India is steadily moving towards a greener mobility as the country strives for a zero emission environment and has committed to achieve net zero emission status by 2070. The EV industry has received good support from the government in recent years to increase penetration of electric vehicles in India. Central and state government initiatives to accelerate the transition to electric vehicles, such as promoting local battery production and increasing the affordability of electric vehicles, bode well for the industry, according to rating agency CareEdge Research.
Although penetration of electric vehicles (EVs) in India is still in its infancy, the electric two-wheeler (E2W) segment has seen significant growth over the years and currently accounts for around 62% of total EV sales according to the rating. vehicles in FY23. office.
E2W sales in FY23 grew by 188% y-o-y and E2W's CAGR during FY19 to FY23 was 92%, the rating agency noted. This sales growth can be attributed to a shift in customer preference towards electric cars due to government subsidies and technological advances, lower operating costs, low maintenance costs and increasing environmental sensitivity, according to CareEdge Research.
The sales of low speed E2W are higher compared to high speed E2W. In addition, electric scooters in the electric two-wheeler category have been the favorite choice of consumers so far, accounting for the majority of sales. Moreover, numerous launches in the fast electric motorcycle market are expected in the coming years, especially from the established players, which will give a boost to this segment.
E2W sales continued to grow in FY23 due to a shift in customer preference from petrol two-wheelers to electric vehicles as a result of government subsidies, resulting in competitive pricing and technological advancements, lower operating costs, low maintenance costs and increasing environmental sensitivity.
The increase in demand is mainly due to government support through various incentives offered under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) programme. Under the FAME-II scheme, the incentives for E2W have been increased from Rs. 10,000/kWh to Rs. 15,000/kWh and the incentive ceiling has been increased from 20% to 40%.
In addition, many states offer additional subsidies and other incentives, such as waivers of registration fees and road taxes for electric vehicles. However, there was some impact on FY23 E2W sales due to withholding of subsidies under FAME-II for non-compliance with Phased Manufacturing Program (PMP) guidelines under the scheme.
“Favorable government policies coupled with central regulations have contributed to the growing penetration of electric cars in states like Delhi and Maharashtra. These states are also relatively better off in terms of availability of charging stations, though they are still far behind in terms of actual requirements,” said Tanvi Shah, director, CareEdge Advisory & Research.
The rating agency said Delhi, Maharashtra, Haryana, UP and Punjab have the most comprehensive EV policies, while Arunachal Pradesh, Manipur, Himachal Pradesh, Ladakh, Kerala and Uttarakhand have the least. comprehensive electric vehicle policies.
Few government policies have comprehensive plans that balance sales, production and overall ecosystem development. The growing number of public charging stations is expected to be driven by a range of players, including operators of clean charging points, oil marketing companies, utilities and electric vehicle fleet operators. Public sector oil companies like IOCL, HPCL and BPCL are also planning to set up charging facilities for electric vehicles.
The Department of Energy has even revised its guidelines and standards for electric vehicle charging infrastructure. The revisions include provisions to make it easier for EV owners to charge at home/office using existing electric connections, a land use revenue sharing model to make charging stations more energy efficient, guidelines for providing affordable rates, timetables for connecting of charging stations in the network and a fixed ceiling on the cost of electricity services.
EV charging infrastructure
While sales of these electric vehicles are increasing, there are several issues affecting the development of electric cars. India's adoption of electric vehicles is hampered by a lack of significant charging infrastructure. The main challenges faced by electric two-wheeler users in India were poor battery charging infrastructure, limited top speed, non-availability of high-speed support network, reduced range and poor build quality.
Despite a significant increase in the number of public charging stations over the past year, India still has a long way to go to meet its targets. As of January 2023, India had 5,254 public electric vehicle (EV) charging stations, totaling 20.65 lakh EVs. To date, the FAME-II program has provided grants of Rs. 10 billion to deploy nearly 2,900 charging stations in 25 states. From January 2023, Delhi will have the maximum number of vehicles per charging station, followed by Goa and Karnataka. Gaps need to be addressed through better legislation, improved monitoring, mechanisms and capacity building across the policy value chain.
Meanwhile, the Indian government has also focused on its battery exchange policy, which would initially prioritize battery exchange services for electric scooters, motorcycles and three-wheeler auto rickshaws. This is likely to help boost the deployment of electric vehicles for last-mile deliveries and ride-sharing, the rating agency noted.
In addition, EV drivers can use battery swapping to replace dead batteries with freshly charged batteries at exchange stations. Since the battery is the most expensive component in an EV, the change will allow companies to offer it as a service through lease or subscription models, which CareEdge Research says will help lower EV ownership and maintenance costs.
Point of view
The domestic electric vehicle market in India will show a compound annual growth rate of 49% between 2022 and 2030, with 10 million sales per year by 2030, according to the Economic Survey 2023. As the EV market in India grows exponentially, vehicle manufacturers have gradually tended to to produce more electric vehicles, CareEdge Research said. Some major players in the electric vehicle market include Hero Electric, Ola Electric, Ather Energy, Tata Motors, Mahindra Electric, Hyundai and MG Motors. Other key players have also announced plans to produce additional EV models suitable for the Indian market in the future, increasing competition in the market and boosting adoption.
CareEdge Research added that sufficient investment should be made by manufacturers and emphasis should be placed on research and development (R&D) to establish innovative methods of making electric vehicles, disposing of batteries, using batteries and mining minerals needed for electric batteries. . to minimize the carbon footprint of electric cars.
Moreover, the proactive measures taken by the government and state government to accelerate the transition to electric vehicles, develop local battery production and increase vehicle affordability augur well for the sector which is expected to grow in the long term in the future. The rating agency's report said the overall outlook for electric cars in India is positive and the country is well on its way to achieving a sustainable and environment-friendly transport ecosystem.
Stock to watch
Some of the listed companies investing heavily in green mobility and its ecosystem are: Greaves Cotton, Hero MotoCorp, TVS Motors, Bajaj Auto, Tata Motors, Mahindra & Mahindra, Atul Auto, Olectra Greentech, Ashok Leyland, Eicher Motors, Exide Industries, Amara Raja Batteries, Tata Power, Indian Oil Corporation, BPCL, Reliance Industries, NTPC, Powergrid Corporation, Tata Chemicals, Himadri Specialty Chemical, Gujarat Fluorochemicals, Neogen Chemicals, Motherson Sumi, Graphite India and Uno Minda.
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