Are electric vehicles the future in India?
The electric vehicle market has a broad range of stakeholders and a multifaceted reach. Electric Vehicles adoption is critical to rise at a mass level and quickly in the world’s third-largest automobile market, which is currently the fifth-largest in the world. In 2021, more than 3,30,000 EVs were sold, representing an increase of 168 per cent over 2020. According to research by IVCA-EY-IndusLaw, this number will surpass 90 lakh by 2027. However, two- and three-wheelers are currently driving this increase in sales.
Therefore, several factors must be considered before the Indian EV ecosystem is healthy. Only a small percentage of new EV registrations are for electric passenger cars and buses. In addition, the nation has to have a functional charging infrastructure. What are the short-term market trends for electric vehicles in India and the government’s initiatives in this area?
The present situation
Two-wheelers and three-wheelers accounted for 48% and 47% of the 168 per cent rise in sales reported in 2021, respectively, with passenger vehicles coming in at 4% and electric buses coming in at a meagre 0.36 per cent. According to the IVCA-EY IndusLaw, the demand for personal mobility and increased gasoline and diesel prices support the spike in EV sales.
Twenty per cent of Electric Vehicles registrations in India’s most populous state, Uttar Pradesh, saw the majority of EV sales. “As of CY21, electric vehicles accounted for 1.1 per cent of total vehicle sales and are expected to account for 39 per cent of total automotive sales by CY27, growing at a ~68 per cent CAGR over the next five years,” the report states.
Finances and investments
The EV industry’s projected growth has already attracted significant investments. The industry saw investments of about $6 billion in 2021; by 2030, this amount is predicted to rise to $20 billion. Finance and investments are one aspect of the EV ecosystem that enables stakeholders to profit from this expansion.
Investors in private equity (PE) and venture capital (VC) have increased their commitments to the sector. These investments increased from $181 million to $1.718 billion, representing an 849 per cent annual growth rate (time frame not indicated).
Several mutual funds are now available for making direct investments in the sector. These open-ended funds invest in businesses creating electric vehicles (EVs), associated technologies, parts, and materials. As an illustration, look at the Mirae Asset Global Electric & Driverless Vehicles ETFS Fund of Fund, which offers investment options in projects like lithium & battery technology and electric and autonomous vehicles.
“The acknowledgement of finite energy options indicates that innovative companies unlocking sustainable long-term energy solutions like EV, Solar and alternate energy will score better commercial returns and are also equipped to tap into the sector’s long-term potential,” says Ishpreet Singh Gandhi, Co-founder of Stride Ventures and Stride One.
“As an investment opportunity, sustainability, specifically clean energy, is at the cusp of becoming one of the capitals generating long-term assets like gold, real estate and equities; yielding great returns in the long run.”
According to projections from the Ministry of Skill Development and Entrepreneurship, the EV industry in India might produce 50 million or 1 crore indirect jobs by 2030 in addition to 10 million or 1 crore direct jobs.
If India continues to make consistent growth, the EV industry will present a $206 billion opportunity by 2030, according to a CEEW-CEF analysis. This would necessitate an overall expenditure of $180 billion in EV manufacturing and charging facilities. This emphasises the enormous effort that needs to be completed, for which government assistance is vital.
The administration reaffirmed its commitment to the Paris Agreement, spurred on by its goal to see a significant move to electric vehicles by 2030. India has two consumer- and manufacturer-focused programmes, whereby the government provides $1.4 billion in subsidies to consumers and raises import tariffs to encourage indigenous production. The government’s primary focus is on the electrification of public transportation because most of the vehicles that receive subsidies are buses, two-wheelers, and three-wheelers. Additionally, the government has set up $140 million to construct a charging infrastructure.
10,000 EVs are being purchased from manufacturers by Energy Efficiency Services Limited (EESL) for distribution to government agencies using a rental model and upfront sales. The 10,000 EV tender from EESL intends to lower the initial cost of EVs significantly.
The National Electric Mobility Mission Plan 2020 (NEMMP), introduced in 2012 to enhance national fuel security by promoting EVs and hybrids, is another policy promoting EV adoption. A further incentive for buying EVS is offered by the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) programme. The Phase II of the scheme, which started in 2019, gives incentives for electric two-wheelers ranging from Rs 1,800 to Rs 29,000 and up to Rs 1.38 lakh for cars.
Earlier this year, the COP26 Summit in Glasgow, India, introduced the e-AMRIT platform. The portal seeks to serve as a one-stop shop for all information on EVs, including information on investment opportunities, governmental regulations, and available subsidies, as well as information on charging facility locations and EV financing choices. Similarly, an EV Super App will be available and act as a one-stop mobile phone solution for all information on charging, rates, etc.