Better incentives, enterprising startups, OEMs reignite India EV ambitions

16, Jun. 2021

The Mahindra eXUV300 electric SUV on display at the Auto Expo 2020 at Greater Noida in the northern Indian state of Uttar Pradesh on Feb. 6, 2020. The company plans to launch more than 10 new EV models in categories such as cars and three wheelers by 2026. (NNA)
The Mahindra eXUV300 electric SUV on display at the Auto Expo 2020 at Greater Noida in the northern Indian state of Uttar Pradesh on Feb. 6, 2020. The company plans to launch more than 10 new EV models in categories such as cars and three wheelers by 2026. (NNA)

By Atul Ranjan

NEW DELHI, NNA: India's nascent electric vehicle market is poised for a big leap over the next five years with local and foreign players such as incumbent original equipment manufacturers (OEMs) recently charting out bold plans as the country made a renewed push to speed up EV adoption last week.

While growth is currently facing infrastructure and pricing challenges since the ecosystem is still fledging, the future is bright as many firms and startups are ramping up investments to avoid missing the bandwagon after global OEMs announced ambitious plans to roll out EVs in recent months.

After all, the Indian government is offering subsidies and policy support to promote India as a global EV manufacturing hub and the adoption of e-mobility to reduce vehicular emissions in the country.

Last Friday (June 11), the government announced more measures and incentives to accelerate the pace of EV production and adoption which was slowed down following the outbreak of the COVID-19 pandemic last year.

The government decided to increase the sales subsidy for electric two-wheelers by 50 percent.

The ministry of heavy industries and public enterprises has modified the second phase of FAME or 'Faster Adoption and Manufacturing of Electric Vehicles' scheme by increasing subsidies for two-wheelers from 10,000 rupees per kilowatt-hour (kwh) to 15,000 rupees per kwh.

The ministry also announced plans to place bulk orders for electric buses and 300,000 electric three-wheelers through state-owned Energy Efficiency Services Ltd. (EESL). The firm offers energy efficient and clean energy solutions and creates aggregate demand to help manufacturers achieve economies of scale.

The second phase of FAME had aimed to provide incentives totaling 100 billion rupees from April 2019 for three years. The scheme is likely to be extended by another two years.

On the latest revisions of the scheme, Sohinder Gill, director general of Society of Manufacturers of Electric Vehicles (SMEV), said, "It’s an important and admirable decision taken by the government, a move that will bring down the prices of electric two wheelers nearer to the ICE vehicles and remove one of the biggest hurdles of the high sticker price of electric two-wheelers.”

Gill, who is also the CEO of Hero Electric, a market leader in the electric two-wheeler segment, said with the increase in demand incentives, a city-speed e-scooter (45-50 km/hour) with a range of 100km/per battery charge is likely to cost around 60,000 rupees while a high-speed scooter (70-80 km/hour) with a range of 80 km/charge is expected to have a price tag of about 100,000 rupees, close to that of an ICE two-wheeler.

“Together with the other important factors like extremely low running cost, low maintenance and zero emission, such price levels will surely spur a substantial demand for electric two wheelers,” Gill said, adding that he firmly believes the time has come for mass adoption of electric two wheelers.

The country’s leading two- and three-wheeler OEM TVS Motor Co. forayed into the EV segment last year with the launch of an electric scooter. It also believes the better incentives will boost sales and encourage more local investments in future technology.

Industry veteran Vinay Piparsania, a former executive director at Ford India, told NNA that the revised FAME II scheme with its key focus on electric two-wheeler segment is a “strong acknowledgement” of the certainty that more affordable electric two-wheelers will drive early EV adoption in the country.

He also said the lead taken in bulk buying of electric buses and electric three-wheelers by EESL will help spur demand.

Ratings agency ICRA Ltd. said the share of EVs in India's auto market is likely to reach about 8-10 percent for two wheelers and over 30 percent for three wheelers (excluding e-rickshaws) by 2025. Electric cars, buses and light commercial vehicles are also expected to see an increasing penetration, reaching a range of 3-10 percent, said the firm in its May report.

Currently, the adoption of most EV types is still extremely low at below 1 percent, while electric buses have a presence of 1-2 percent.

Meanwhile, brash startups like Ather Energy Pvt. Ltd., Ola Electric Mobility Pvt. Ltd. and Omega Seiki Pvt. Ltd. are already pursuing aggressive growth strategies with their two-and three-wheeler products.

Incumbent OEMs are also stepping up electrification push through investments and collaborations as they look to tap emerging growth opportunities in various EV categories.

India’s leading OEM Mahindra and Mahindra Ltd. (M&M) plans to invest 30 billion rupees within the next five years and launch more than 10 new EV models in categories such as cars and three wheelers by 2026.

Last month, the automaker decided to merge its e-mobility subsidiary Mahindra Electric Mobility Ltd. (MEML) with M&M to scale up growth and develop a robust EV product pipeline.

During an analyst conference call in May, Rajesh Jejurikar, executive director (auto & farm sectors), M&M, said the company's immediate focus is to offer last-mile connectivity solutions such as electric passenger and cargo carriers while electric cars in the utility vehicle segments will dominate its long-term plan.

