As India's EV growth continues to remain steady, an industry body has said that collaborating with global counterparts would help local companies. In its recent report, the India Energy Storage Alliance (IESA) also said that India's EV market could grow 49% between 2021-2030, with volumes crossing annual sales of 17 million by 2030.
Speaking to DIGITIMES Asia recently, Avanthika Satheesh, Industry Research Manager - Emerging Tech, Customized Energy Solutions at the India Energy Storage Alliance, pointed out that many of the companies that are active in this field are already joining forces with international players.
"The government has allocated Rs18000 crores (US$2.3 billion) for supporting local lithium-ion cell manufacturing under advanced chemistry cell production linked incentives (PLI) scheme for 50 GWH," Satheesh explained. "For these 10 companies have participated, and four of them were selected to receive the subsidy. Most of these companies are partnering with foreign technologies for technology licensing or joint venture to start local cell manufacturing.
But the process of indigenization is also well on the way. Satheesh pointed out that for EV components such as motors, controllers, magnets, several companies have already started local manufacturing in the two- and three-wheeler segments. This is also expected to happen slowly for electric buses as well. Few companies are also known to have acquired the technology for magnets, although public announcements on this are yet to be made.
Factors driving demand
IESA's report has suggested exponential growth for EVs this decade. According to Satheesh, the significant factors that could drive this growth are rising fuel costs and government initiatives aimed to make EVs more attractive.
"Major factors that will drive the demand for EVs are increasing price of petrol and diesel, FAME subsidy incentives, lowering the price of lithium batteries, attractive total cost of ownership of commercial vehicles, subsidy support and state EV policies for charging infrastructure development," Satheesh said.
Interestingly, IESA's report also mentioned that lead acid batteries are the most popular in India due to their use in battery-operated 3-wheelers, but this could change as companies launch more vehicles that use li-on. Lithium iron phosphate (LFP) is the preferred choice for electric three- and four-wheelers, whereas nickel manganese cobalt (NMC) is mainly used for electric two-wheelers and e-buses.
Steps to lower the costs
The Indian government has offered a slew of schemes to lower the cost of electric vehicles. Besides the central government, regional authorities are also pitching various offers that could improve the market.
"With increased local manufacturing of EV components supported by Phased Manufacturing Program and Auto PLI scheme for auto components, costs are expected to come down," Satheesh said. "EV battery costs to come down with support from ACC PLI batteries. EV OEMs are supported by the Auto PLI subsidy scheme by the government. With increased manufacturing and scale of production, costs are further driven down."
But there have been some worries that the ongoing global economic headwinds could prompt the government to decrease the support it is currently offering. According to Satheesh, even if this happens, the market could pick up by the time the current schemes come to an end.
"If the allocated Rs10,000 crores aren't utilized by 2024, the scheme might get extended," Satheesh said. "However, the market is expected to pick up by then, and there is a good chance for the subsidy to be retracted."
Segments seeing growth
In terms of annual EV sales, three-wheelers take up 50% of the share and belong to the commercial vehicle category. In two-wheelers, food and package delivery applications drive the demand for EVs. Major e-commerce companies like Amazon and Flipkart have announced their electrification move within the next 3 -4 years, which are also expected to drive growth.
"In commercial four-wheeler segment, Lithium cabs, Ola electric, Blu Smart, and several others have announced targets to convert their fleet by a certain percentage to electric," Satheesh added. "Total cost of ownership is turning more attractive by day as petrol and diesel prices soar high."
Persisting challenges
There are several challenges that the industry needs to overcome as it moves forward. The most obvious among them is the high capex. Although this is being subsidized now, loans are difficult to obtain because of the high interest rates.
"To reduce the upfront capex cost, FAME subsidy is imposed on vehicles," Satheesh pointed out. "Presently financing rate of EVs is higher than ICE, although the interest in EV loans is tax exempted. To promote the installation of public charging stations, subsidies up to INR1000 crores were announced by the Dept of Heavy industries. CESL, a government entity, is aggregating the demand for charging stations from PSUs to disburse the subsidy and encourage station installation."
The industry must also deal with the ongoing supply chain and semiconductor shortage concerns. Although there are signs that these issues could be beginning to ease, their impact is still wreaking havoc across industries.
"It has affected severely," Satheesh said. "At present, the waiting time of acquiring EVs such as Tata Nexon is six months. The situation hasn't eased since 2021. Semiconductor manufacturers have increased the manufacturing investments, and this situation might ease out before the end of the year."
