Charging ahead: The future of India’s EV market

Prime Minister Narendra Modi made a bold statement for India to be Viksit when she turns 100. A few months later, at COP27, another statement followed - India will have net zero emissions by 2070. These two goals might seem very different, but they are closely tied. Both envision a future of sustainable growth, with cleaner air and greener industries. 

The transportation sector is at the heart of this change. Road transport alone accounts for about 20% of urban pollution in India, and when you add in the emissions from manufacturing, logistics, and after-sales services, the numbers only grow. In fact, according to an IQAir report, out of the 50 most polluted cities worldwide, 42 of them are Indian. That’s why the Indian government is making a strong push to accelerate the growth of the electric vehicle (EV) sector.

A Sector Ready to Thrive

The transition to electric vehicles (EVs) in India has been steadily progressing, with the logistics sector leading the way by adopting EVs for last-mile deliveries using both two-wheelers and three-wheelers. This initial adoption has helped foster greater acceptance of EVs among consumers, particularly as more people are opting for EVs as their second cars.

Government initiatives like the FAME schemes have played a crucial role in boosting EV adoption by providing attractive subsidies. Furthermore, the reduced GST of 5% on EVs, in contrast to the 28% on ICE vehicles, has enhanced this growth. The FAME subsidies had a requirement of local value addition which resulted in the steady development of the local ecosystem. Today there is a strong push towards localizing most of the EV components with battery packs, battery management systems, motors, motor controllers being built in India. Additionally, even chargers (both AC & DC) and charger components including rectifiers and PLCs are being developed and built locally. This is creating the perfect storm for the EV sector, and as more states introduce their own incentives, the momentum will only grow.

But this is just the beginning. By 2070, it’s estimated that OEMs will need to invest over USD 323 billion to fully decarbonize the transportation sector. That’s an enormous figure, but with it comes an equally massive opportunity. Early investments in EV infrastructure, vehicle production, and battery technology will pay off handsomely for companies that move now. For investors, this is a golden moment to back companies that are building the foundation for India’s green future.

The Opportunity for OEMs and Investors

There is no question that original equipment manufacturers (OEMs) face significant initial investment costs, especially in the early years. However, the successful IPO of Ola Electric and the upcoming IPO of Ather provides good tailwinds for further deepening of the sector. Hero Motors is an early investor in Ather and recently in Altigreen (a 3-Wheeler Logistics and Passenger OEM). TVS Motors is an investor in Ultraviolette. By 2050 EV sales are expected to hit USD 300 Bn and that provides a massive opportunity.

As EV in India matures, it would require building robust public charging infrastructure and availability of locally produced battery packs. Both of these are already on the agenda with over 16000CCS2 chargers already available across the country and multiple startups and SMEs working on Cell to Pack. Amara Raja is a large investor in Log9 Materials. Dedicated suppliers for BMS, Motors & Motor Controllers, Connectors are also emerging around the Tamil Nadu and Maharashtra ecosystems.

With energy giants like HPCL and BPCL stepping in to install chargers in their outlets, and IOCL partnering with Phinergy to offer Aluminium Air based battery packs, the pace of development is set to accelerate. Battery swapping players are also gaining traction, further supporting the sector’s expansion and providing more flexibility to consumers. For investors, this is where the real potential lies: in backing the infrastructure that will power the EV revolution.

The Battery Boom

Batteries are the new oil, powering the industry. India is actively promoting local battery manufacturing through production-linked incentive (PLI) schemes.

As charging technology improves, both from the battery and charger side, reducing the time it takes to charge without degrading cell life, adoption will continue to grow. I can see this surge in demand will initially be driven by electric two-wheelers, which are expected to lead the charge by 2030. As more consumers switch to electric, the market for EV batteries and components will continue to expand, further driving down costs.

Financing The Future of EVs

One of the biggest challenges facing the EV sector is the availability of financing options. EVs, with their higher upfront costs, remain pricier than conventional vehicles. Although startups have entered the EV financing space, large traditional financiers have been slower to follow. This hesitation has kept the cost of EV loans relatively high compared to ICE vehicles, which in turn, affects affordability.

However, this is where we can see the opportunity. Quite a few startups like Alt Mobility, Oto Capital, Leaf Round, Grip Invest and more traditional players like Gentari (arm of Petronas) and MBSI (arm of Yamaha) are currently the main line of financiers taking up the bulk of exposure to the commercial passenger and logistics segment. Traditional financial institutions like banks and NBFCs have been watching the evolution from the sidelines but are slowly stepping in - which should bring parity in the financing costs.

Opportunities Across the Value Chain

More than just cars, the entire EV ecosystem offers great investment potential. Charging stations, battery production, after-sales services, and even software solutions that optimize vehicle performance all present opportunities for growth. Last-mile charger deployment is being accelerated through franchising, contributing further to sector expansion.

As the EV sector scales, it will require significant investments not just in vehicles, but in the infrastructure that supports them. The expansion of charge point operators, with new entrants and established energy giants driving the charge, offers a promising area for growth. Battery-swapping technology is also gaining traction, offering faster solutions for consumers and further encouraging adoption.

The sheer breadth of opportunities means that investors can find value across the entire supply chain, from raw materials like lithium and cobalt, to battery manufacturers, to companies developing cutting-edge electric drivetrains.

The road ahead may be long, but it’s a one worth taking. One electric vehicle, one battery, one charging station at a time, we’re building a cleaner, more sustainable India. 

Manu Iyer is a Board Member of Raptee.HV. Views expressed are his own.