Opportunities and Challenges of the Indian Electric Vehicle Market

10 Jun 2022

India has pledged to lower its emission intensity by 45% from 2005 level by 2030 and achieve net-zero emissions by 2070 at recent COP26 summit. As the largest market for 2 & 3-wheelers, electric vehicles (EVs) play a pivotal role in India’s green transition. Rising fuel costs in the market and concerns over air pollution among the public are further acting as catalysts for the vehicle electrification agendas of the government. The Indian government with policies such as FAME-1 & FAME-2 is trying to accelerate EV adoption domestically. Automakers are also increasingly focusing on the Indian market for EV manufacturing as the government continues to push its clean energy transition initiatives. According to NITI Aayog, the public policy think tank, by 2030, 80 percent of two & three wheelers, 40 percent of buses, and 30-70 percent of cars in India will be EVs. In addition to these green initiatives, the government is also trying to strengthen the local supply chain and position India as a major exporter to other Southeast Asian markets. Therefore, this favorable situation is triggering automakers to roll out their EVs at a rapid pace. A recent survey finding by the Automotive Component Manufacturers Association of India (ACMA) said that 60% of its members say that they are ready to supply for the EV market demands and the rest will be ready by 2023.

Market overview

The global electric vehicle market size is projected to reach 39,208,000 units by 2030, from an estimated 8,151,000 units in 2022, at a CAGR of 21.7% says ResearchAndMarkets’ report. As per the Indian Union Ministry of Road Transport and Highways’ data, the total registered EVs stood at 3.13 lakh units in FY21 & crossed one lakh mark in only 2 months in FY22.

Impact on the Auto component market

As the Indian automotive industry inclines more toward EVs, the demand for EV components will shift as well. While components like brakes, suspension, chassis, etc, won’t be impacted much, engine components will take a hit. So both EVs & internal combustion engines will co-exist in the market for a while during this EV transition. However, the EV adoption presents an enormous growth opportunity for players in the electrical and electronic components market such as motors, batteries, etc.

Challenges

The absence of charging infrastructure is one of the drawbacks to EV adoption in India. As it is the backbone of electric mobility, India would need to set up a huge number of charging stations to meet the demands of future EV customers. The lack of standard chargers, different batteries, and public charging spaces are some of the additional challenges associated with charging infrastructure.

The other major obstacle is that India heavily relies on the import of lithium-ion cells from China and Taiwan. Since India doesn’t produce the raw material, this poses a major hurdle for companies that are willing to invest in the EV market in the country.

Is India ready yet?

The Indian government is playing a pivotal role in the electrification of its auto sector and has ambitious plans to prioritize the shift to eco mobility. Both state & central governments have to educate and sensitize their citizens about the dire need for clean energy solutions. With the right government policies, significant investments by automakers, and public-private partnerships we will be able to build an amazing end-to-end EV ecosystem in the country.