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Mint Explainer: Navigating India's electric vehicle surge

With over 2.8 million EVs already on its roads, India's EV market is poised for a staggering 94.4% CAGR by 2030.  (File photo: Mint)
With over 2.8 million EVs already on its roads, India's EV market is poised for a staggering 94.4% CAGR by 2030. (File photo: Mint)

Summary

  • The valuation of India's EV market, which stood at $3.21 billion in 2022, is expected to soar to $114 billion by 2029.

New Delhi: The electric vehicle (EV) market in India is on a speed run amid rising sustainability concerns and escalating fuel costs. With over 2.8 million EVs already on its roads, India's EV market is poised for a staggering 94.4% CAGR by 2030. As global and local automakers intensify their presence in this segment, the valuation of India's EV market, which stood at $3.21 billion in 2022, is expected to soar to $114 billion by 2029. Mint explains the current developments in the EV industry in the country:

The government’s push to the market

Even though the Indian EV industry is in its early stages, the growth plan under the ‘Make in India’ initiative aims to make the country a manufacturing hub for various sectors including the EV industry. The government aims to achieve 100% local production of EVs under this initiative. The Indian government has therefore announced several initiatives like Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME India), the PLI scheme for the auto and the auto component, and the PLI scheme for manufacturing of advanced chemistry cell (ACC) to drive local production and achieve its goal for green mobility.

Phase II of FAME has earmarked 10k crore as incentives to customers, PLI has reserved around 26k crore for encouraging the automotive industry to start sourcing and producing vehicles locally in the country including EVs.

Existing brands and their expansion plans

Several automotive brands, including Tata Motors, Mahindra, Hyundai, Ola Electric, Ather Energy, Okinawa, TVS, MG, Hero Electric, and others have already come up with the electric vehicles in the country.

Mahindra & Mahindra plans to invest 10,000 crore in a new EV factory in Pune with an aim of launching five electric SUVs by 2026. While competitor, Tata Motors wants EVs to make up 50% of its total portfolio sales by 2030 as they bolster its EV-sale and after-sale service infrastructures. The two-wheeler EV manufacturer, TVS Motor Co. plans to ramp up monthly IQube production to 25,000 units from this month while doubling the number of EV-selling outlets during this fiscal. Ola Electric looks to continue building the world's largest electric hub in Dharmapuri, Tamil Nadu with a 7,600 crore investment and expand into ASEAN nations, Latin America, and European markets.

New Entrants Eyeing Market Share

Several non-automotive brands like Foxconn and JSW group are also in the process of announcing their entry into the EV segment through greenfield and brownfield projects.

JSW Group is in talks with MG Motor to enter the EV space. The company has formulated two plans, with the focus on securing a minority stake in MG for a deal valued at $1.2-1.5 billion. The company is looking to buy Ford Motor Co.'s Chennai plant. Both Mahindra and JSW are contenders for the plant.

Ford’s Chennai plant is spread across 350 acres and has an annual production capacity of around 200,000 vehicles and 340,000 engines. The plant has been shut since July 2022, and the state government is keen to find a new buyer to revive production. It can give a fillip to the EV plans of both companies.

Foxconn, iPhone manufacturer, is aiming to enter the electric vehicle manufacturing space in India and is reportedly in talks with some state governments in this regard. Accordingly, an Indian delegation is set to visit Taiwan soon to meet Foxconn executives and discuss its plans. However, it is still unclear whether Foxconn would do contract manufacturing for multiple brands or for one through a joint venture.

Roadblocks ahead

Firms continue to heavily rely on imported EV batteries which results in reduced margins. The government is determined to push domestic battery production to power EV vehicles, so India needs to establish a robust battery value chain, including raw material production, cell manufacturing, and module assembly. And the country needs to work towards building a self-sufficient EV industry in order to reduce its dependence on other countries for battery supply.

Besides, expanding the domestic battery manufacturing capacity will require significant investment in research and development (R&D) and infrastructure. Even though the government has launched PLI schemes, the pace of development has been slow. The lack of standardization in charging infrastructure in the country will add to these issues, making it difficult for EV owners to charge their vehicles in different locations. This goes hand in hand with the manufacturing challenges and needs immediate action. Another key obstacle is the initial expense of electric vehicles, which is higher than traditional internal combustion engine vehicles. 

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