On Friday, India's Tata Group signed an outline agreement to build a lithium-ion cell factory for about 130 billion rupees ($1.58 billion), as part of the country's efforts to develop its own electric vehicle supply chain.

India's car market is insignificant in comparison to the country's population. Tata Motors dominates electric vehicle (EV) sales, which accounted for less than 1% of India's total car sales of approximately 3.8 million last year.

According to a joint statement on the memorandum of understanding between Tata's unit Agratas Energy Storage Solutions and the government of the western state of Gujarat, construction on the plant, which will be located in Sanand, northern Gujarat, is expected to begin in less than three years.

It would have initial manufacturing capacity of 20 Gigawatt hours (GWh), which could be doubled in a second phase of expansion, the statement said.

"The plant will go a long way in contributing to the development of the EV ecosystem in Gujarat and India," Vijay Nehra, an official in the Gujarat state government told.