Despite challenges, India's EV story likely to pan out, says BNP Paribas

The report sees India as more favorably placed than many of the other countries in the region, driven by a large and growing domestic market, a supportive policy environment, and a maturing automotive industry.

Autocar Pro News Desk By Autocar Pro News Desk calendar 22 May 2024 Views icon2511 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Despite challenges, India's EV story likely to pan out, says BNP Paribas

A new report "Asia’s next EV powerhouse? India versus the rest" by financial services firm BNP Paribas paints a bullish picture of India's potential to become a global leader in the electric vehicle (EV) market.

The report sees India as more favorably placed than many of the other countries in the region to lead the EV industry.

"Countries elsewhere in the region are also trying to replicate China’s success. Thailand, for example, is seeking to transition its legacy industry towards an EV future, with Chinese support. Indonesia is using its downstream resources (e.g., nickel) to encourage localisation. But we believe India is most likely to replicate China’s success," it noted.

The report highlights both the 'push factor' of government incentives and investments as well as the 'pull' factor of a large and growing market.

The Indian government's ambitious plans to invest over USD 11 billion in manufacturing incentives and establish 140 GWh of battery cell capacity by 2030 are creating a fertile ground for EV growth, it noted, adding that global players like Tesla have started taking plans for an India entry seriously.

Government Support

The report details the FAME India Scheme, a flagship program by the Indian government that offers subsidies for electric vehicles and charging infrastructure. The PLI, another key government initiative, provides production-linked incentives to attract investments in the EV sector. These schemes are creating a favorable environment for EV manufacturers and suppliers to establish themselves in India, it noted.

It pointed out that the government's FAME India Scheme and the PLI scheme have been instrumental in driving the growth of the Indian EV industry. These initiatives provide monetary support for manufacturers to invest in new technologies and expand production capacities.

The report also notes the Indian government's push to establish a robust domestic EV supply chain, with a strong focus on battery manufacturing. The government has plans to establish 140 GWh of battery cell capacity by 2030.

However, to achieve this goal, India also needs to address challenges such as ensuring access to raw materials and developing a skilled workforce.


However, the Indian market also poses unique challenges, largely to do with the cost sensitivity of the consumers.

The high upfront cost of EVs remains a major barrier to mass adoption, while the lack of extensive charging infrastructure and the potential disruption from new entrants like Tesla pose significant risks.

Still, the report emphasizes that addressing these challenges could lead to significant rewards. For instance, investing in charging infrastructure could create new business opportunities and jobs, while developing a robust domestic supply chain for EV components could reduce India's dependence on imports and boost the economy.

The Apple Story

The report suggests that Apple's thriving manufacturing operations in India could serve as a model for global electric vehicle (EV) manufacturers looking to tap into the country's growing EV market.

Within just 2-3 years, Apple has successfully transitioned from importing iPhones to manufacturing them in India, resulting in significant profitability and efficiency gains for Apple's suppliers in the country.

The report noted that the first plant making iPhones in 2017, was primarily an assembly centre for entry-level or legacy models.

"And then, in 2020, Covid led supply chain disruption hit globally. Covid changed the supply chain dynamics and India’s proposition. Now there was a need to diversify the production facilities and India started looking more attractive for the ramp-up. The government also rolled out production linked incentives to attract mobile phone assembly in the country.

"What followed was a swift ramp-up of local assembly of iPhones. India’s contribution to Apple’s iPhone production increased from negligible in 2020 to around 15% by 2023. Apple is now targeting to ramp up its Indian manufacturing to 25% of its global iPhone production by 2025, as per media reports.

"We believe Apple’s successful ramp-up in India and its manufacturing model is a useful template for global EV OEMs looking at India," it noted.

The report highlights several factors that contributed to Apple's success in India, including the availability of a skilled workforce, supportive government policies, and a growing ecosystem of suppliers. These factors, the report argues, are also present in the Indian EV industry and could be leveraged by global EV manufacturers to establish a strong foothold in the market.

The report also notes that Apple's success in India has had a positive spillover effect on the country's broader manufacturing sector. The company's suppliers have invested heavily in new facilities and technologies, creating thousands of jobs and boosting economic growth.

The BNP Paribas report comes at a time when several global EV manufacturers, including Tesla, are exploring the possibility of setting up manufacturing operations in India.

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