India’s electric vehicle (EV) market could be worth nearly $206 billion in the coming decade if it were to achieve its FY 2030 EV ambitions, says a study by the CEEW Centre for Energy Finance (CEEW-CEF).
To meet this target, a cumulative investment of more than $180 billion will be required in vehicle production and charging infrastructure until FY30, it said.
India’s FY30 EV ambition will translate into total sales of 102 million vehicles, annual battery demand of 158 GWh and a support infrastructure of 2.9 million public charge points by that year. As of March 2020, the number of registered EVs in India stood at just half a million.
The country is emerging as a potential investment destination for EVs but fragmented markets, poor business viability of charging infrastructure, and the lack of clear policy mandates may affect EV investments, it pointed out.
“Availability and affordability of capital for OEMs, battery manufacturers, charge point operators, and end consumers would be key to determining the pace, efficiency and cost of India’s transition to EVs,” said Vaibhav Pratap Singh, Senior Analyst at CEEW-CEF, and lead author of the report.
“Consistent policy support would also be critical. The recent announcements by the government to set up EV kiosks in petrol stations and permit sales and registration of EVs without batteries can give a boost to the sector.”
With an estimated annual battery capacity requirement of 158 GWh by FY30, there will be a massive market opportunity for domestic manufacturers. Even if 50 per cent of the battery manufacturing capacity were indigenous, investments would amount to as much as $6.1 billion by FY30.
The recently approved production-linked incentive (PLI) scheme for the automobile and battery manufacturing sectors could help enable the right ecosystem for indigenisation and job creation in the EV sector, said the report.
India would also need a network of over 2.9 million public charging points by FY30, beyond the in-home charging points. This could create another massive market opportunity requiring cumulative investments of up to $2.9 billion.
Capping of rental costs
Currently, there are about 1,800 public charging points across the country. The report recommends capping rental costs for public charging stations and creating a charging infrastructure investment facility to strengthen the business case for charging infrastructure.
The EV market also presents a huge opportunity for India’s automobile loan market. According to the study, if 50 per cent of the EV upfront costs — $103 billion — required through FY21-FY30 were to be financed through debt, the banking sector would have to more than triple its current advances of $31 billion towards vehicle loans in the next 10 years.
The report indicates that distributing all the upfront costs as well as operating costs (including fuel, maintenance, and insurance) into equal annual costs — a method called annualisation — would help navigate the challenge of high upfront purchase cost. The solution could help create a track record of performance and repayments and thus help with the creation of a vibrant loan market for EVs.
In addition, development of policies around battery reuse, recycling, and leasing to help bring down the high upfront cost of EVs. To encourage uptake of EVs, favourable policies that combine incentives for EVs with disincentives for internal combustion engine (ICE) vehicles would be required, it said.
India’s 2030 EV ambition states that 70 per cent of all commercial cars, 30 per cent of private cars, 40 per cent of buses, and 80 per cent of two-wheeler and three-wheeler sales in 2030 should go electric.