2021 is the year of the Electric Vehicles.
Electric Vehicles have a simpler design, fewer parts, and last 3.5 times longer than Internal Combustion Engine (ICE) vehicles. They are more powerful at lower speeds as well as smarter. This is the first step in the overall disruption of the automotive industry. The introduction of Electric cars have brought a lot of enhancements to the automobile industry, from rapid charging technologies to better vehicle management systems.
India's new initiatives to accelerate the transition to E-Mobility are motivated by the burden of oil imports, increasing emissions, and international efforts to fight Global Climate Change. The speed, performance, and cost of India's transition to EV will be determined by the availability and affordability of capital for OEM (Original Equipment Manafacturer), battery producers, charge point operators, and end-users.
According to a study by India Energy Storage Alliance (IESA), the EV industry in India is projected to reach over 63 lakh units per annum by 2027, rising at a CAGR (compound annual growth rate) of 44% between 2020-2027. Following the implementation of the FAME (Faster Adoption and Manufacturing of (Strong) Hybrid and Electric Vehicles) India scheme, the EV demand in India has exploded. EV deliveries reached 4.2 lakh units in 2019 and are forecast to rise at a CAGR of 36% until 2026.
The pandemic of COVID-19 not only hampered the industry's growth but also dampened the overall consumer demand. In some segments, however, consumer sentiment has remained positive. In India, EV sales of two-wheelers increased by 21% in FY 2020. Sales of electric buses rose by 50% in the same period. The demand for EV, on the other hand, remained bleak, with a 5% drop. In terms of overall EV revenue, despite a slight setback in 2020, sales continue to be steadily increasing. In January 2021, 15, 910 EVs (EVs) were sold in India, with Uttar Pradesh selling the most, followed by Bihar and Delhi.
India stands to gain on many fronts by transitioning to EVs: it has a relative surplus of clean energy resources and professional talent in the infrastructure and manufacturing sectors. India represents the world's largest untapped market, especially in the two-wheelers segment. Under the automatic route, 100% Foreign Direct Investment (FDI) is permitted in this market. Leading players such as OLA Electric Mobility Pvt. Ltd., Ather Energy, and Mahindra Electrics are rapidly expanding their market presence in response to this opportunity. Tesla Inc., an American EV and renewable energy corporation, recently established its presence in India by forming Tesla India Motors and Energy Pvt Ltd in Bengaluru.
Compared to Internal Combustion Engine (ICE) cars, EVs have a considerably higher upfront expense, owing to battery prices. The running costs of an EV, on the other hand, are much lower. As a result, the Total Cost of Ownership (TCO) is an important and reliable metric for comparing the economics of ICE and EV vehicles. The value proposition of EVs from the customer's perspective would be lower TCO, particularly in applications where asset usage can be high. In India, mass-market EV channels are yet to appear, but both incumbents and new players are working hard, and the volume growth inflexion point might not be far away.
According to the IEA's main scenario, India's EV fleet – which includes two and three-wheelers, motorcycles, coaches, buses, and trucks – will account for 34% of the country's overall road stock by 2040, with two and three-wheelers responsible for the overwhelming majority of the total.
The recent developments are:
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February 2021
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Ather Energy has relocated its factory from Bengaluru to Hosur. The factory is said to have a manufacturing capacity of 0.11 million two-wheelers per year.
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March 2021
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Ola Electric has announced the construction of the world's largest electric scooter factory in Hosur, which will manufacture 2 million units per year, within the next 12 weeks. Ola Electric plans to expand demand to 10 million vehicles a year by 2022, accounting for 15% of the global e-scooter industry.
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April 2021
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Sterling and Wilson Pvt Ltd has announced their entrance into the Indian electric mobility market by forming a 50/50 joint venture with Enel X to introduce & develop groundbreaking charging infrastructure.
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Expansion of charging infrastructure across the country
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States such as Tamil Nadu, Delhi, Karnataka and Telangana have set impressive targets for the implementation of public charging facilities to improve the country's EV adoption.
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NITI Aayog released a study titled “India's Electric Mobility Transformation” in April 2019, predicting that by 2030, EV sales penetration in India will be 70% for commercial vehicles, 30% for private vehicles, 40% for buses, and 80% for two and three-wheelers. If met, these targets will result in a net reduction of 14 exajoules of energy and 846 million tonnes of CO2 emissions over the lifespan of the deployed vehicles. Electric cars delivered before 2030 will save 474 million tonnes of oil equivalent, or US$207.33 billion, over their lifespan.
The government aims to accomplish two goals with the Automotive Mission Plan, the National Electric Mobility Mission Plan (NEMMP), and other initiatives: promote long-term growth in the industry and reduce pollution and oil dependency. The government is encouraging alternative fuel adoption through FAME2, which is an expansion of the original FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) programme, to minimise reliance on oil imports. FAME2 is intended to incentivize the electrification of the public transport fleet of buses and taxis, as well as facilitate demand for all kinds of alternative fuels, while “FAME1” gave incentives to EV (EV) and hybrid EV customers. Furthermore, battery-electric cars are subject to lower products and services tax of 12%, compared to 31-48% for other vehicles, to promote immediate acceptance.
As of today, 27 states and UTs have developed mobility transition initiatives to provide their residents with safe, inclusive, cost-effective, and environmentally sustainable transportation choices. Karnataka was the first state in India to implement a robust EV scheme, and it has since been a hotspot for EV companies in India, both in terms of EV and EV ancillary production, as well as R&D. Tamil Nadu is also progressing at a remarkable speed, due to its supply ecosystem, larger land parcels, proximity to ports, and proactive investor help through administrative portals like Guidance Tamil Nadu.
The Key Takeaways:
Finally, the availability of capital for original equipment suppliers, battery manufacturers, and charge point operators, as well as investments in infrastructure and a diverse range of customer choices, will determine the size of India's EV market. By FY 2030, India's EV aspiration would necessitate a total annual battery capacity of 158 GWh, presenting massive investment prospects for investors. At this point, supporting policy support initiatives are crucial.
About the Author
Amreta Saha is an Assistant Manager- Research at 82Advisory. She is a postgraduate in Economics from the Symbiosys School of Economics and is a finance enthusiast.