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Electric vehicle (EV) sales in India are expected to cross 9 million units by 2027 and the industry is seen creating more than 10 million direct and 50 million indirect jobs by 2030, says an IVCA-EY-Induslaw report.
The EV industry attracted $6 billion in investment in 2021. This could grow to $20 billion by 2030. In a sign that the EV market is drawing the attention of private equity/venture capital investors in India, such investments are estimated to grow from $181 million to $1,718 million during the same period – an annual growth rate of 849%. “This (PE/VC investment) has reached about $666 million in 2022 so far,” said Rajat Tandon, president of the Indian Private Equity and Venture Capital Association (IVCA).
Tandon added that while the Indian start-up ecosystem was focused on technological adaptation and environment, social aspects had also topped their themes for innovation. This was likely to give a further boost to ESG (environmental, social and governance) growth and climate specific funds, he said.
Many new and first-time investors are joining the bandwagon. However, experts feel that there is a need for the government and larger investor community to come together and work towards more sustainable solutions.
Srihari Mulgund, new-age mobility partner at EY-Parthenon, said electrification of Indian mobility presented a ‘once-in-a-lifetime opportunity’ to reimagine the future of the Indian automotive sector. “Capital becomes a strategic lever as we embark on this journey to electrify mobility.”
The Indian Electric Vehicle ecosystem is currently at an initial stage of development, but it has been gaining traction. In 2021, EV registrations stood at about 330,000 units, a 168 per cent jump over 2020. The sales were led by two- and three-wheelers – at 48 per cent and 47 per cent growth, respectively – followed by passenger vehicles at 4 per cent.
The e-rickshaw/e-kart category (top speed at less than 25km per hour) accounted for a large part of the three-wheeler segment, with a share of 45 per cent. E-buses, which are included in others, had a share of 0.36 per cent.
The spike could be attributed to the need for personal mobility, increased awareness of the environment and rise in prices of petrol (which have increased by Rs 43 a litre in the three years from 2019 to 2022). The second phase of Faster Adoption and Manufacturing of Hybrid and Electric vehicles (FAME-II) incentives also helped increase the adoption of electric two-wheelers.
The first quarter of 2022 saw sales of almost 110,000 units. Uttar Pradesh topped EV registrations in the country, with a share of 20 per cent, followed by Karnataka and Tamil Nadu. Of the overall 2-wheeler registrations, 67 per cent were in Karnataka, Tamil Nadu, Maharashtra, Telangana, and Rajasthan.
The bulk of the 3-wheeler registrations were in Uttar Pradesh, Bihar, Assam, and Delhi, which collectively accounted for 75 per cent of total sales. Maharashtra, however, recorded the highest sales in the passenger vehicle segment, at 3,700 units.
A large part of growth in EV sales is expected to come from the travel segment, especially electric three-wheelers and electric two-wheelers due to a fixed-duty cycle and companies (e-commerce, groceries and shops) committing to going completely electric in their last-mile deliveries.
Lack of charging infrastructure, though, is one of the biggest challenges for the EV industry. At present, there are only 1,742 charging stations across the country. This number is expected to increase to 100,000 units by 2027 to cover the demand from the 1.4 million EVs expected to be on the roads by then.
Currently, India accounts of for about 2.5 billion tonnes, or 7 per cent, of global carbon emissions. The ICE (internal combustion engine) vehicular pollution contributes 40 per cent to India’s total pollution. The IVCA-EY-Induslaw report said EVs would help reduce exposure to VOCs (which are carcinogenic) and help improve life expectancy.
Another report released by strategy consulting firm, Redseer, indicates that sales penetration of electric two-wheelers could increase 78 per cent by 2030 on the back of government policies, technology, infrastructure and consumer acceptance. The report suggests that top reasons for choosing electric two-wheelers are better features (such as interactive dashboards, connectivity, and driving features), and superior economics (running cost and price). Among other reasons are the fact that it is more environment-friendly and offers better performance (instant acceleration). Compared with ICE vehicles, the cost of ownership for electric two-wheelers is 20-70 per cent less, with cost savings increasing along with usage.
“Although emerging strongly, it is not without its challenges – long charging time and poor charging infrastructure are the two main pain points for both users and non-users,” said Mukesh Kumar, engagement manager at Redseer.
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