India’s EV Manufacturing Capacity and Market Preferences
The Indian automotive industry is the fifth largest in the world and is slated to be the third largest by 2030. Catering to a vast domestic market, reliance on conventional modes of fuel intensive mobility will not only be unsustainable, but also damaging to India’s climate action commitments. Indian policymakers are thus working on developing an EV ecosystem in the country and have set an ambitious target of 100 percent electrification by 2030. The FDI policy and incentive schemes like the PLI program will also facilitate this vision.
The central government has set ambitious targets for electric mobility adoption in India, pegging electric vehicle (EV) sales penetration in India at 70 percent for commercial cars, 30 percent for private cars, 40 percent for buses, and 80 percent for two- and three-wheelers by 2030. These targets, if achieved, could lead to a net reduction of 14 exajoules of energy and 846 million tons of CO2 emissions over the deployed vehicles’ lifetime.
Electric vehicles sold until 2030 can cumulatively save 474 million tons of oil equivalent over their lifetime, worth US$207.33 billion. Regardless of the country’s ambitious targets, India’s EV space is at a nascent stage. However, looking at it differently – India offers the world’s largest untapped EV market, with particular scope for sales in the two-wheeler segment. Meanwhile, India has allowed 100 percent foreign direct investment in this sector under the automatic route.
Additionally, the government has announced various policy initiatives to propel the adaptation of electric mobility in India, including the two phases of Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME) scheme and different production linked incentive (PLI) schemes ACC battery manufacturing, automobile manufacturing, and auto component industries.
Data indicates that by January 2022, a total of 160 EV models were approved in India under FAME II. Out of the 160 approved, 49 were from the two-wheeler segment, 88 from the three-wheeler segment, and 23 were from four-wheelers. While major players in the four-wheeler segment are Tata Motors and Mahindra Electric, Hero Electric and Ampere Vehicles took the lead in the two-wheeler segment.
As of 2022, there are over 356 EV manufacturers in India. Sales figures reveal that India sold 913,532 EV units between FY12 and FY22 (till January), with 276,265 EVs sold in FY22. Sales in FY22 picked pace after a pandemic induced slowdown in the earlier fiscals. A state-wise analysis of sales data between FY20 and FY22 reveals that Uttar Pradesh emerged as the top state, clocking maximum EV sales in the given period at 145,645, followed by Delhi, Karnataka, Bihar, and Maharashtra.
Scope for EV component manufacturing in India
Being the fifth largest market for the global automotive industry, India has a strong presence of OEMs in the conventional vehicle segment. However, in contrast to the more than 10,000 auto component manufacturers in the conventional vehicle segment, there are very few players in the EV auto-ancillary manufacturing space at present. Industry experts believe that since there is lesser complexity involved in manufacturing electric vehicles, the demand for core ICE vehicle parts, such as engine, clutch, gears, and radiators would slump, negatively affecting the respective industries.
Electric vehicle landscape in India
State-wise EV sales in India between FY 2020 and FY 2022
Category-wise EV sales in India
Battery manufacturing in India
India has limited battery manufacturing capacity to cater to the EV market. Presently, most of the EVs sold in India use imported batteries as major players in battery manufacturing, such as BYD, Panasonic, CATL, CALB, LG Chem etc., have manufacturing, facilities outside India.
This also leads to higher costs of batteries and a consequential increase in EV prices in India. Battery commands nearly 35 to 40 percent of the EV cost in the value chain.
To address this local supply deficit, the government has announced policies like the PLI scheme for ACC (NPACC) battery manufacturing. Leading battery producers like Amara Raja Batteries have taken cue, and are investing in green technologies, such as the production of lithium-ion batteries. Recently in March 2022, the government officially notified four successful bids for the PLI scheme.
Localization of the supply chain is critical for bridging the cost differential between EVs and ICE vehicles. As per the Society of Indian Automobile Manufacturers (SIAM), support to local manufacturers to acquire and develop technology and collaborate globally with technology suppliers is essential in order to localize production.
The supply chain localization in India depends on three major factors – conducive government policies, strong auto component manufacturing presence, and access to raw material. While government policies, such as the Phased Manufacturing Program, provide ample push for local manufacturing and some auto-component manufacturers already have access to capital for investment, India lacks the availability of the raw material needed to manufacture key EV components that have a high share in the EV value chain (see table below).
Localization potential of EV components in India by 2030
EV charging infrastructure in India
Abundant availability of EV charging infrastructure is one of the major drivers for enabling higher adoption of electric mobility. A robust and well-developed EV charging infrastructure alleviates the charge anxiety of users and increases offtake.
EV batteries can be charged in two ways:
- By charging the batteries
- By replacing the drained battery with the new one which is commonly known as battery swapping
Charging in electric mobility
Existing charging stations in India
State-wise installed charging stations as of November 2021
Process of setting up EV charging infrastructure in India
State-wise break-up of charging stations sanctioned under FAME II
Battery swapping provides for decoupling of batteries from EVs and reducing their explicit costs. It also ensures reduced waiting/charging time for vehicles and offers a promising alternative to increase the adoption of EVs in the commercial segment.
In battery swapping, a third party takes the ownership of the battery and is liable for replacing the drained batteries with fresh/charged batteries. The third party also needs to ensure standardization in batteries. Battery swapping stations act as battery aggregators and charge batteries by availing electricity connection from either power distribution companies or through open access.
Presently in India, battery swapping is emerging as a promising business model for the three-wheeler (e-rickshaws and autos) segment, with many players like Sun Mobility, Lithion, E-Chargeup Solution, ACME, OLA, Amara Raja, Panasonic etc. venturing into this arena.
Union Budget 2022-23: Battery swapping policy introduced
In the 2022 Union Budget, India’s finance minister announced the introduction of a battery swapping policy, in pursuit of developing a “Battery/Energy-as-a-Service” business model.
The central government’s policy think tank Niti Aayog has formulated the official draft policy, which was open for public comments till June 5, 2022.
Functioning of battery swapping station
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