Domestic EV market is likely to grow at CAGR of 49% between 2022 and 2030
The Economic Survey 2023 has predicted that the domestic electric vehicles (EV) market is likely to grow at a compounded annual growth rate (CAGR) of 49% between 2022 and 2030, reaching 1 crore units, 10 million, in annual sales by 2030. That is equivalent to the total number of EVs on road globally as of 2022.
This booming EV industry, which the survey predicts will create 5 crore direct and indirect jobs by 2030, has already opened doors to several new business opportunities for OEMs, fleet operators, financiers and energy solution providers. New features and components in EVs like front boots, remote operations and charging station tracking, are creating opportunities for players across the landscape, including auto component companies who provide vehicle interface, chassis, charging systems, battery management systems, battery accessories and thermal management systems, according to a KPMG-CII report.
Fig 1: Growth in ACC battery manufacturing is the next big focus for India. Image: Mercedes-Benz
Advanced Chemistry Cell Manufacturing
While India's capabilities in the EV battery manufacturing value chain is currently limited to pack assembly, initiatives such as the Production Linked Incentive (PLI) scheme are a significant step towards enhancing domestic cell manufacturing by incentivising players to further develop in this sector.
This scheme has an outlay of Rs 18,912 crore in incentives for building a 50 GWh ACC manufacturing capacity. Further, the ground is fertile for new research and technological innovations in diversifying battery cell chemistries to reduce dependence on lithium, which opens doors for new start-ups.
At present, four companies, – Reliance New Energy Solar Limited, Ola Electric Mobility Private Limited, Hyundai Global Motors Company Limited and Rajesh Exports Limited – have been selected under the PLI scheme for Advanced Chemistry Cell (ACC) Battery Storage.
ACC PLI scheme is expected to accelerate EV adoption and hence translate into net savings of Rs 2,00,000 crore to Rs 2,50,000 crore on account of oil import bill during the period of this programme and increase the share of renewable energy at the national grid level.
Fig 2: Semiconductor chips are at the heart of an electric vehicle | Source: ShutterStock
Electronics and semiconductor manufacturing
Over the last decade, the country's electronics and semiconductor product manufacturing sector has grown tremendously. In 2014, India’s electronics ecosystem which includes manufacturing, design, innovation, and production, was valued at Rs 82,230 crore. By 2022, it had grown to Rs 616,725 crore, and is predicted to surpass Rs 2,466,900 crores by 2025-26.
The electronics and semiconductor industries received 66 per cent of the Foreign Direct Investment (FDI) that flowed into India over the last three years.
With the e-mobility revolution underway in India, the role of semiconductor technology in accelerating EV growth is becoming increasingly important.
Semiconductor technology is at the heart of EVs and enables the development of powerful batteries, efficient power management systems among others. EVs require up to three times more semiconductor content than conventional vehicles and are expected to drive the growth in this sector and provide new business opportunities.
The India Semiconductor Mission (ISM), the business division of the Digital India Corporation that aims at promoting the growth of the country's semiconductor and electronics manufacturing industries, is at present evaluating business proposals from several investors to establish fabs and chip manufacturing facilities in the country.
Fig 3: India’s charging infrastructure is still at a nascent stage and can expect rapid growth over the next decade | Photo: Shutterstock
The development of charging infrastructure in India is transitioning away from standalone charging stations with dedicated area for multiple chargers, to fragmented installations of destination-based chargers.
By 2030, India is forecasted to be home to 102 million EVs, with 2.9 million public charging stations needed to accommodate the growing EV adoption. More than 30 Charge point operators are presently active in this sector that includes both established players as well as start ups. As the demand for electric vehicles grows, this space is expected to have an upward trajectory as more and more firms compete with each other in this segment.
Fig 4: India’s draft Battery Swapping Policy, if implemented, will trigger exponential growth in the model of battery as a service | Photo courtesy of Honda
Battery-as-a-service (BaaS) gaining prevalence
BaaS is gaining traction as it can reduce charging wait time along with high upfront cost of EVs. It helps consumers lease batteries separately, eliminating the need to purchase the battery upfront along with the vehicle. The model allows users to swap the battery in swapping stations for a recharged battery every time it gets discharged.
BaaS is driving prevalence in e-buses since the model can drastically reduce the initial costs of EVs by up to 50 per cent. The battery for a 9m electric bus costs between Rs 0.5-0.55 crore, while the entire bus costs between Rs 0.12-0.13 crores.
For OEMs, this will help match prices with fossil fuel counterparts, making it a viable option for whom prices have been a major concern, the report said.
Leasing in the shared mobility sector
Driver partners are generally hesitant towards direct ownership of EVs due to apprehensions around the vehicle's performance and financial constraints. Moreover, limited financing options, with only few NBFCs present in the market, also adds to this hesitation. Current financing also has high interest rates (23-25 per cent).
Leasing as an option helps eliminate these factors and hence is gaining preference among consumers. Leasing eliminates the pros of investing a dedicated amount to an asset, while offering the same benefits of owning an EV.
Start-ups at forefront of emerging opportunities
In recent years, India's start-up ecosystem has grown exponentially, garnering attention from both traditional and non-traditional OEMs. Smaller EV OEM start-ups are competing against big industry players in the two-wheeler and three-wheeler spaces, where the volume is expected to see growth in the near future.
Moreover, start-ups are gaining prevalence across various phases of the EV value chain in terms of providing technological tools and software, battery solutions, leasing, ride hailing, and charging infrastructure.
As of March 2022, the Indian EV industry hosts 592 start-ups spanning across battery production, charging infrastructure and battery recycling. Indian start-ups are becoming increasingly prominent in the EV value chain, offering advanced technology solutions.