Wiktor Wise
The adoption of electric vehicles (EVs) in India is gaining momentum, driven by government initiatives, the rising cost of crude oil, and the need to reduce carbon emissions in line with the Paris Agreement. The Indian government has implemented various incentives, such as the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, Production Linked Incentive (PLI) schemes, and tax breaks, to encourage the domestic manufacturing and purchase of EVs. As a result, the Indian EV market is evolving rapidly, with close to 0.32 million vehicles sold in 2021, representing a 168% year-over-year increase. However, challenges remain, particularly regarding the development of charging infrastructure, which is crucial for the mass adoption of EVs. While the current penetration of EVs in the four-wheeler segment is low, at around 0.1%Indian EV industry is projected to expand significantly, with the market expected to reach up to US$113.99 billion by 2029.
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What You'll Learn
- Electric vehicle adoption is based on the Paris Agreement to reduce carbon emissions
- The Indian government incentivises the domestic manufacturing of EVs and batteries
- The electric car market is divided into passenger and commercial segments
- The Indian EV battery market is projected to surge from $16.77 billion in 2023 to $27.70 billion by 2028
- India's EV finance industry is likely to reach Rs. 3.7 lakh crore ($50 billion) in 2030
Electric vehicle adoption is based on the Paris Agreement to reduce carbon emissions
The Indian EV industry is gaining momentum, supported by government initiatives and the rise in crude oil prices. The government has introduced several measures to incentivize the domestic manufacturing of EVs and batteries. These include the FAME India Scheme, which promotes the early adoption of hybrid and electric vehicles, and the Production Linked Incentive (PLI) scheme, which aims to boost India's battery infrastructure. The Indian government has set a target of 100% EV adoption by 2030.
Ongoing electric vehicle adoption in India is based on the Paris Agreement to reduce carbon emissions, improve air quality in urban areas, and reduce oil imports. The electrification of the transport sector is crucial to meeting the Paris Agreement goals of limiting global warming to 1.5°C or "well below 2°C". However, the current trajectory of EV adoption is not enough to achieve these targets. To accelerate progress, public-private efforts are needed to create a sustainable and circular EV market. Clear global standards and credible solutions to abate emissions across the industry are essential.
The formulation of guiding principles is a crucial first step in establishing a circular and sustainable battery value chain. This includes ensuring that electric vehicles are produced and operated with clean electricity. The implementation of an industry-wide "Battery Passport" solution, as proposed by the Global Battery Alliance, would provide trusted information about the social, environmental, and governance impact of batteries. Additionally, removing the upfront cost of transitioning to an EV can accelerate the vehicle replacement rate and benefit taxi, ride-hailing, and car-sharing services transitioning to electric fleets.
To support the mass adoption of electric vehicles in India, the expansion of infrastructure facilities is necessary, including the establishment of more charging stations. The deployment of charging infrastructure should be tailored to future mobility corridors, mobility hubs, and demand hotspots. For example, fast-charging stations in prime city locations that prioritize shared electric cars or urban delivery vehicles can improve air quality, reduce carbon emissions, and propel the electrification of core urban mobility services.
The Indian EV market is evolving rapidly, with close to 0.32 million vehicles sold in 2021, up 168% from the previous year. In the electric two-wheeler market, Hero Electric, Okinawa, and Ather Energy control a combined market share of 64%. Tata Motors leads the passenger vehicle segment with a market share of 71%, while MG Motors India offers the longest-range EV with a single charge of 439 KM.
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The Indian government incentivises the domestic manufacturing of EVs and batteries
The Indian government has implemented various measures and incentives to promote the domestic manufacturing of electric vehicles (EVs) and batteries. The goal is to reduce oil dependence, cut down on pollution, and provide affordable and accessible electric vehicles to the public. Here are some key initiatives:
Production-Linked Incentive (PLI) Schemes
The Indian government introduced two Production-Linked Incentive (PLI) schemes to encourage the production of advanced automotive technology products and increase domestic battery production. These schemes account for significant financial allocations, with one scheme worth 260 billion rupees and the other, worth 180 billion rupees. The PLI scheme for Advanced Chemistry Cell (ACC) battery storage, or PLI-ACC, aims to boost India's battery infrastructure and is expected to increase domestic battery cell manufacturing capacity by 50 GWh over five years.
