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Policy push and new technologies to drive electrical vehicles sales in India
Articles- Jul 31,24
Though the electric vehicle (EV) penetration in India is only 6.8 per cent (in FY24), the growth opportunity in the EV sector is only going to go up in the future driven by shifting consumer preferences, strong governmental support and technological progress, says Rakesh Rao.
Rising concern about the environment and policy initiatives of the government have been driving the sales of electric vehicle (EV) in India in the last few years. The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, launched in 2015, has been a major driver. Notwithstanding the subsidy cuts and regulatory shifts, EV sales in 2023-24 grew robustly over 41 per cent, surpassing 1.6 million, which is significantly higher than FY23’s 1.1 million. Overall EV penetration in India rose to 6.8 per cent in FY24 against 5.3 per cent in FY23.
Prajyot Sathe, Associate Director, Mobility – Electric Vehicles, Frost & Sullivan India, elaborates, “The EV industry in India has been growing over the last five years in all segments, led by electric two wheelers (e-2Ws), followed by e-buses, electric commercial vehicles (e-CVs) and electric four-wheelers (e-4Ws). Areas which have seen significant technological advances include batteries, electric motors, power electronics, and charging technology which are applicable to all vehicle segments.”
The Indian government has set an ambitious target for electric vehicles to comprise 30 per cent of private car sales, 70 per cent of commercial vehicle sales, and 80 per cent of two- and three-wheeler sales by 2030. Thanks to government policy to subsidise EV sales to encourage consumer acceptance, India’s electric vehicles industry has made significant progress. Veer Singh, CEO Lord’s Automative Pvt Ltd, explains, “Initiatives like FAME scheme have provided incentives for the development of EV infrastructure. The implementation of smart grids and renewable energy sources for charging stations is further promoting sustainable and eco-friendly practices within the industry.”
Courtesy: Business Standard
On September 15, 2021, the government approved the Production Linked Incentive (PLI) Scheme for the automotive sector with a budgetary outlay of Rs 259.38 billion to support domestic vehicle manufacturing. Sathe opines, “EVs are covered under this PLI scheme. The scheme has two components viz. the Champion OEM incentive scheme and the Component Champion incentive scheme. A total of 95 applicants have been approved under the PLI scheme. The Ministry of Heavy Industries (MHI) had earlier approved 20 applicants, along with their 12 subsidiaries, for the Champion OEM incentive scheme, subsequently approving 75 applicants, along with their 56 subsidiaries under the Component Champion incentive scheme. Two auto OEM companies were approved for both parts of the scheme. The forthcoming FAME III scheme is set to be mainly an extension of the ongoing FAME II and will focus on component localisation as well as charging infrastructure development.”
The evolving market
The electric vehicle industry in India has witnessed a significant transformation over the past few years. Singh explains, “The materials used in EVs have undergone substantial changes. Lightweight materials such as aluminium, carbon fiber, and advanced composites are now commonly used to reduce the overall weight of vehicles, thereby improving their energy efficiency. Moreover, innovations in electric motors, such as the development of permanent magnet synchronous motors (PMSMs) and induction motors, have contributed to improved performance and efficiency.”
Battery technology, a critical component of EVs, has also seen a remarkable progress. He elaborates, “The shift from traditional lead-acid batteries to lithium-ion batteries has been pivotal. Lithium-ion batteries offer higher energy density, longer life cycles, and faster charging times. Additionally, advancements in solid-state battery technology and research into alternative materials like graphene are poised to further revolutionise the industry by providing even higher performance and safety.”
Commenting on the technological evolution in the light electric vehicle (LEV) industry, Namit Jain, Founder and CEO, Zen Mobility, says, “In the early years, EVs were primarily built in countries like China and imported here in CKD (Completely Knocked Down) kit versions. There was no R&D being done locally in India. This is still the case with the majority of EV companies today. However, now there are a few emerging companies that are investing in R&D and building new innovative products purpose-built for the Indian conditions and market. There has been a boom of suppliers for multiple components like chassis, batteries, electronics, etc. Customers are now expecting high quality at affordable prices. Charging infrastructure has also seen a drastic change in the last few years, with many companies developing charging and swapping infrastructure.”
One of the primary technological shifts in the Indian EV industry is the adoption of advanced manufacturing techniques. “Traditional automobile manufacturing processes have been augmented with new methodologies such as automation, robotics, and 3D printing. These technologies have increased the precision, efficiency, and scalability of EV production. The integration of artificial intelligence (AI) and machine learning (ML) in the manufacturing process has further optimised supply chain management, quality control, and predictive maintenance, leading to reduced production costs and enhanced product reliability,” highlights Singh.
