Powering Up: Exploring the Driving Forces Behind India’s Thriving Electric Vehicle Market

Nitin Gadkari, Minister of Road Transport and Highways, has stated that ‘‘Between 2019 and 2021, two-wheeler electric vehicles increased by 422%, three-wheelers by 75%, and four-wheelers by 230%’’[4]. Globally, electric vehicles are gaining popularity and this trend definitely imparts its influence on the Indian market, where significant growth is seen, with close to 3.2 lakh vehicles sold in 2021 [7]. The  Electric Vehicle Market in the country, in the year 2020 had a market size of $USD 5 billion. This is projected to grow at an astronomical 44% compound annual growth rate and reach $USD 47 billion by the year 2026 [8].

The automobile industry has always been an essential part of the Indian economy and market. However, in the current climate crisis, with increasing vehicle demand due to population growth, fossil fuel-powered or conventional energy sources are no longer a sustainable option. This is more relevant in India where approximately 80% of its crude oil requirements are imported. It is in this context that the emergence of Electric Vehicles (EVs) is extremely important. India’s EV market was valued at USD 220.1 million in 2020 and is projected to grow at 94.4% from 2021 to 2030 [1].

The popularity of EVs in India can easily be noted by assessing the market sale of these vehicles, where above 300,000 electric vehicles were registered in Uttar Pradesh, Maharashtra and Karnataka [6]. As of March 15ᵗʰ 2023, 256,980 EVs were registered in the country [12]. In addition to the environmental benefits that are present in using an EV, there are several other drivers that exist in India, driving the sales of electric vehicles. Four such key drivers are discussed in detail below.

Key factors driving the electric vehicle market in India

1. Government Policies and Incentives

As part of efforts to drive the growth of the market, the government has drafted stringent emission norms, such as the Bharat Stage (BS) VI emission standards implemented by India’s Ministry of Road Transport and Highways (MoRTH) [1]. Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) is India’s flagship program to promote electric mobility, launched in 2015 by the Department of Heavy Industry. 2,877 charging stations have been approved in 68 cities across 25 States/UTs under FAME-II [12]. The states of Andhra Pradesh, Karnataka, and Delhi are leading the way in terms of the number of charging stations sanctioned in India, with 266, 172, and 72 stations respectively [3]. To develop a competitive domestic manufacturing ecosystem for electric mobility, the National Mission on Transformative Mobility and Storage mission will lay out the strategy and roadmap necessary for India to leverage its size and scale. Additionally, it aims to improve air quality in cities, reduce India’s dependence on oil imports, and boost the use of renewable energy and storage systems [3].

2. Rising Fuel Costs

Fuel prices rising exponentially in India, acts as a driver in increasing the sale of electric vehicles. The increase in sales of electric vehicles during 2019-2021 shows a relationship between the increasing fuel prices and the growing market of EVs. India’s fuel prices are high due to heavy taxes, which might increase further, along with which the cost of oil imports heavily affects India’s import bill [5].  Petrol prices in February of 2021 alone were Rs 100. At this rate, a typical petrol vehicle’s running cost would be around Rs 8-9 km per litre, whereas for an EV it would only be around Rs 1 per km. This difference will amount to huge savings in the large run [11]. In states like Andhra Pradesh, Bihar and Jharkhand the most recent petrol rates were 110.4₹/L, 107.2₹/L and 99.80₹/L respectively [9]. The per capita income in the above-mentioned states is ₹1,76,707 (Andhra Pradesh), ₹43,605 (Bihar) and ₹71,071 (Jharkhand) [10]. These numbers show how the majority of one’s income would go into petrol vehicles and in turn, highlights the cost-effectiveness of EVs.

3. Growth of Indian Companies Leading The EV Race – Make in India

The Indian government encourages the manufacturing of EVs by Indian-based companies and thus acts as a major driver in the Indian EV market. One of the major advantages that this would have is affordability and it’s being custom-made for Indian roads and travel requirements. Some of the top Indian companies for EVs are TATA, Mahindra, Okinawa and Ather Energy, and they manufacture not only passenger cars but also 2W and 3W-like autorickshaws. Production Linked Incentive (PLI) scheme, with a budget of INR 25,938 crore, has the backing of automobile manufacturers, who have committed to invest an amount of INR 74,850 crore as against the Government’s estimate of INR 42,500 crore spread over a five-year period starting from FY23 [13]. Initiatives such as these, followed by a response from the industry, are a much-needed stimulus towards achieving the five trillion dollar economy, Make in India, and Atma Nirbhar Bharat Abhiyan.

4. Charging Infrastructure and Battery Technology

Being able to conveniently charge EVs is crucial in its sale and market. To enable these charging stations have been installed in cities and along expressways and highways, by the government [6]. As mentioned earlier, a large number of charging stations have been approved in most states and UTs and this number is expected to surge further. For example, EV charging points have been installed in some commercial buildings in Gurugram, allowing office staff to charge their vehicles during work hours [6]. Shuchi Anant Virya, a joint venture company, has also established 18 charging points along the Manali-Leh highway. Battery charging points are also installed at the homes of EV buyers by companies that sell EVs [6]. PLI-ACC is a government incentive program for advanced chemistry cell battery storage, intended to boost India’s battery infrastructure. The allocated fund for the same is US$ 2.45 billion (Rs 18,100 crore), to be given to beneficiaries over five years once the manufacturing facility is set up [7].

A promising future for electric vehicles in India

The future of EVs in India is quite promising. With the above-mentioned drivers’ exponential growth is predicted in the Indian EV market. At the same time, there are barriers that exist in implementing a growing EV market in the country. Some of these barriers are the high initial investment in buying an EV and even though the charging infrastructure is developing, it is not widespread enough. There is also a need to educate more citizens, especially those not belonging to the elite and upper-class income bracket, on the advantages of owning an EV. Considering that these barriers will be dealt with in the near future, EVs will be a very prominent part of the Indian market, thus helping the country in achieving its sustainability goals.

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List of References

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