EVs AND THE INDIAN MARKET – A PARADIGM SHIFT - Atul Jhunjhunwala

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The last five decades have been a true reflection of the very famous saying by Dean Kamen ‘Every once in a while, a new technology, an old problem, and a big idea turn into an innovation’; and one of the more recent examples of such innovation is ‘electronic vehicles.’ With the rising environmental and sustainability concerns across the globe, significantly due to the excessive usage of vehicles running on internal combustion, the idea of electric vehicles has gained the momentum of a separate industry on its own. In India too, the buzz is growing with each passing day.

At this juncture, it would be important understand to delve deeper, to have an insight into the Electronic Vehicles’ (EV) Industry in India and the major factors that modulate the same.

To begin with, to understand the overview and the potential of the EV industry as a whole, we need to answer two significant questions –

First, ‘Are the external conditions conducive enough for this sector to grow?’ The majority of the corporations are becoming more socially and sustainability-focused with an emphasis on the ESG norms. So, from this end, there is a substantial push in terms of developing the industry and moving towards alternate sources of energy which take a lesser toll on the environment. Moreover, policy-making by governments across several jurisdictions has also started to support the growth of the EV market. For instance, the EU government has implemented an ‘extra tax’ regime on heavy vehicles which use conventional sources of energy. Similarly, to boost the EV industry in India, the Government has allowed a 100% Foreign Direct Investment under the automatic route– which clearly implies a positive impetus for the growth of the Indian EV Industry

The second question is ‘Whether the EV industry can grow, and if yes, whether it can grow in a profitable manner?’  According to a 2019 white paper by the World Economic Forum, the Indian automobile industry is one of the fastest-growing markets, even though it accounts for only 0.5% of the global EV market.

In India, while the industry is currently in a nascent stage, we can already see mass adoption of electric vehicles with the best example being electric rickshaws. Niti Aayog states that by the year 2030, the EV sales penetration in India would stand at 70% for commercial cars, 30% for private cars, 40% for buses, and 80% for two & three-wheelers. Another study published by Auto News in Europe states that the EV sector profitability would match the profitability of internal combustion engine-based vehicles. Hence, studies clearly suggest with optimistic governmental as well industrial sentiments, the profitability is expected to improve as engine efficiency and manufacturing efficiency are bound to go up on account of new developments and new R&D budgets.

Now that the potential of the EV industry is established, we can take a look at the intricacies of the industry and identify the factors that can ‘fuel’ the growth of this industry. A study by the Centre for Energy Finance analyzed the different costs involved in the manufacturing process; and according to the study, the battery is one of the most critical components of any EV and costs approximately 40% of the entire cost amount, also giving this space the most scope to make profits. Then there are other components like electronic motor, power electronics, vehicle integration, etc which range from 10-20% each.

So, the OEMs or Original Equipment Manufacturers need to ramp up - and this indeed, has been the core focus of the India Inc. Further, to mitigate the uncertainties and risks anticipated due to the multiple challenges in manufacturing batteries, the Indian Government has established the National Mission on Transformative Mobility and Battery Storage to aid the same. Similarly, on a state level, the Karnataka Government has introduced a comprehensive EV policy, while Tamil Nadu granted a 100% vehicle tax waiver to EVs and is planning a dedicated park for EV manufacturing.

Thus, in the above pretext, it would be safe to conclude that the EV Industry stands on three essential pillars – Government Policies: Public-Private Partnership & In-house manufacturing of batteries and other crucial components. And to set the stage for the EV industry to realize it expected potential and become another ‘www’, all these three factors should operate in sync and harmony.


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