FAME India Scheme
The Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) India Scheme was launched in 2015 to promote the adoption of hybrid and electric vehicles. The FAME-II scheme, with a budget of US$1.3 billion, supports the adoption of various electric vehicles, including two-wheelers, three-wheelers, passenger vehicles, and buses. The scheme has been extended until 2024.
Electric Mobility Promotion Scheme 2024
The Indian government's Electric Mobility Promotion Scheme 2024 offers purchase subsidies for two-wheeled and three-wheeled electric vehicles with traction battery packs assembled in India. This scheme encourages the domestic production of battery packs for these types of vehicles, which have higher market penetration than four-wheeled electric vehicles in India.
State Government Incentives
In addition to central government initiatives, state governments like Karnataka and Tamil Nadu are offering incentives to boost battery manufacturing. These incentives include exemptions from stamp duties and interest-free loans, further encouraging the establishment of battery cell production facilities in India.
Tax Breaks and GST Reductions
The Indian government has introduced tax breaks and reductions in Goods and Services Tax (GST) to make EVs more affordable for consumers. Under Section 80EEB of the Income Tax Act, buyers can claim a deduction of up to ₹1.5 lakh on interest paid for loans taken to purchase EVs. Additionally, the GST on electric vehicles has been reduced from 12% to 5%, and the GST on charging infrastructure has been lowered to 18%, encouraging the installation of more charging stations.
These initiatives by the Indian government demonstrate a strong commitment to incentivizing the domestic manufacturing of EVs and batteries, addressing infrastructure gaps, and making EVs more accessible and affordable for the public.
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The electric car market is divided into passenger and commercial segments
The electric vehicle market in India is divided into passenger and commercial segments. The passenger vehicle segment holds the maximum market share, with increasing sales in China, India, Norway, and Germany. The commercial vehicle segment, on the other hand, is still a relatively niche market. However, it is estimated to be the fastest-growing segment in the coming years due to innovations in EV batteries, which improve commercial vehicle load capacity.
In the passenger vehicle segment, Tata Motors holds a dominant position in the electric vehicle space with a market share of 71%. This is led by their two key models, Nexon and Tigor EV. MG Motors India is in second place and offers the longest-range EV with the MG EZS model, which provides 439 KM on a single charge. Hero Electric, Okinawa, and Ather Energy control the electric two-wheeler market in India, with a combined market share of 64%. Hero Electric has a market share of 36%, followed by Okinawa with 21%. Ather Energy, with an 11.1% market share, is slowly gaining market share as it expands its distribution network across India.
The electric three-wheeler segment has seen similar growth, reaching a market volume of more than half a million units in 2023. Most three-wheelers are used commercially as e-rickshaws and goods carriers. Mahindra, a conventional automobile manufacturer, leads this segment. The adoption of electric vans is still in its early stages, but the growing demand for EVs will drive segmental growth during 2024-2032.
The Indian government has implemented several initiatives to support the manufacturing and adoption of electric vehicles, including the FAME-II scheme, which aims to promote the growth and early adoption of hybrid and electric vehicles with a budget outlay of US$1.3 billion. The government has also introduced the Production Linked Incentive for Advanced Chemistry Cell Battery Storage (PLI-ACC) scheme, with a total outlay of US$2.45 billion, to boost India's battery infrastructure. These initiatives are expected to help achieve the target of 100% EV adoption by 2030.
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The Indian EV battery market is projected to surge from $16.77 billion in 2023 to $27.70 billion by 2028
The Indian electric vehicle (EV) market is growing rapidly. It was valued at $3.21 billion in 2022 and is projected to reach $113.99 billion by 2029, with a compound annual growth rate (CAGR) of 66.52%. This growth is driven by the increasing demand for cleaner and more efficient alternatives to gasoline-powered vehicles, supported by government initiatives and the rise in crude oil prices. The Indian government has set a target of achieving 30% electrification of its vehicle fleet by 2030 and is taking measures to incentivize the domestic manufacturing of EVs and batteries.