As more customers transition to EVs, customer preferences are driving the technology evolution. “For example, we are seeing customers demand higher speed vehicles which match the speed of their ICE (internal combustion engine) counterparts. Previously, customers were satisfied with 25 kmph EVs or max 50 kmph EVs – 4 years ago about 90 per cent market share vehicles were sub-50 kmph top speed and now they are less than 10 per cent market share. Related to this, we are now seeing many more motor companies coming up in India, and many of them working on innovative new technologies on the motor,” states Anirudh Ravi Narayanan, CEO, BNC Motors Pvt Ltd.
Customers are also looking for app features in their vehicles; as a result most of the vehicles being sold today have built in telematics and connected capabilities. He adds, “We are also seeing cost reductions going on by all manufacturers to make vehicles more affordable to customers. For example, manufacturers who had large touch screens on their scooters are reducing or eliminating touch screens to reduce costs.”
Hurdles on the EV road
Despite the green advantage of electric vehicles, consumers are still skeptical about buying electrical vehicles because of various reasons. “One of the key challenges is building EVs that are robust and long-lasting. This requires extensive testing and validation of the vehicles before they are launched in the market. Second is after-sales service, which is crucial for the upkeep of the vehicles currently on the road. Finally, the supply chain for a few selected electronics is still a challenge since these are still imported from China and need to be localised,” explains Jain.
India’s reliance on imported lithium-ion batteries and components raises costs and exposes the sector to global risks. “The global supply chain for EV components, including batteries and rare earth metals, faces challenges related to geopolitical tensions, supply disruptions, and raw material availability. Building resilient supply chains and reducing dependence on limited resources are strategic imperatives for the industry. While the cost of EVs has been decreasing with technological advancements and scale economies, upfront purchase costs remain higher than conventional vehicles. Affordability barriers need to be addressed through incentives, subsidies, and advancements in manufacturing efficiencies,” stresses Singh.
The government is eyeing 30 per cent EV sales by 20230 and to achieve this level of EV penetration, approximately 5.6–5.8 million public charging units will be needed. “In terms of charging infrastructure, relatively slow charging infrastructure development is a hurdle to market development. Acquiring land banks to optimally position charging stations in cities has constituted a major bottleneck that the government has failed to address to date,” opines Sathe.
According to Singh, insufficient charging infrastructure can limit the convenience and practicality of EVs for consumers, particularly in urban and rural areas with limited access to charging points. Absence of effective battery recycling and disposal system is also a concern. He opines, “As the demand for EVs increases, so does the volume of batteries that reach the end of their life cycle. Effective recycling and disposal of lithium-ion batteries pose environmental challenges and require scalable solutions to minimise environmental impact and maximise resource recovery.”
Building robust domestic supply chain
The fast-growing EV sector presents big opportunity for auto component makers as well. The new EV policy framework, announced by the Indian government in March 2024, mandates that companies entering the EV manufacturing sector must establish facilities within three years and achieve a localisation threshold of 50 per cent within five years.
Sathe comments, “The industry has been trying to establish localised supply chains with up to 20-30 per cent component localisation having been achieved mainly for e-4Ws. Localised component production is likely to increase to nearly 50-60 per cent by the end of 2030. Localisation trends will be the highest for components such as power and control wiring harness, along with connectors, AC charging inlets, DC-DC convertors, miniature circuit breakers (MCBs), circuit breakers, electric safety devices (power electronics), electric compressors, traction motors and controllers. Local battery production will only reach around 50 per cent by 2030.”
Customer requirements are also encouraging companies to go for localisation. Narayanan elaborates, “We are seeing more demand from customers for quality, which is filtering out companies which are predominantly importing from China and white labelling. This is forcing companies to build up their R&D and localise their supply chains.”
He adds, “Due to FAME subsidy, all OEMs localised a good portion of their supply chains and over the past four years, we have seen a flourishing EV components eco-system develop in India. We have also seen foreign capital coming on to establish or expand domestic EV component manufacturing – with Musashi (of Japan) itself being a great example.” BNC Motors is collaborating with Musashi to introduce the Japanese firm’s technology (related to batteries and drivetrain) in its new EVs.
