Investors Embracing EV Gigs

Apart from EVs, the investors are also inclined towards sustainable business options

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Electric vehicles (EVs) have been labelled as the future of mobility for a long time now. A key factor in promoting sustainability, investors are also slowly warming up to the sustainable mobility space during the ongoing funding winter. The electric vehicle segment has witnessed a surge in interest from investors as they intend to shift to a space that is actively contributing to the sustainability factor in India.

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Eight of the many investors that interacted with Entrepreneur India in regards to its last edition intend to invest in the sustainable mobility space.

"We are seeing a strong deal flow in a number of different spaces that includes fintech, Web3, SaaS, creator economy. We are also seeing some early shoots in the EV ecosystem and in climate tech," said Alok Goyal, partner, Stellaris Venture Partners.

"We are keen to invest in fintech, agritech and sustainable mobility space," said Brijesh Damodaran, chief investment officer and co-founder, Auxano Capital.

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A report from JMK Analysis and Research suggests that different electric vehicle segments recorded a surge in numbers. The electric two-wheeler segment or popularly known as E2W recorded an increase of 75 per cent in FY2022 over sales as compared to FY2021. Hero Electric, Okinawa Autotech and Ampere Vehicles were the top three players accounting for approximately 60 per cent of the market share. Electric cars witnessed an increase of 275 per cent in sales for FY2022 as compared to FY2021. Tata Motors was the top electric car player accounting for over 80 per cent share in the market and MG Motors came in second place accounting for over 10 per cent of the market share.

The sustainable mobility space has recently come under scrutiny following the combustions and explosions of batteries and EVs in India. The combustion instances have raised some doubts in the minds of potential EV buyers. However, the logistics companies are attempting to switch to 100 per cent electric as the fleets of these companies go through serious changes. The last-mile delivery companies are attempting to be 100 per cent sustainable by adopting green and economical fleet.

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According to a report by the consultancy firm Alix Ventures, the sales in the electric vehicles sector could witness a surge of 33 per cent by 2028. The report also states that the sales in the electric vehicles sector could witness a surge of 54 per cent by 2035. The demands are believed to increase globally as nations strive to fulfil their sustainable goals.

The world is going through financial turmoil due to various reasons such as the effects of the Russia-Ukraine War, rising inflation, recession, etc. The 'funding winter' is a result of the financial turmoil. Furthermore, the cash crunch and the funding winter resulted in investors streamlining their portfolios.

"This is an interesting thing we are also noticing, while in my opinion there is no one factor that we can attribute this to, we can theorize about a few underlying levers. This "funding winter" has realigned investors to seek more grounded business models and focus on high-conviction investing, something that might be playing in the favour of EVs start-ups. Additionally, institutional investors are still sitting on substantial dry powder, funding winter or not, investors have to invest and probably many investors are finding the EV space to be a perfect opportunity to do so, and that too at much more reasonable valuations. Finally, the vision of 2010s, that world would shift to electric mobility, come 2020s has become almost a foregone conclusion, which undoubtedly is also driving this spurt of investments," said Sparsh Kumar, senior investment associate, Unicorn India Ventures on being asked the sudden resurgence in the investors' interest in the EV space during the funding winter.

READ MORE: Powering Last-Mile Delivery With An EV and A Charger

India is actively moving toward its COP26 sustainable goals of becoming a carbon-neutral nation by the year 2070. The adoption of electric vehicles in the commercial space has been the first step to reaching that set goal.