Favorable factors drive India EV makers to accelerate production

20, Oct. 2021

Naveen Munjal, managing director of Hero Electric, will increase production of electric two wheelers significantly. (Photo: NNA)
Naveen Munjal, managing director of Hero Electric, will increase production of electric two wheelers significantly. (Photo: NNA)

By Atul Ranjan

NEW DELHI, NNA - Electric vehicle (EV) manufacturers in India are ramping up expansion plans in anticipation of greater EV adoption in the country following a favorable policy push.

To encourage EV sales, the central government and around half of the 36 Indian states and union territories are offering incentives to make green vehicles even more affordable to people and businesses.

Also, better economies of scale and lower battery costs are expected to provide an additional fillip to the industry.

EV makers in the country are shifting gears to capitalize on these opportunities, especially in the two-wheeler segment which is well on course to achieve price parity with conventional two-wheelers.

Analysts see this as a key factor that could drive green motorbike adoption from less than 1 percent in the market share currently to at least 8-10 percent by 2025.

In FY2021, overall two-wheeler registrations alone accounted for a whopping 80 percent of the total vehicle registrations in India, which is the world’s largest two-wheeler market with annual sales of around 15-20 million units.

Electric two-wheelers now account for about 0.8 percent of the bike category.

With sales of electric scooters and bikes expected to rise significantly in the next 4-5 years, EV manufacturers are seizing this massive growth opportunity.

India's largest electric two-wheeler manufacturer Hero Electric Vehicles Pvt. Ltd. recently announced that it would expand annual production to half a million units by March 2022, up from the current 100,000. It will subsequently increase capacity to a million units.

“We are currently in the process of expanding our capacity for which we have earmarked 7 billion rupees. This is the bare minimum that we intend to invest to ramp up our EV business in the next few years,” Naveen Munjal, managing director of Hero Electric, told NNA in an interview.

Munjal said the company might establish two new “mega” plants in the next five years to cater to growing demand.

The company, one of the country’s oldest EV manufacturers, is currently expanding its plant at Ludhiana in the northern state of Punjab.

Munjal said, “Last year, the total market size of electric scooters was around 140,000-150,000 units. We anticipate it will grow to at least 4-5 million units in the next five years.

Hero Electric plans to more than double its dealerships to 1,500 in the next two to three years.

With about 1,650 charging stations already set up, it hopes to increase the network to 20,000 by the end of next year.

It recently announced its plan to set up 10,000 stations across the country in partnership with EV startup Massive Mobility.

Another well-known local EV player, Kinetic Green Energy & Power Solution Ltd, is investing over 17 billion rupees to build a manufacturing plant at Visakhapatnam in the southern state of Andhra Pradesh to produce two-and-three wheelers.

“Kinetic Green Energy has come forward to set up electric two wheelers, three wheelers, advanced technology battery manufacturing, battery swapping stations with an estimated cost of 1750 crore rupees (17.50 billion rupees),’’ the state government said in a press release recently.

New players in two-wheel EVs such as WardWizard Innovations and Mobility Ltd; and HOP Electric Mobility are also boosting manufacturing capacities.

WardWizard Innovations, which produces electric two-wheelers under ‘Joy e-bike’ brand, is putting up an automated assembly line at its Vadodara plant in the western state of Gujarat to double capacity.

“Considering the growing demand for EVs, majorly driven by the electric two-wheelers, the company’s new automatic assembly line will become operational from October 2021, increasing its annual production capacity from 100,000 units to 200,000 units in a single shift,” the company said in a statement, adding that it can increase to 600,000 units annually with three shifts in operation if demand surges.

The company plans to almost double its dealer network to over 750 stores by March 2022.

HOP Electric Mobility's manufacturing unit at Jaipur in the northern state of Rajasthan now boasts an annual production of 50,000 units. The company is in the process of setting up an additional facility to help increase capacity to 150,000 units yearly by February 2022.

Some EV manufacturers have also set their eyes on three-and-four wheelers as many logistics and e-commerce players are planning to replace their small delivery vehicles with electric ones soon,

Hence, EV manufacturer Omega Seiki Mobility Pvt. Ltd. (OSM) is betting big particularly on the commercial EV segment.

In September, the company unveiled the country’s “first” electric four-wheel small commercial vehicle (SCV). Called 'M1KA', it looks somewhat like a mini version of the small pick-up truck.

OSM is finalizing plans for a new manufacturing plant in the southern state of Karnataka to produce more of such vehicles, founder and chairman Uday Narang told NNA.

The company is collaborating with French battery system manufacturer Forsee Power, which counts Japanese trading firm Mitsui as one of its investors, to develop NMC (Nickel Manganese Cobalt) batteries for its EVs.

In July this year, OSM and Forsee Power announced a strategic partnership to provide lithium-ion batteries technology for OSM's entire vehicle range.

“The EV market is growing especially in the commercial vehicle space on the back of cost effectiveness, sustainable solutions and the increasing support from the central and the state governments. The favorable environment motivates us to expand our EV offerings for our customers,” said Narang.

Its parent company, Anglian Omega Group, launched a new financing company called Anglian Finvest on Oct. 13 to facilitate more EV sales in the country.

Around 75 percent of two-wheel purchases are financed by loans in India. There are very few firms offering loans to EV buyers currently.

Meanwhile, more investors are shifting their focus on the country’s burgeoning e-mobility market.

Japan’s SoftBank-backed Ola Electric is currently setting up “the world’s largest Futurefactory” in the country to produce revolutionary e-scooters. Last month, it raised over $200 million (15 billion rupees) from various investors including Falcon Edge, to fund expansion plans.

On Oct. 12, the country’s leading automaker Tata Motors Ltd. announced that private equity firm TPG Group would be investing 75 billion rupees in its new wholly-owned electric vehicle subsidiary. It will be incorporated to undertake its passenger electric mobility business.

Tata Motors plans to invest over 150 billion rupees ($2 billion) in its EV business.

According to Arun Agarwal, deputy vice president for fundamental research at Kotak Securities Ltd, Tata Motors is actively planning to roll out EV models over the next five years as it ropes in sister companies to help accelerate EV sales and adoption.

“Favorable government policies and further decline in battery prices can rapidly accelerate electrification in the passenger vehicle industry. Tata Motors can establish itself as a formidable player in the EV space in India,” he said.

The Indian government has set various targets for EV adoption - 30 percent for private cars, 70 percent for commercial vehicles, 40 percent for buses and 80 percent for two-and-three wheelers by 2030.

The Council on Energy, Environment and Water (CEEW), a think-tank, noted in its May 2021 report that India’s transition to electric mobility could translate into a market opportunity worth $206 billion by FY30.

“The lion's share of this opportunity lies in EV manufacturing,” it concluded.