With 100% FDI available, new production centers, and a greater push to improve charging infrastructure, India’s electric vehicle industry is gaining traction.
Other growth factors for the Indian EV industry include subsidies and policies supporting deeper discounts for Indian-made electric two-wheelers, as well as a boost for localized ACC battery storage manufacture. Furthermore, in September 2021, Cabinet authorized a production-linked incentive program for the automotive sector to stimulate the manufacture of electric and hydrogen fuel cell vehicles.
In this article, we are going to explore the factors due to which the demand for electric vehicles in India is increasing.
India’s recent policies to accelerate the transition to e-mobility are motivated by the burden of oil imports, rising pollution, and international commitments to address global climate change.
India’s electric vehicle industry has set ambitious growth goals
India’s automobile sector is the world’s fifth-largest, with plans to become the third-largest by 2030. Reliance on traditional modes of fuel-intensive mobility to cater to a large domestic market would not be sustainable. To solve this, Niti Ayog is designing a “Shared, Connected, and Electric” mobility alternative, with an ambitious goal of achieving 100% electrification by 2030.
India stands to gain on many fronts by shifting to electric vehicles (EVs): it has a relative wealth of renewable energy supplies and a qualified workforce in the technical and manufacturing industries.
According to an independent analysis conducted by CEEW Centre for Energy Finance (CEEW-CEF), India’s electric vehicle market will be worth US$206 billion by 2030 if the country meets its ambitious 2030 objective. This would necessitate a total investment in car production and charging infrastructure of about US$180 billion.
According to another report from the India Energy Storage Alliance (IESA), the Indian EV market will develop at a CAGR of 36% until 2026. During the same period, the EV battery market is expected to develop at a CAGR of 30%.
At the COP26 Summit in Glasgow, India launched the website e-AMRIT – https://www.e-amrit.niti.gov.in/ – which would serve as a one-stop platform for all information on electric cars. It tackles significant concerns about EV adoption and purchasing, such as charging station locations and EV finance alternatives, as well as investment prospects, government rules, and potential incentives for drivers and manufacturers.
EV Ecosystem in India
Regardless of the country’s goals, India’s electric vehicle industry is still in its infancy. However, when viewed from a different perspective, India is the world’s greatest unexplored market, particularly in the two-wheeler segment. Under the automatic approach, 100% foreign direct investment is permitted in this sector.
The central government is also prioritizing sustainable mobility, as evidenced by recent amendments to the FAME II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India) scheme to make electric two-wheelers more affordable. As of November 25, 2021, around 1,65,000 electric vehicles had been sponsored under phase two of the FAME scheme, with a demand incentive of about INR 5.64 billion.
In addition, several production-linked incentive schemes are aimed at fostering a local manufacturing ecosystem to aid in the adoption of electric mobility vehicles. This will be accomplished by encouraging new investments in the development of domestic supply chains for essential technology, products, and auto components.
What are these Production-linked incentive schemes?
The government announced a Manufacture-Linked Incentive Scheme (PLI) for ACC Battery Storage Manufacturing in May 2021, which will encourage domestic battery production and minimize reliance on imports. This will provide the necessary infrastructure for the EV industry, lowering the cost of EVs dramatically.
The government established a PLI Scheme for the automobile and drone industries on September 15, 2021, to incentivize high-value advanced automotive technology vehicles and products, such as “green automotive production” (see Cabinet press release here).
Existing automotive companies as well as new investors who are not currently in the vehicle or auto component manufacturing business is eligible to participate in the PLI Scheme for the auto sector.
There are two parts to the scheme:
- Champion OEM Incentive Scheme
- Component Champion Incentive Scheme
New Players in EV Market of India
Many significant battery manufacturers, such as Amara Raja Batteries, have taken the lead in directing new investments into green technologies, including lithium-ion batteries, as a result of these incentives.
Leading businesses such as OLA Electric Mobility Pvt, Ather Energy, and Mahindra Electrics are rapidly expanding their market presence in response to the opportunity that India’s EV industry affords. Furthermore, governments such as Karnataka and Tamil Nadu are enacting creative and timely investor-friendly laws in addition to constructing the required infrastructure.
- Tesla Inc., an American electric vehicle and renewable energy corporation, recently established its presence in India by forming Tesla India Motors and Energy Pvt Ltd in Bengaluru.
- Ather Energy, India’s first intelligent electric vehicle manufacturer, relocated its US$86.5 million manufacturing from Bengaluru to Hosur in February 2021. (Tamil Nadu).
- Ola Electric, a subsidiary of the unicorn Indian ride-hailing start-up Ola, announced in March 2021 that it would build the world’s largest electric scooter plant in Hosur (about a two-and-a-half-hour drive from Bengaluru) over the next 12 weeks for US$330 million, to produce 2 million units per year. Ola Electric plans to increase production to 10 million vehicles per year by 2022, accounting for 15% of the global e-scooter market.
- Greaves Cotton announced its debut into the multi-brand electric car retail industry under the brand name AutoEVMart on September 9, 2021. According to rumors, this platform would provide consumers with a diverse selection of electric vehicles, ranging from Ampere Electric to other EV companies.
- Sterling and Wilson Pvt Ltd (SWPL), India’s largest engineering, procurement, and construction firm, recently announced its foray into the Indian electric mobility market. It has formed a 50-50 joint venture with Enel X to launch and build innovative charging infrastructure in India, which will be incorporated on April 1, 2021.
Positive achievements have also been made in the growth of charging infrastructure across the country, with states such as Andhra Pradesh, Uttar Pradesh, Bihar, and Telangana establishing ambitious targets for the deployment of public charging infrastructure to boost electric car adoption.
Local fiscal sops, superior logistics, an investor-friendly government policy, business facilitation through easier access to authorities, supply chain connections, and the availability of adequate land are the main reasons why certain states are doing better than others.
Karnataka was the first state in India to enact a comprehensive EV legislation, and it has since become a hotspot for EV enterprises in India, both in terms of EV and EV auxiliary manufacturing, as well as R&D. Due to its supply ecology, greater land parcels, closeness to ports, and proactive investor support through administrative portals like Guidance Tamil Nadu, Tamil Nadu is also progressing at a noteworthy rate.
Nonetheless, while the electric vehicle industry is expanding, it still has a long way to go to meet the government’s ambitious 2030 target. The pandemic of COVID-19 not only hampered the industry’s advancement but also affected overall market demand.
In some categories, though, the market mood has remained positive. In India, EV sales for two-wheelers increased by 21% in FY 2020. Sales of electric buses climbed by 50% in the same period. The market for electric automobiles, on the other hand, remained bleak, with a 5% drop. In terms of total EV sales, following a slight setback in 2020, sales appear to be steadily increasing. In January 2021, 15,910 electric vehicles (EVs) were sold in India, with Uttar Pradesh selling the most, followed by Bihar and Delhi.
This all shows that the Indian Market is very much open for foreign investments.