India’s EV sector in 2022: an overview

Representative image (Source: Reuters)

With multiple EV launches in the two-, three- and four-wheeler space, and a staggering growth rate of 686 percent in the first quarter of FY22, it’s evident that this has been the biggest year for electric mobility in India. Electric two-wheelers alone saw 250 percent y-o-y growth, while carmakers across the spectrum cumulatively launched more models than in any previous year.

Put aside the numbers for a moment and take a look at some of the cars that have been launched this year — from a long-range version of the bestselling Tata Nexon EV to an ultra-luxurious S-Class that will be locally assembled. The massive gaps in the Indian EV landscape are being filled-up fast. Yet, the target of 30 percent market penetration by 2030 seems like a distant dream.

Taking heat

Battery fires continue to remain in the forefront of the big EV debate, with several manufacturers, from Okinawa Electric to Ola Electric, experiencing battery fires. Several models were recalled, more stringent testing standards were introduced, but even though e-scooters saw a drop in demand in the immediate aftermath of the fires, the segment continues to grow steadily.

When Tata Motors recorded its first EV battery fire, the need for brands to reassure customers of the product's safety standards became much stronger. As a result, talk of battery management systems, thermal management, and cooling technology has crept into the sales pitches of most EV brands.

While the conversation around battery safety was largely absent from the public realm last year, this year consumers are more cautious about which brands to trust. Several e-scooter start-ups continue to use imported battery packs that have not been designed keeping in mind India’s challenging environmental conditions, hence brands that make battery packs in-house now have a leg-up over those that don’t.

New launches

Even with Tesla choosing to not partake of the great Indian EV festival, there were plenty of legacy carmakers who jumped at the opportunity to bring global heavy hitters to Indian shores.

EVs continue to be a pricey affair, which is why we saw brands introduce completely built units (CBU) to the market, in an effort to gauge consumer interest. Kia brought in 100 units of its EV6 and received thrice as many bookings, claimed the brand.

Volvo India, which announced the local assembly of its maiden EV, the Volvo XC40 Recharge, claims to have sold out the first batch, as did BMW with imported models of the i4, iX and the Mini SE. On all fronts then, EV demand is considerable, particularly in the luxury segment.

Besides these, domestic car makers like Tata Motors and Mahindra Electric made considerable progress in the EV space. Both brands have showcased their born-electric platforms, with Tata Motors unveiling an indigenously developed one with the Avinya concept. Mahindra Electric will use Volkswagen’s modular MEB platform components to create its own exclusive range of e-SUVs.

Even Citroen India threw its hat into the EV ring, announcing that it will be launching the need-of-the-hour — an affordable electric hatchback — early next year.

Policy

This year has been the most significant in terms of EV policy, with production-linked incentives (PLI), along with central and state subsidies being offered to help manufacturers and OEMs build a healthy EV ecosystem.

Although FAME II subsidies exist at a national level, many states are yet to offer incentives at the state level. Only Gujarat, Maharashtra, Delhi, Meghalaya, Bihar, Haryana, and Chhattisgarh offer incentives to both manufacturers and consumers in an effort to push electric mobility.

Infrastructure

Major investments in clean, renewable energy have been made this year. In August, RIL announced that in addition to setting-up gigafactories for photovoltaic panels, energy storage, green hydrogen, and fuel cell systems, it will also be launching a gigafactory for power electronics.

One of the more noteworthy investments being made by RIL is in sodium-ion batteries, a resource that could revolutionise the EV industry. In a $135 million deal, Reliance acquired Faradion, a UK-based start-up developing sodium-ion batteries.

Given that sodium is an abundant resource, unlike lithium and cobalt whose supply crunch is already affecting the EV industry, an early investment in the technology could give India a huge advantage in EV battery development.

Additionally, many manufacturers, including Maruti Suzuki and Tata Motors, are also investing heavily in battery technology. Maruti Suzuki just unveiled its battery plant, set to come up in Gujarat’s Hansalpur, which will be built at a cost of Rs 7,300 crore.

The Tata group has stated that while Tata Chemicals has no immediate plans to set up a battery manufacturing plant, Tata Motors does intend to enter the domain.

In two-wheelers, Ola Electric announced that it will be expanding its existing factory to include a battery cell manufacturing unit that will be functional by the end of 2024. Having signed the government’s PLI agreement for battery manufacturing, the brand is in talks with global suppliers to help meet its production target of 10 million scooters and a million electric cars per year.

Challenges

Apart from the obvious challenges, which include patchy charging infrastructure and electricity supply, the EV market continues to face one major issue – local reserves of lithium. At present, India imports 100 percent of its lithium-ion cells, which makes it very expensive. With batteries accounting for 60 percent of overall EV costs, battery price continues to be the biggest barrier for EV adoption.

For India to be a world leader in the EV space, it would need to have greater and easier access to lithium, cobalt, nickel, and manganese, at least until battery technology leans more towards sodium-based batteries or renewable hydrogen-based mobility picks-up in a big way.

Then there’s the lack of public charging stations. According to a poll conducted by Grant Thornton Bharat FCII, India would need four lakh charging stations by 2026, against the roughly 2,900 available now.

The forecast

India’s EV industry is expected to grow at a CAGR of 43.13 percent between 2019-2030, according to Research and Markets’ India Electric Vehicle Ecosystem Market Outlook.

With only 50 million EVs on the road by 2030, projections show that we will be  40 percent short of NITI Aayog’s goal of 125 million EVs. Lithium prices are at their highest in three years, and battery component costs are not expected to come down for a couple of years. Supply chain issues are likely to persist.

Nonetheless, 2025 is deemed to be the year the Indian EV market will come of age. With many brands, including neophytes like Ola Electric and ICE (internal combustion engine) market leaders like Maruti Suzuki set to launch their maiden EV offering, the second half of the decade will bring exciting changes, particularly in the battery space, which would determine how the EV sector fares.