The company is also looking at new partnerships to create an exciting EV portfolio for SUVs (Sports Utility Vehicle), he let on.

Another leading OEM with ambitious EV plans is Tata Motors Ltd., which is expected to launch three new EVs over the next two years.

“Tata is expecting that the (overall automotive) industry will be 7-10 percent electric in the next five years. By having an early mover advantage in EVs, Tata is targeting to gain market share in the overall passenger vehicle segment as the industry transitions towards electric,” said brokerage firm HDFC Securities Ltd. in a report.

It noted that Tata is leveraging the rich ecosystem of its group of companies to gain EV traction.

HDFC said, “Tata Motors will produce battery electric vehicles, Tata Chemicals Ltd. will produce lithium-ion batteries, Tata Power Co. will set up charging infrastructure, Tata Motors Finance Ltd. will provide loans and IT service provider Tata Consultancy Services Ltd. will provide the software.”

New Delhi-headquartered Hero MotoCorp Ltd., one of the world’s largest manufacturers of motorcycles and scooters, is set to roll out its first EV model next year, having joined hands with other EV players.

It acquired a stake in the EV startup Ather Energy Pvt. Ltd., took part in a fixed battery development led by a German R&D centre, and partnered Taiwan's Gogoro Inc. to develop a battery swapping system.

Another incumbent OEM Bajaj Auto Ltd., also a leading manufacturer of motorcycles and three-wheelers in India, has already produced an electric scooter called “Bajaj Chetak”. It plans to enter the electric three-wheeler segment in 2022-23, according to a report by brokerage firm Emkay Global Financial Services Ltd.

Global automakers such as Toyota Motor Corp. and Suzuki Motor Corp. have already announced their partnership to promote EVs in various markets including India. Their subsidiaries Toyota Kirloskar Motor and Maruti Suzuki command a strong market presence in India, with the latter being the largest passenger vehicle maker in the country.

Suzuki Motor Corp. is setting up a factory jointly with Toshiba Corp. and Denso Corp. in the western state of Gujarat to produce lithium-ion batteries.

Expecting the demand of electric buses and light commercial vehicles (LCV) to soar in the next five years, the country’s leading commercial vehicle maker Ashok Leyland Ltd. is planning to build green urban buses and other LCVs.

Canada-based electric commercial vehicle manufacturer Green Power Motor is exploring partnerships to help launch its models in India, according to brokerage firm Emkay Global Financial Services Ltd., which invited the company to participate in an EV conference in May.

Global player Tesla Inc. from the US, which registered its Indian subsidiary this year, has started hiring local staff for positions ranging from charging operations and aftersales to grow its EV business in India.

Enterprising new local players are also forging ahead.

India’s Omega Seiki Mobility (OSM) has set an ambitious goal to become “the Tesla of electric cargo space” by manufacturing electric cargo vehicles for the local and surrounding markets of South Asia and Southeast Asia.

“We are investing more money into the company. We have already allocated 2 billion rupees and will be assigning another 8 billion rupees into Omega Seiki Mobility business,” Uday Narang, chairman of OSM told NNA in an interview.

OSM recently announced that it would develop a manufacturing facility in Bangladesh with an investment of 1 billion rupees (about $13.6 million).

Another new entrant Ather Energy, which has launched its remodeled EV scooter, is also determined to expand across India. It has grown its presence to a dozen Indian cities as of March this year in its target to cover as many as 40 Indian cities by March 2022.

With an investment that could go up to 24 billion rupees, EV startup Ola Electric Mobility has already set up a big e-scooter manufacturing plant which boasts an initial annual capacity of 2 million units.

As EV production in India is picking up fast, the component suppliers are adapting to the transition by increasing local product development and entering global tie-ups to cater to rising demand.

Over 120 billion rupees investments have been committed for local production of components in India so far as of April this year, Shamsher Dewan, vice president and group head of corporate ratings at ICRA, told NNA.

Dewan said incentivizing local manufacturing for batteries, critical components and charging infrastructure is critical for the growth of the EV ecosystem and adoption in the country.

ICRA expects the recently announced production-linked incentive (PLI) scheme for auto components and ACC (Advanced Chemistry Cell) batteries to provide much needed impetus for local production.

According to Emkay Global, EV penetration in India is expected to be driven by factors such as stringent emission norms, incentive schemes and well-defined long-term policies by both the central and state governments.

The Society of Manufacturers of Electric Vehicles also noted that many states across the country such as Delhi, Gujarat, Maharashtra, Andhra Pradesh, Haryana, Karnataka, Kerala, Tamil Nadu, Telangana and Uttar Pradesh have introduced policies to promote e-mobility.

Recently, Gujarat announced its glorious plan to turn one of its cities, Kevadia, into an electric vehicle city.

Flourishing e-commerce firms such as Flipkart and Zomato are also planning to shift their entire delivery fleet to electric by 2030.

“Across the value chain, the expectation of EV adoption is high, and now the debate has shifted from ‘when’ to ‘how fast’,” Emkay Global concluded.