The world most populous country is getting serious about the EV revolution with significant growth anticipated in India’s EV sector. Currently there are approximately 3 million registered EVs in India, with sales projected to reach 10 million EV’s per year by 2030. That will make the sector worth some USD 266 billion by 2030 while creating employment for around 50 million people. Asian Insiders partner, Pawan Bhatnagar examines what is fast becoming one of the most attractive opportunities in Asia.
India is setting to electrify its vast personal vehicle market across all classes but especially in the 2-wheel and 3-wheel segments where millions of daily urban commutes add to India’s famous choking metropolitan smog. But as registrations for electric vehicles shoot up – more than 10 times nationwide over the past 3 years – hopes grow for an improvement environment and the significant economic boost that will come from this explosive growth.
India, in company with many other countries straining to meet international obligations, is racing to go green. National targets include having 33% of all private car sales and up to 80% of two and three-wheeler sales be electric by 2030. The growth in these sectors is evident. From tiny numbers of electric scooter and motorcycle sales only 2-3 years ago, sales have already reached 1 million per year… but as there are an estimated 250 million two and three-wheeler vehicles on Indian roads now, that 1 million is just the beginning. There are some new 700 EV startups eyeing this demand, while also many internal combustion engine (ICE) manufacturers have accelerated their transition to electric vehicles.
Sales in these categories are rising more sharply because these vehicles tend to be used for shorter, urban trips where there is less associated range anxiety. This is an issue because India’s EV infrastructure is still emerging and is some way from maturity. The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) scheme has been being implemented from April 2019 and focusing primarily on electrification of public and shared transportation while also building the charging infrastructure in 68 cities across 25 states around the country. The scheme works primarily through financial incentives and subsidies with major domestic energy companies and with the intention of establishing 7,432 further EV charging stations. The scheme includes Production Linked Incentives (PLI) for selected manufacturers to stimulate cost-efficient production of EV’s along with incentives and tax reductions for purchasers.
Leading early adopters in India’s EV sector are delivery and logistics companies, attracted by the lower costs of going electric and for whom two and three-wheeled vehicles makes good sense on busy Indian roads. On-demand rideshare services likewise are attracted with several leading firms announcing their shift towards all-electric fleets.
This rapid surge in domestic demand however should be considered alongside the point that India is still one of the leading exporters of automobiles and intends to continue to grow that business. India’s EV sector’s export market grew by almost 250% in the first seven months of 2023 alone, with sales particularly strong in Europe. While there are many international competitors in this space, notably nearby China, several other countries are investing significantly on their EV export market, spurring India into considerable government investment into high-tech research and development.
The sheer scale of this rapid transition is naturally creating pressure in other areas, notably supply chains and especially for those expensive imported materials required for battery production – cobalt, nickel and lithium. This is keeping prices of new EVs high, and despite the emergence of various innovative consumer financing models, the real challenge lies in how to reduce the cost of battery production. Considerable effort is being placed therefore in researching improved battery chemistry to both increase battery efficiency and reduce hazard while also looking to reduce dependency on imported materials.
To keep up with the growing expansion, most EV manufacturers have invested heavily in various segments of the industry recently. India’s EV sector has attracted FDI worth around USD 34 billion between April 2000 and March 2023, accounting for around 5.5% of the total FDI during the same period. India is tracking towards becoming the largest EV market by 2030 with a total investment opportunity of over USD 200 billion over the next decade. The Indian government is encouraging investment in the EV sector, allowing 100% FDI under the automatic route. As well as the FAME scheme and its extensions, other nationwide and regional schemes include subsidies towards battery swapping stations, expansion of national highways, fast track approvals for related technological development in battery efficiency, energy transference, electronics and advanced driver assistance systems.
India’s EV sector offers major opportunities for significant growth in both catering to the exploding Indian domestic market while positioning for a leading position internationally.
India’s EV sector offers tremendous opportunity for international companies to successfully enter the market. Amidst this challenging environment, Asian Insiders offers vast experience and knowledge. For a no obligation call, please contact Jari Hietala, Managing Partner: jari.hietala(at)asianinsiders.com or Pawan Bhatnagar, India Partner: pawan.bhatnagar(at)asianinsiders.com