The Indian EV battery market is an integral part of this growing industry. It is projected to surge from $16.77 billion in 2023 to up to $27.70 billion by 2028, with a CAGR of 10.56%. This growth presents a significant opportunity for India to establish its manufacturing capabilities for EV battery packs, reducing its heavy dependence on imports. Currently, India imports 60-65% of the components required for battery packs.
The expansion of the EV market in India is closely linked to the development of its supporting infrastructure. As of February 2024, there were 12,146 operational public EV charging stations across the country, with Maharashtra leading the way. However, to accommodate the rapid growth of EVs, India needs to significantly increase its charging infrastructure. A recent Confederation of Indian Industry (CII) report emphasized the need for 1.32 million charging stations by 2030, requiring over 400,000 installations annually.
The Indian EV market is dominated by two-wheelers, with Hero Electric, Okinawa, and Ather Energy controlling a combined market share of 64% in this segment. In the passenger vehicle segment, Tata Motors leads with a 71% market share, followed by MG Motors India. Tata Motors aims to achieve 30-40% of its sales from EVs by 2030 and is investing around $2.16 billion to expand its electric vehicle business.
The Indian EV industry is attracting significant investment commitments. Notable examples include Tata Motors-JLR's investment of up to $1.07 billion, VinFast's commitment of up to $2 billion, and Royal Enfield's investment of $358.1 million. With its cost-effective manufacturing base, skilled workforce, and supportive government policies, India is on track to become the largest EV market by 2030.
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India's EV finance industry is likely to reach Rs. 3.7 lakh crore ($50 billion) in 2030
India's electric vehicle (EV) industry is rapidly evolving, with around 0.32 million vehicles sold in 2021, up 168% from the previous year. The Indian government has been proactive in framing policies and providing incentives to support the manufacturing and adoption of EVs. The target is to achieve 100% EV adoption by 2030.
To achieve this ambitious goal, India's EV finance industry is expected to play a pivotal role. According to a report by NITI Aayog and Rocky Mountain Institute (RMI), the industry is projected to reach Rs. 3.7 lakh crore (US$50 billion) in 2030. This represents about 80% of the current size of India's retail vehicle finance industry, valued at Rs. 4.5 lakh crore (US$60 billion).
The report, titled 'Mobilising Finance for EVs in India', emphasizes the need to mobilize capital and finance towards EV assets and infrastructure. Amitabh Kant, CEO of NITI Aayog, highlighted the importance of lowering costs and increasing the flow of capital from banks and other financiers to accelerate domestic EV adoption and compete globally in manufacturing EVs and components like advanced cell chemistry batteries.
To address the challenges faced by end-users, such as high-interest rates and insurance rates, NITI Aayog and RMI have proposed a toolkit with 10 solutions. These solutions include financial instruments like priority-sector lending and interest-rate subvention, as well as creating better partnerships between original equipment manufacturers (OEMs) and financial institutions through product guarantees and warranties. Additionally, the development of a formal secondary market can enhance the resale value of EVs.
The Indian EV market is poised for significant growth in the coming decade, driven by improving economics, new business models, and government initiatives. The transition to electric mobility not only aligns with India's commitment to the Paris Agreement to reduce carbon emissions and improve air quality but also offers substantial economic, social, and environmental benefits for the country.
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Frequently asked questions
As of February 2024, there are 12,146 operational public EV charging stations in India. However, the exact number or percentage of electric vehicles in India is unclear. In March 2022, there were 1 million registered electric vehicles, but this figure excludes data from several states.
The Indian government has implemented various initiatives to support the manufacturing and adoption of electric vehicles. This includes the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, which provides incentives for purchasing electric vehicles, and the Production Linked Incentive for Advanced Chemistry Cell Battery Storage (PLI-ACC) scheme, which is expected to boost India's battery infrastructure. The government has also reduced the GST rate on EVs from 12% to 5% and introduced additional tax benefits for those purchasing EVs.
It is expected that electric vehicles will account for 10-15% of all cars in India by 2030. However, the Indian EV Industry is slowly gathering momentum, and the government has set a target of 100% EV adoption by 2030.
In the electric two-wheeler market, Hero Electric, Okinawa, and Ather Energy control a combined market share of 64%. Tata Motors leads the passenger vehicle segment with a 71% market share, followed by MG Motors India.
