The Indian automotive industry is the fifth largest in the world and is slated to be the third largest by 2030.
The Indian automotive industry is growing at a fast pace however, support from energy sector is required for successful achievement of growth. Considering the scarce nature of petroleum resources, Government of India is focusing towards clean energy sources, hence the initiation of electric vehicle (“EV”) industry.
To encourage the EV industry National Electric Mobility Mission Plan (“NEMMP”) was launched in 2013 by Department of Heavy Industry (“DHI”) as a roadmap for the faster manufacture and adoption of EVs in India.
Various incentives are being provided by central and state government under different schemes. Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (“FAME India”) Scheme was notified in April 2015.
Figure 1- Electric cars as a proportion of the number of cars in the country (in %)
(Source- Global EV Outlook 2020, International Energy Agency)
According to an independent study by CEEW Centre for Energy Finance (CEEW-CEF), the EV market in India will be a US$206 billion opportunity by 2030.
Regardless of the country’s ambitious targets, India’s EV space is at a nascent stage. However, looking at it differently – India offers the world’s largest untapped market, especially in the two-wheeler segment.
100 percent foreign direct investment is allowed in this sector under the automatic route.
In Union Budget 2022-2023 it was announced that battery swapping policy will be brought out and inter-operability standards will be formulated.
Prices of nickel have soared over 100% in the last few days as the Russia-Ukraine war has triggered a shortage of the metal, threatening to disrupt production of batteries for electric vehicles. The increased prices may also drag the margins of the EV industry.
Figure 2- Category-wise EV Sales
(Source- Centre for Energy Finance)
PRESENT STATE OF EV INDUSTRY IN INDIA
EV Component Manufacturers
In May 2021, the government rolled out a Production-Linked Incentive Scheme (PLI) for ACC Battery Storage Manufacturing, manufacturers will be selected through a competitive and transparent bidding process, and selected beneficiaries will have to set up a manufacturing facility within two years. The incentives under the PLI scheme will be disbursed over a fixed period of five years, from the time of commissioning of the manufacturing facility.
The Indian government is planning to localise the production of semiconductor chips to address the chip shortage issue in the passenger vehicle segment and save money on foreign exchange.
Government to offer up to 50% of project cost to companies setting chip plant: Applicants have to make a minimal capital investment of Rs 20,000 crore and the Company must have minimum revenue of Rs 7,500 crore (including group companies) in electronics system design and manufacturing in any of the 3 financial years preceding the year of submission.
EV Manufacturers
FAME (Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India) is a part of the National Electric Mobility Mission Plan. Main thrust of FAME is to encourage electric vehicles by providing subsidies, it is aimed at incentivizing all vehicle segments. There are two phases of Scheme:
- Phase I: It was introduced in 2015 and was functional till 31st March 2019
- Phase II : It started in April 2019 and will continue till 31st March 2024
Figure 2- Share of EV Sales
(Source- Centre for Energy Finance)