Musashi is investing Rs 1.60 billion to establish new assembly lines and upgrade existing facilities in India, and aims to achieve a localisation level covering two-thirds of the total cost by the end of the financial year. Naoya Nishimura, CEO, Musashi India & Africa Region, elaborates, “The EV industry in India is evolving rapidly, with advancements in manufacturing processes, materials, and technologies. Musashi is at the forefront of this transformation, providing products such as the 2W E-axle side unit and battery management system (BMS) software, which enhance overall efficiency and performance. Therefore, we address key challenges in the industry, such as optimising battery performance and improving component efficiency, through our high-quality gear systems that minimise friction losses and extend driving ranges. Our strategic plans include increasing localisation levels to over 75 per cent by next year and exploring export opportunities in Southeast Asia and Africa.”
He adds, “We are also diversifying our product range to include components for three-wheelers and four-wheelers, reflecting our long-term vision as a leading supplier in India's EV landscape.”
Green and bright future
While the government has framed policies to push EV sales, experts feel still lots need to be done to propel growth. On the policy side, Narayanan has following suggestions:
- First, provide longer term policy clarity. For example, Mercedes recently mentioned that they would invest in the EV market in India if GST stayed at 5 per cent for the next 10-years. This type of policy clarity will be beneficial for all players. Automotive investment returns are over many years, and policy plays a big role in the returns, so having long-term clarity is necessary for long-term investments.
- The government should either eliminate subsidies altogether or make them more inclusive. The PLI policy, for example, is closed to a certain set of manufacturers and the criteria for investments and audits are so high that most who have qualified are not able to benefit from it.
- It really is time to rollout a policy for battery swapping. Battery swapping is far superior to charging as it cuts down time of refueling to a few minutes from a few hours, and eliminates one of the major inconveniences of owning an EV. Clarity on this will be a big boost for the EV industry.
According to Sathe, over 120,000 passenger EVs are likely to be sold in 2024, which will drive EV penetration to 3-4 per cent. “OEMs such as Tata Motors, SAIC, and Mahindra & Mahindra will continue to lead the market. BYD and Stellantis, in addition to other foreign OEMs, have been trying to gain a foothold in the Indian market and it will be interesting to see how the competitive landscape evolves in the next 4-5 years. Demand in the domestic market will be good to absorb both e-2Ws with an anticipated penetration rate of 50 per cent in the scooter segment by 2030, e-3Ws with an expected 60 per cent and e-4W with 12-15 per cent penetration rate by 2030. Besides this, OEMs will target traditional export markets in Africa and Latin America,” he adds.
Government initiatives have always helped the EV industry; they act as a catalyst for the growth and adoption of EVs in the country. Jain believes that the time is apt for the launch of FAME III, which will be very important as there are now many organised players in the industry. Through FAME, the government can really push the switch from ICE to electric by providing subsidies to lower prices further and aid adoption.
Though there are challenges at present, the future of EVs in India is promising. Driven by shifting consumer preferences, strong governmental support and technological progress, the growth opportunity in the EV sector is only going to go up in the future.
Prajyot Sathe, Associate Director, Frost & Sullivan India
The industry has been trying to establish localised supply chains with up to 20-30% component localisation having been achieved mainly for e-4Ws. Local battery production will only reach around 50% by 2030.
Namit Jain, Founder and CEO, Zen Mobility
There has been a boom of suppliers for multiple components like chassis, batteries, electronics, etc. Customers are now expecting high quality at affordable prices.
Anirudh Narayanan, CEO, BNC Motors Pvt Ltd
We are seeing customers demand higher speed vehicles which match the speed of their ICE counterparts. Related to this, we are now seeing many more motor companies coming up in India.
Veer Singh, CEO, Lord’s Automative Pvt Ltd
Effective recycling and disposal of lithium-ion batteries pose environmental challenges and require scalable solutions to minimise environmental impact and maximise resource recovery.
Naoya Nishimura, CEO, Musashi India & Africa Region
The EV industry in India is evolving rapidly, with advancements in manufacturing processes, materials, and technologies. Our strategic plans include increasing localisation levels to over 75% by next year.
Electric vehicles
Indian EV industry
electric car
Rakesh Rao
FAME scheme
Frost & Sullivan
Indian Electric Vehicle Market
Prajyot Sathe
EV batteries
electric motors
Namit Jain
Zen Mobility
Anirudh Narayanan
BNC Motors
Veer Singh
Lord’s Automative
lithium-ion batteries
EV charging infrastructure
Naoya Nishimura
Musashi India
Tata Motors
BYD
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