Will India's EV Industry Press the Accelerator In 2023?

As we come close to the end of 2022, here is a look at how things will shape up for India's electric vehicle sector in 2023

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By S Shanthi • Dec 21, 2022


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Even though 100 per cent transition to electric vehicles (EVs) seems like a distant dream, the growth trajectory for the adoption of EVs is steeper than expected with respect to two-wheelers (2W) and three-wheelers (3W).

According to a recent report, EV sales across segments (2W, 3W, 4W and e-buses) grew by 110 per cent in FY22 as compared to the previous year. Around 5.2 lakh units were sold across segments in FY 22. Further, the EV value chain revenue pool is expected to reach between $76 billion and $100 billion by 2030, potentially translating to an $8 billion–$11 billion profit pool, as per a recent report from Bain & Company.

As we come close to the end of 2022, here is a look at how things will shape up for the EV industry in 2023.

Will 2W continue to be the forerunner?

Factors such as comfort, low cost of ownership, and ease of commute have increased the demand for E2Ws in India. This is expected to continue in the coming years as well. "90 per cent of the high-speed E-2W market is dominated by nine players. There are a lot of other players entering the market under various parts of the entire value chain," said Mitesh Shah, co-founder, Inflection Point Ventures.

Charging is relatively easier for 2W, however, charging infrastructure should be enhanced for other sub-segments to gain sales momentum across the board, he added.

Moreover, EV financing is also gaining momentum due to which access to credit is becoming much easier, pushing more and more people towards EVs, particularly E-2Ws. In addition to that, tax exemptions and subsidies from the government under FAME II (Faster Adoption and Manufacturing of Electric and Hybrid Vehicles) are also expected to continue encouraging consumers towards E2Ws.

"The adoption curve for 2W is the steepest and in the shorter duration (2-3 years) it is expected to continue as the cost delta between ICE & EV for 2/3W compared to 4W is low. Further, with the government regulation on delivery fleets, the market for the 2/3W is expected to grow by leaps and bounds over the next 2-3 years. The adoption pace in 4W will pick pace after 4-5 years of use cases are available in the market. Currently, the early adopters are opting for 4W EV and the use cases regarding an insurance claim, resale value and usable life & replacement cost of battery unfold we will see the early majority adopt to the swift," said Brijesh Damodaran, co-founder and Chief Investment Officer, Auxano Capital.

Challenge of range anxiety

Range anxiety caused by a lack of charging infrastructure and power outages has been the most significant barrier to widespread EV adoption in India. According to a recent study, India needs at least 20 lakh public charging stations across the country by 2030 to achieve the government's target of EV adoption, that is, 30 per cent penetration in private cars, 70 per cent in commercial vehicles, and 80 per cent in 2Ws and 3Ws by 2030.

5 lakh public charging stations are already in the pipeline and hopefully, 2023 will see many more of that. In urban cities, many apartments have already allotted space for private charging. Besides, policy incentives are being ramped up for public charging infrastructure as well. This can make EVs operational at scale. In addition to this, many more startups are expected to scale their research and development in 2023 to come up with indigenous solutions to the issue of range anxiety.

Localization in the pipeline?

Apart from battery cells, other components already have Indian manufacturers. Experts say that with the reduced complexities in manufacturing EVs over the ICE engine, we will see new OEMs emerge both locally and globally. "While it's difficult to see quick adoption in 4W space for new OEM, the 2/3W market will see higher adoption. Another challenge with new OEMs is the availability of spares and service networks. The importance of this is reduced by EV but from a buyer's perspective while purchasing expensive 4W these would be factors while decision making. The component market in India is already very mature," said Damodaran.

The government push towards granting FAME II subsidies is also expected to continue incentivizing local procurement. Further, large vehicle OEMs have already announced significant capital investment plans for local manufacturing. "And, component suppliers across the board are gearing up for transitioning to EVs. Several existing players in the auto component industry have invested ahead of time to develop EV-specific capabilities, and newer component manufacturers are coming up as well," said Arpit Maheshwari, Principal, Stellaris Venture Partners.

New business opportunities

As the market for EVs grow, more business models may see an uptick and we may also see many more startups coming into play into the existing models.

"Platform Sales for EV will emerge as a large market, with new OEMs emerging they have the product expertise and price competitiveness but lack the distribution network like the legacy players. Thus these new OEMs would need a specialized sales channel for delivery and push sales of their products over the legacy competitors," said Damodaran.

Experts predict a similar shift in the after-sales service market as well."With the reducing no. of components in a vehicle, the requirement for after-sales service will reduce thus managing exclusive centers may be rendered unviable and multi-brand expertise can help," he added.

"With a wider assortment of products to choose from, we now expect companies providing ancillary services to gain traction," added Maheshwari.

Companies that offer charging infrastructure/swapping will continue to see increased adoption. Also, financing is critical to driving vehicle sales in India, and companies that leverage EV knowledge to provide differentiated financial products are also likely to take off.

Overall, according to experts, not only will the sector see an uptick in growth, propelled by sub-segments such as battery tech startups (battery as a service, battery swapping), EV financing, motor controllers and vehicle intelligence services, EVs powered by hydrogen cells & solar powered EVs.

S Shanthi

Senior Assistant Editor

Shanthi specializes in writing sector-specific trends, interviews and startup profiles. She has worked as a feature writer for over a decade in several print and digital media companies. 


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