Sales of electric vehicles in India reached more than one million units last year, up more than 200 per cent on 2021, according to data from Vahan, a database of vehicles registered in the country.
“Despite being in the early stages, the Indian EV industry shows remarkable growth potential,” says Brajesh Singh, president of management consultancy Arthur D Little in India.
“Many Indian EV manufacturers are now eyeing international markets to expand their footprint and gain a competitive edge”, alongside the fast-expanding domestic market, Mr Singh says.
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Arthur D Little projects that annual EV sales in India could reach 17 million by 2030.
Factors driving growth include the Indian government's push for 30 per cent of cars to be electric by 2030, as the country – which has some of the world's most polluted cities – strives to reduce its carbon emissions, Mr Singh says.
Greener forms of transport will also help India to reduce its dependence on costly imports of crude oil.
There are “several key factors that underpin India's undeniable potential as an EV manufacturing hub”, says Mr Singh.
“To support this transition, India has created a conducive environment by offering various policies that promote the growth of the EV sector,” he says.
These include production-linked incentives for manufactures and subsidies for consumers.
But some manufacturers are looking beyond India, as EV sales grow globally.
Among them is Bengaluru-based start-up Pravaig Dynamics.
This month, the electric car manufacturer announced that it had signed an agreement to set up its first overseas plant in Saudi Arabia.
The factory will have the capacity to produce up to one million vehicles and its target markets for sales is the GCC, Europe and the US, it says.
Saudi Arabia is an attractive location “as they move away from the commodity economy [and] leapfrog … to high-technology endeavours”, says Siddhartha Bagri, chief executive of Pravaig.
The company is aiming to begin manufacturing its vehicles in Saudi Arabia next year, he adds.
“India has emerged as a fast-growing player in the EV industry, both in technology and manufacturing,” says Mr Bagri. “We are very ambitious about India's role in the global EV market.”
“Our future expansion plans include scaling up production capacity by 40 times in the next three years and introducing more commercial and civilian electric vehicles.” Global demand for electric vehicles over the coming years is expected to be in the billions, he adds.
As the company maps out its global drive, he says he is encouraged by the fact that India is already becoming a major exporter of electric scooters and motorbikes, with manufacturers also experiencing rapid growth in the domestic market.
The majority of EV sales last year – 63 per cent – were for two-wheelers.
Three-wheelers, which include autorickshaws, accounted for 32 per cent, according to Vahan data. Electric cars only made up 4 per cent of the market, while buses accounted for the remainder.
Factors including a lack of charging infrastructure in India and the high upfront cost of electric cars – largely driven by the expense of imported batteries – are holding back sales, industry insiders say.
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“When it comes to electric four-wheelers, the costs escalate further,” says Pankaj Sharma, co-founder and director at Log9 Materials, an India nanotechnology company.
“This is why we haven't seen as many affordable EV four-wheelers, as larger batteries are required, leading to increased expenses.”
But AMO Mobility, an EV manufacturer based in Noida, a satellite city of New Delhi, is capitalising on the growing demand for electric two-wheelers.
Specialising in electric scooters, the company says it experienced growth of 450 per cent in vehicle sales in the financial year to the end of March 2022 over the previous year, and an increase of more than 50 per cent in the last fiscal year.
“There is an increasing demand for EVs as consumers and businesses are becoming more environmentally conscious and are seeking cleaner and sustainable transportation options,” says Sushant Kumar, founder and managing director of AMO Mobility.
“Secondly, the rising fuel costs have made EVs a more attractive and cost-effective alternative.”
Beyond the large consumer market in India, AMO Mobility is branching out into other countries to increase its customer base. The company has started exporting its products to Nepal and is actively exploring opportunities in Africa, Mr Kumar says.
The company is “seriously considering” setting up manufacturing operations abroad, he adds.
“As part of our international expansion strategy, we will explore opportunities in various markets to establish our presence and contribute to the global electric mobility ecosystem effectively,” says Mr Kumar.
But while the company is eyeing opportunities overseas, he says there are still several roadblocks that need to be addressed at home.
“Several factors and challenges are impeding the full potential of India's EV manufacturing industry,” says Mr Kumar. “Firstly, the cost of batteries remains a significant barrier, making EVs relatively more expensive than conventional vehicles.”
This is largely due to the fact that most batteries used in India's EVs are imported.
“Secondly, there are challenges in developing a robust and efficient supply chain for EV components, which can affect production and scalability,” adds Mr Kumar.
“Thirdly, while there is a growing demand for EVs, it is still not sufficient to create a self-sustaining ecosystem.
“Further efforts are required to generate widespread demand for EVs among consumers [and] overcoming these challenges will be essential for unlocking the full potential of India's EV manufacturing industry.”
India's EV manufacturing and sales will only be able to scale up significantly when there is a proper industry ecosystem, including finance, infrastructure, supply chain, and government incentives and policies, says Akihiro Ueda, chief executive of EV company Terra Motors Corporation.
“These things still need to be streamlined and put into a proper structure for driving EV growth in India,” Mr Ueda says.
While there is work to be done, the signs are encouraging and this is attracting more companies to launch EVs, some experts say.
One example is Raptee, which recently set up a factory in the southern city of Chennai to build premium electric motorcycles. The facility has a capacity of 100,000 units a year.
“We will be exploring the export markets at an appropriate time in a couple of years after we establish our manufacturing capacity,” says Dinesh Arjun, chief executive and co-founder at Raptee.
The sector is attracting more investor interest, with figures from start-up data platform Tracxn showing that there are 1,120 companies in India that develop and manufacture EVs, and 282 of these have attracted $3.2 billion of equity funding in the past two years.
“EV manufacturing in India is gaining mainstream industry focus,” says Koushik Bhattacharyya, managing director and head of industrials at investment bank Avendus Capital.
“There are exciting new start-ups, especially in smaller EVs segments like two-wheelers and three-wheelers, who are disrupting the market with innovation and competitive pricing. We are also seeing more merit in the intentions of global companies like Tesla, who are looking to address the Indian market with local manufacturing.”
Last month, Tesla chief executive Elon Musk said that the electric car maker was looking at making a “significant investment” in India.
“I am confident that Tesla will be in India and will do so as soon as humanly possible,” Mr Musk said following a meeting with Indian Prime Minister Narendra Modi, who was on a visit to the US.
Tesla has long been eyeing the Indian market, but Mr Musk has indicated in the past that the company was deterred by high import duties on vehicles and that it wanted to trial sales of its cars before manufacturing in the country.
“Hopefully, there is more policy level support to get the Indian EV market to a critical mass in the next two years,” Mr Bhattacharyya says.
One significant development is that India is increasing its focus on manufacturing lithium-ion batteries.
“The most significant hurdle hindering the widespread adoption and scaling up of EV manufacturing in India is undoubtedly the lack of access to crucial technology, particularly when it comes to lithium-ion tech,” says Mr Sharma of Log9, which this year launched India's first indigenous lithium-ion cell manufacturing facility in Bengaluru.
“Currently, like many other countries, India heavily relies on importing its lithium-ion cells primarily from China.”
But his company is working on addressing this challenge.
“We envision a future where indigenisation of crucial components paves the way for a thriving EV industry,” says Mr Sharma.
In addition, he says Log9 is already in the process of testing its products abroad, as it explores opportunities to manufacture overseas.