How the rapid transition to electric vehicles is boosting investments in the Indian EV space – EQ Mag
Pollution levels in Indian cities have been rising, generating a slew of health issues for residents. The need for sustainability is at its peak. EVs provide a more environmentally friendly and sustainable means of transportation, which can help lower pollution levels. This has resulted in an increase in demand for EVs throughout the country.
Electric vehicle (EV) registrations increased by 168% in 2021 compared to 2020. The Indian government has launched several measures to encourage the country’s use of electric cars (EVs). This government backing has produced a favourable climate for expanding India’s electric transportation ecosystem.
This is not it. Companies are developing business models such as battery swapping, leasing, and rental services to make EVs more accessible and inexpensive to customers. This is assisting in the expansion of India’s electric transportation ecosystem.
What is the EV scenario in India like?
India has not yet pledged to completely phase out conventionally fuelled automobiles by a particular year. However, the country has set an ambitious target of having electric vehicles account for 30% of all new vehicle sales by 2030. This might help India save more than $14 billion in crude oil imports yearly. This shift is projected to be aided by the rapid adoption of two- and three-wheelers (LEVs- Light Electric Vehicles).
To stimulate the usage of EVs, it has created programmes such as Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME). Its primary focus is on technological research, demand generation, charging infrastructure, and scaling up EV production. The quality and accessibility of charging infrastructure would have a big impact on EV production in India. This can be aided further by establishing an enabling framework with appropriate policies and regulations.
The Indian government has allocated a sum of $96.8 million towards the FAME plan, which involves implementing both supply and demand-side incentives to promote the adoption of electric vehicles. Some states have also set aggressive EV objectives; 18 of the 28 states have either a draught policy in place or have reported one.
Balancing local EV production with imports
The Indian government has prioritised the development of the domestic capacity to manufacture electric battery components and has strongly promoted the expansion of domestic manufacturing. (through interventions such as production-linked incentives). It is beginning to bear fruit, with several global corporations considering setting up Lithium-ion battery plants and other EV component manufacturing in India. Local businesses have also entered the EV market.
More initiatives to increase domestic car manufacturers are also expected to be unveiled by the administration. However, disincentivising imports through high import taxes may not be the best long-term strategy. The government has established an import charge of 60% on automobiles under $40,000 and 100% on cars exceeding $40,000. In 2021, import tariffs on EV components such as Lithium-ion cells and battery packs were also raised. This makes vehicle costs higher than traditional cars, particularly in the four-wheeler market. A temporary decrease in import levies may enable automobile manufacturers such as Audi and Tesla to achieve sufficient volumes to commit to producing them domestically.
The investment boom is projected to continue
Overall, EV sales are increasing, as are investments.
The sector received significant investments (US$6 billion) in 2021 and is expected to get US$20 billion by 2030. In 2021, PE/VC investors invested around $1.7 billion; by 2022, this figure had already surpassed $666 million.
The investment momentum is also projected to continue, with the number and size of climate-specific funds and environment, social, and governance (ESG) funds increasing. As the EV ecosystem grows, many new investors are jumping on board.
Now the question is, what motivates these investments?
The global shift to electric cars (EVs) has resulted in a considerable surge in investment in the Indian EV industry. The Indian government has set an ambitious goal of reaching 100% EV sales by 2030. Because of its enormous population and increasing middle class, India has drawn both domestic and foreign investment.
Here are some factors that are driving investments in the Indian EV space:
Government incentives: The Indian government has launched various initiatives to promote EV adoption. These include tax incentives, subsidies, exemptions from registration fees, road tax, and toll charges. Such incentives encourage more people to invest in EVs, driving the demand for EVs in India.
Growing market demand: With the increasing awareness of the harmful effects of air pollution, there is a growing demand for cleaner and more sustainable modes of transportation in India. EVs offer a solution to this problem, which has led to a surge in demand for EVs in the country. This growing market demand is attracting investments from both domestic and foreign investors.
Technological advancements: Advances in battery technology and charging infrastructure make EVs more practical and convenient for daily use. This has helped increase consumer confidence in EVs, driving the demand for EVs in India.
Collaborations and partnerships: Many domestic and foreign companies collaborate to develop EV technologies and infrastructure in India. For example, Ola has partnered with Siemens to build an EV manufacturing plant in the country. Such collaborations are attracting more investments in the Indian EV space.
Overall, as investors recognise this sector’s potential for development and profitability, the quick shift to electric cars encourages investments in the Indian EV field. Some drivers driving investments in the Indian EV field include the Indian government’s support for EVs, rising market demand, technical breakthroughs, and collaborations and partnerships.
The bottom line
Due to government participation at several levels, ownership of EV infrastructure, quick decision-making, collaboration and coordination with stakeholders, and dedication to short and long-term goals is essential to adopt EVs in India rapidly. There are a few challenges regarding R&D capability, charging infrastructure and EV batteries.
Despite the obstacles, worldwide EV industry trends continue to impact Indian customers, increasing EV choice. The advent of e-rickshaws, which have replaced traditional rickshaws in the public transportation sector due to their low cost, energy efficiency, and lower maintenance, has boosted familiarity with EVs. Aside from growing customer desire to adopt EVs, government incentives and subsidies will sweeten the deal and drive EV industry growth in India.
Source: PTI
