Why they stand out: Sona is among the few companies globally with capabilities to develop high power-density, lightweight EV systems, combining mechanical precision (gears/differentials) with electrical systems (motors/controllers). They have already built a strong EV-focused order book with a large share linked to electric programs.
- How they may gain: As localisation norms tighten and India seeks to reduce dependence on imported traction motors, OEMs will need proven domestic suppliers with existing EV drivetrain capabilities. Sona is already embedded in global EV supply chains, with EV components driving a significant share of its revenue and growth.
MTAR Technologies: Precision Manufacturing
MTAR Technologies is a niche Indian engineering firm specialising in high-precision, mission-critical components for sectors like clean energy, nuclear, space, and defence.
- What they do: The company manufactures complex, high-tolerance components and assemblies used in applications such as fuel cells, hydrogen systems, nuclear reactors, and aerospace equipment, where precision and reliability are non-negotiable.
- Why they stand out: MTAR’s core strength lies in its ability to deliver ultra-precision machining and complex assemblies for critical applications, backed by long-standing relationships with marquee clients like ISRO and global clean energy players.
- How they may gain: As EVs evolve — especially motors, controllers, and related systems — they may increasingly require advanced materials and precision engineering similar to aerospace and clean energy applications. And as India moves towards boosting domestic capability, companies like MTAR which already possess proven high-precision manufacturing capabilities, are well-positioned to participate in the emerging EV subsystems supply chain.
Amara Raja Batteries: Indirect beneficiary
Amara Raja is one of India’s leading energy storage companies, transitioning from lead-acid batteries to lithium-ion solutions for electric mobility and energy storage.
- What they do: The company manufactures automotive and industrial batteries and is investing heavily in lithium-ion cell manufacturing, battery packs, and EV energy solutions, including a planned gigafactory and partnerships for advanced chemistry cells.
- Why they stand out: Amara Raja stands out because of its early mover advantage and aggressive pivot toward localisation of lithium-ion manufacturing in India. They also have the capability to scale across both traditional and new-age battery technologies.
- How they may gain: The EV battery ecosystem in India is already witnessing rapid localisation driven by strong policy support and capital investments. With batteries becoming a domestically anchored value chain, companies like Amara Raja stand to benefit from growing EV adoption.
The Indian market may be ready for an EV revolution, but the heart of the business still runs on imported magnets. The real opportunity, therefore, lies in companies that can replace those imports and boost domestic production, and these small caps are worth keeping an eye on in the days ahead as the EV sector grows and evolves
Sources
India relaxes sourcing rules to speed up electric bus, truck production | Mint
Electric vehicle traction motors without rare earth magnets – ScienceDirect
Sona BLW Precision Forgings Limited – IPO Note
Sona Comstar Posts Healthy Financial Performance In FY24
About Us – Welcome to Amara Raja Group
MHI awards 10 GWh capacity to one bidder under PLI ACC scheme