India's EV industry threatens explosive growth

Fan Jen-Chih; Samuel Howarth, DIGITIMES Asia 0

Credit: Yulu

India is set to become an EV maker's Klondike.

India's automotive market has grown to surpass 4 million vehicles annually. This is comparable to Japan, and second only to China and the United States globally.

With 11 times the number of people in Japan, India's population is comparable to China's. However, given that its automotive sales are less than 20% of China's, there is significant growth potential.

The country has recognized the lower barriers to entering the EV industry. Seizing the opportunity, before it, India promotes Electric Vehicles (EVs) through subsidy policies, making EVs the most promising sector in India's automotive market.

India feels the impact of environmental pollution. The country is also facing rising international fuel import costs.

Short-term challenges

However, since 2022, new venture capital invested in India has been drying up. Securing funding to support EV startups is a critical challenge facing the South Asian country's EV ambitions.

India is one of the fastest-growing economies of the 21st century. Despite this, its per capita nominal GDP has not yet surpassed US$3,000.

The country's power grid is still expanding. EVs, which are relatively expensive, rely on electricity infrastructure and primarily target the affluent class and Mobility-as-a-Service (MaaS) companies.

Overseas confidence

India's shared transportation startups have become a focus of overseas EV startup investments. Nikkei reported that in January and February 2024, two Indian EV shared transportation service companies received significant overseas startup investments.

In January, the Swiss investment company responsAbility invested US$25 million in BluSmart Mobility. In February, Canada's automotive components giant Magna International and Indian motorcycle manufacturer Baja Auto jointly invested U$19.25 million in India's Yulu Bike.

BluSmart Mobility's BEV sharing services have a footprint in New Delhi and Bengaluru. Bengaluru is nicknamed India's Silicon Valley.

ResponsAbility's funds will be used in Mumbai, India's most populous city, to purchase more BEVs and establish charging networks. Yulu Bike, which has already developed in Bengaluru and Mumbai plans to acquire more BEV motorcycles and charging stations.

Stand-up job

Nikkei said the ability of BluSmart Mobility and Yulu Bike to secure investment is commendable. Global purse strings have been significantly tighter since the pandemic.

Global startup investments from October to December 2023 amounted to about US$75 billion. This was only one-third of the peak in 2021.

During the same period, India's investments decreased from around US$15 billion to US$2 billion shrank by a factor of seven. This decline was greater than the global average and signaled the start of a startup investment winter.

Raising funds is a significant challenge for startups and this is particularly true for those that are yet to turn a profit. However, the Indian EV companies that make it to the economic spring have boundless potential for future development.