The Indian electric vehicles (EV) market is expected to grow at a CAGR of 23.47% during the forecast period, i.e., 2018–2026.
Electric Vehicles depend on one or more electric motors for propulsion. These vehicles are not just eco-friendly but cost-effective options than petrol-based vehicles. They usually run on lithium-ion batteries, which have exceptional longevity and good power of retaining energy. Governments worldwide are making efforts to increase the use of these vehicles to curb pollution. The Indian EV market is divided by vehicle type, power source type battery, and regions.
By 2030, it is anticipated that 50% of the population will be living in urban areas. India is one of the emerging economies, and there are many villages and underdeveloped regions in India. Like the metropolitan cities such as Mumbai, Pune, New Delhi, Kolkata, Bengaluru, etc., the government is making efforts to evolve the rural cities by developing improved infrastructural facilities, transport, healthcare, and more. With these facilities comes the introduction of advanced technologies, and this idea of urbanization invites the need for EVs.
The need to control the emission of ozone-depleting gases, reducing the import of fuel, and the ever-increasing cost of energy are other major driving factors of the EV market. Around 98 cities have been nominated for the Smart City Mission 2015. It is an urban development program launched by the Government of India. Many cities under this mission have already embraced the use of these vehicles. The demand from these cities will spike in the years to come.
Electric vehicles are expensive as compared to conventional transport options. This is because of the expensive, compact-sized lithium batteries they operate on. The cost of these batteries is almost equal to the fuel prices in India. These high costs are also because of India's lack of lithium-ion battery manufacturing units.
India is heavily dependent on imports for raw materials to make these batteries, and lithium and cobalt are the minerals India imports primarily from China. Moreover, many EV companies in India function with less than 50% localization. Hence, they cannot avail the benefits and subsidies under the FAME (Faster Manufacturing and Adoption of Hybrid and Electric Vehicles) phase two. All these factors contribute to the increased prices of these vehicles, holding back the market.
India is the second most populated country in the world. The Indian population is mainly dependent on petrol-based vehicles for transport. The rising need to curb the emission of petrol-depleting gases has caused the world to shift towards electric vehicle technologies. The Indian government has undertaken efforts to promote these vehicles operating on electric power. It has adopted specific schemes under the mission of promoting clean energy vehicles. It is under phase two of the FAME scheme launched in 2019.
The state and the central government provide subsidies and incentives to the EV owners under this scheme. For example, an EV owner can avail an exemption of over INR 1 Lakh while paying off the loan to purchase the vehicles. Both the two-wheeler and four-wheeler purchasers are benefited from this exemption. This has attracted the salary-earning individuals to become prospective customers.
The Goods and Service Tax on these vehicles' purchase was also reduced to 5% a few years before. Many states in the country exempt the road fees for the EV owners under the EV policy. The introduction of e-buses by various state governments has contributed substantially to the growth of the Indian EV market. It is predicted to rise in the upcoming years with plans to increase the prominence of these EVs in public transport.
The pandemic impacted the whole world, and practically all the organizations confronted some difficulties during this period. The creation places were shut down because of the limitation forced right after COVID-19. In March 2020, when India's administration organized a lockdown, domestic interest for automobiles and their production was negatively affected when contrasted with March 2019. This impacted the vehicle market drastically.
In addition, electric vehicles lie on a marginally expensive side than ordinary vehicles. Given the lower spending limits, traditional vehicles were preferred during this period, which further impacted the interest for EVs. The majority preferred to choose essential items over any items leading to significant expenses. People lost their jobs, hence their ability to spend decreased. This was a substantial cause for the downfall of the EV market.
After the turmoil and feeling of dread toward this sickness died down to a degree, the assembling units are presently working full fledge and have expanded their limits. The deals of the EVs have begun to increment with the expanding extra cash of individuals. The values will further shoot up during the estimated time frame because of rising mindfulness about the climate issues. Many manufacturers confronted difficulty with the tasks and the shut down due to the absence of cash inflow. With government help, many businesses have found their way to get back on track. The difficult times gradually diminish, and all the industries, including the EV market, are recovering quickly.
Based on the vehicle type, the Indian EV market is categorized into Passenger Cars, Commercial Vehicles, Two Wheelers, and Three-wheelers. Two-wheelers are the most popular options as they are cheaper than cars and comfortable for shorter distances. Followed by that are the three-wheelers, which acquired almost 45% market share in 2021. Commercial vehicles and passenger cars are high priced and not that feasible, and hence they are not preferred by the people in India.
Another way of market segmentation is by the power source, and it is divided into electric vehicles, plug-in electric vehicles, and hybrid electric vehicles.
New Delhi is a prominent EV market in India and is rising to become the EV capital of India. The factors contributing to the market's growth are subsidies, ample charging stations, increasing use of these vehicles in public transport, rising environmental concerns, etc.
According to the FAME phase two, the state of Maharashtra has made critical amendments to its EV policy. It intends to sore the market demand, effortlessly obtain raw materials, and merge the vehicles in public and private transport. It also aims at increasing EV registrations by the end of the forecast period. The government seeks to convert 25% of its public transport into clean energy vehicles.
The e-commerce business readily adopts these automobiles into their logistics department and focuses on more than 20% of their fleet conversion into electric. All these reasons are creating a demand for EVs in Maharashtra and further enlarging the market in the region.
Some of the key players in the Indian EV market are Tata Motors Ltd., Mahindra& Mahindra Ltd., JBM Auto, MG Motor India, Ather Energy, Toyota Kirloskar Motor, Maruti Suzuki Ltd. Olectra Greentech, Ola Electric Mobility, Ashok Leyland, Hyundai, Hero Electric among others.