During the COP26 conference, India announced its ambitious decarbonization objective for 2030. This includes a 50 percent reduction in carbon emissions within the energy sector, EV Sector, and technology, and the achievement of 500 gigawatts of renewable energy generation capacity by 2030. Additionally, India has committed to participating in the global EV30@30 campaign. To accomplish these targets, India plans to triple its current renewable capacity and ensure that electric vehicles (EVs) make up at least 30 percent of new vehicle sales by 2030 through the EV30@30 campaign.
This is a significant undertaking, particularly in the passenger vehicle category. In 2022, electric cars only accounted for 1.3 percent of car sales, with 49,800 EVs sold out of 3.8 million passenger vehicles. However, despite this low percentage, automakers and related industries remain optimistic about the future of EV adoption. Both traditional players and new stakeholders are exploring various avenues for research and development, as well as commercial production of vehicles and auto components.
The Indian electric vehicle (EV) market is expected to experience significant growth in the coming years. According to projections, the market, which was valued at US$2 billion in 2023, is anticipated to reach US$7.09 billion by 2025. Furthermore, industry estimates suggest that the domestic EV market could achieve 10 million annual sales by 2030. In this market brief, we will explore the various initiatives being undertaken by car manufacturers and the government to expand India’s EV market share for both private vehicles and public transport.
India’s EV sector outlook
Based on a report by Bain & Co., it is projected that by 2030, electric two-wheelers could account for approximately 40 to 45 percent of all electric vehicles (EVs) sold in India. Additionally, electric passenger vehicles are expected to make up around 15 to 20 percent of the total EV sales. However, as per a Niti Aayog report, the Indian government has set ambitious targets for EV adoption by 2030. They aim for 40 percent of buses, 30 percent of private cars, 70 percent of commercial vehicles, and 80 percent of two-wheelers to be electric.
Recent data from VAHAN reveals a significant surge in India’s electric two-wheeler market during the third quarter of FY 2023-24 (Q3 FY 24), with a notable 34.42 percent increase in sales compared to the previous quarter (Q2 FY 24). This positive trend is further supported by robust sales in the ongoing fiscal quarter, Q4 FY 24, with a total of 76,301 units sold.
VAHAN is the flagship e-Governance application of India’s National Transport Project, which was launched in 2006 as a Mission Mode Project. Its main purpose is to automate the operations of regional transport offices (RTOs) across the country, including tasks such as vehicle registration, permits, taxation, and enforcement processes.
According to the Economic Survey of India 2023, the domestic electric vehicle market in India is expected to experience a robust compound annual growth rate (CAGR) of 49 percent between 2022 and 2030. It is projected that by 2030, there will be approximately 10 million electric vehicle sales annually. These projections also suggest that the EV industry will create around 50 million direct and indirect employment opportunities within the next seven years.
Automakers Rolling Out Electric Vehicles in India:
Ather Energy Private Limited:
Ather Energy, headquartered in Karnataka, is recognized as India’s fifth largest player in the electric two-wheeler segment. Established in 2013, the company operates two production facilities, one in Bengaluru and the other in Hosur, Tamil Nadu. The Hosur plant spans across 400,000 sq ft and was set up with an investment of approximately US$99 million. It has the capacity to manufacture 110,000 e-scooters and 120,000 battery packs annually.
Notably, Hero MotoCorp, a leading two-wheeler brand, announced in September that it will invest INR 5.5 billion in Ather Energy. With this investment, Ather Energy aims to increase its annual production capacity to 1.5 million units from the current 420,000 units. Additionally, the company has launched more affordable models and aims to achieve a 30-40 percent increase in market share in the coming years.
Electrotherm (India) Limited:
This sector is witnessing the rise of a new contender. Electrotherm, an Indian technology conglomerate, has established its presence across multiple domains of manufacturing and processing. These include steelmaking, foundry, heat treatment, the development and production of electric vehicles, and the renewable energy industry. Notably, the company has gained recognition for its YO Bykes line of electric two-wheelers. With its manufacturing and export hub located in Ahmedabad, Gujarat, Electrotherm’s primary export destinations encompass Nepal, Bangladesh, Sri Lanka, Algeria, and Kenya.
Hyundai Motor India Ltd (HMIL):
Hyundai Motor India Limited (HMIL), the second largest car manufacturer in India, offers electric vehicle (EV) models under the Hyundai and Kia brands. The company is committed to introducing new EVs from its factory in Sriperumbudur, near Chennai. In order to expand its capacity and establish an EV ecosystem in Tamil Nadu, HMIL has signed a Memorandum of Understanding (MoU) with the state government, investing INR 200 billion over a span of 10 years.
As part of this initiative, HMIL will establish a battery pack assembly unit with an annual capacity of 178,000 units and install 100 EV charging stations in Tamil Nadu within the next five years. Additionally, the Sriperumbudur plant will be transformed into an export base for both internal combustion engine (ICE) and EV cars.
Apart from Tamil Nadu, HMIL is further expanding its manufacturing presence in India through the acquisition of General Motor India’s (GMI) Talegaon factory in Maharashtra. Operations at the GMI plant are set to commence in 2025, with an annual capacity of 130,000 units. Hyundai’s future plans include the launch of five EV models in India by 2032.
Mahindra & Mahindra Limited:
The Indian automaker, Mahindra & Mahindra, has a relatively small presence in the electric vehicle market. Their approach is focused on products and lifestyle, rather than being fully committed to electric vehicles. Despite acquiring Reva, an electric carmaker, early on, Mahindra & Mahindra has yet to fully embrace the EV segment. However, the company has plans to introduce multiple EV models (XUV.e, Thar.e, Scorpio.e, and Bolero.e) under the Born Electric brand between 2024 and 2025. Currently, their only offering is the XUV 400.
In January, the company announced its intention to establish an EV manufacturing plant in Pune, Maharashtra, with an investment of INR 100 billion. Additionally, Mahindra & Mahindra will set up a manufacturing facility in Zaheerabad, Telangana, with an investment of INR 10 billion, to produce electric three- and four-wheelers.
Government incentives for purchasing and manufacturing EVs
In order to achieve its ambitious goals for 2030, the Indian government has implemented various significant measures, which include providing incentives for the expansion of local production.
The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme was initiated in 2015 with the objective of reducing dependence on fossil fuels and addressing issues related to vehicular emissions.
Currently in its Phase II, the FAME scheme has been allocated a budget of US$1.2 billion for a period of five years starting from April 1, 2019. A significant portion, approximately 86 percent, of this budget has been allocated to stimulate the demand for electric vehicles (EVs) by facilitating the deployment of 7000 e-Buses, 500,000 e-3 wheelers, 55,000 e-4 wheeler passenger cars (including strong hybrid), and 1 million e-2 wheelers.
As of August 1, a total of 753,000 e-2 wheelers have already received support under the FAME II scheme. It is important to note that only advanced battery and registered vehicles will be eligible for incentives under this scheme.
Regrettably, Hero MotoCorp, TVS Motor Company, Ather Energy, and Ola Electric Technologies, the four leading electric vehicle manufacturers, have faced penalties for breaching the FAME II guidelines. Consequently, they have returned a portion of the government incentives that were initially provided.
These companies had sold separate portable chargers in order to qualify for the FAME scheme. The additional costs of these chargers, which exceeded the ex-showroom price of the two-wheelers, were ultimately borne by the customers.
The future of the FAME scheme’s extension to phase three remains uncertain, as there is a disagreement between the finance and heavy industry ministries regarding this matter.