Exciting times ahead for India’s Commercial EV market

The market for EV vehicles in India has seen a stellar shift in the last two years. Even though the initial volume ramp-up took some time to materialize, the electric two wheeler segment has seen exponential growth in the most recent fiscal year. The market for electric three-wheelers will experience similar growth in the current fiscal year and other segments will follow soon after. While the initial drivers were government policies with a goal to reduce emissions and increase energy independence, the exponential growth in EV adoption stems from the TCO advantage that commercial EVs have over their ICE counterparts. 

In addition to the lower operating costs—for example, commercial electric three-wheelers enjoy 70% lower operating costs than their ICE counterparts, there are several other important drivers of EV adoption. Firstly, with EVs, companies achieve their carbon neutrality and sustainability goals. Secondly, the EV eco-system has matured with better service support, public charging infrastructure (where needed), and more cohesive collaboration between suppliers and manufacturers. Thirdly, the data-driven approach of EV deployments have significantly improved the performance and management of EV-led cargo fleets. Lastly, EV deployments and their benefits are seen across various industrial use cases since the market is beginning to understand how to deploy EVs across these use cases. 

In the context of Commercial EVs, vehicles deployed for last-mile deliveries across Tier 1 cities are driven for an average distance of 80 km during the day. For this range, EVs do not depend on public charging infrastructure today. These vehicles are typically charged overnight at hubs. However, for wider deployment of EVs across multiple applications range anxiety must be alleviated. Hence, the government has laid out the mission to set up one charging station every three kilometers in cities and every 25 kilometers on highways. The government has launched several initiatives to promote the development of EV charging infrastructure, such as the FAME program, which provides incentives for setting up charging stations. 

In addition, private companies have also started investing in charging infrastructure, and there has been an increase in the number of charging stations across the country. These initiatives will help scale public charging infrastructure in India and enable deployments of commercial EVs for long-haul transportation, giving the EV industry its next upswing. 

India has set ambitious goals to reduce its carbon footprint and improve air quality, and the transition to electric vehicles (EVs) is a crucial component of this effort. To achieve the targets set by NITI Aayog, the government of India has been implementing several initiatives to promote the growth of EV manufacturing in India. On the demand side, companies have realized the commercial, operational, and environmental benefits and are open to increasing EV deployments. On the supply side, technology advancements in battery manufacturing, recycling, and vehicle design have made EVs a far more viable transportation alternative. 

A stronger eco-system coalition has been taking shape over the recent years between key participants across the value chain, including automakers, battery manufacturers, charging infrastructure providers, and consumers. Additionally, the government is rolling out supportive policies and encouraging investments. These are clear indicators that the country is now EV-ready - more so in the commercial EV segment, making the goals set by NITI Aayog realistic.

The CEEW-CEF study's prediction that cumulative EV sales in all vehicle segments would reach over 100 million units by FY30 may seem ambitious. However, it is not impossible, given the rapid pace of technological advancements, policy initiatives, and growing interest in EVs for both commercial and private uses. The scale of the demand can only be met by multiple EV OEMs designing vehicles that cater to wide use cases. 

On one hand, Investments in the EV manufacturing ecosystem, battery technologies,  use training, battery reuse and recycling ecosystem, EV repair and service ecosystem and axillary services must be made. On the other hand, investments in charging infrastructure, increase electricity generation and improvements in grid infrastructure are equally important.

EV market, which is still in in its nascent stages, has been primarily a metro story with limited deployments in non-metros so far. Metros offered the infrastructure and critical mass for initial deployments to be successful. However,  as the products mature, charging infrastructure and OEMs’ service network improves, and the ecosystem’s understanding of EV usage and deployments increase, non-metro regions will see a surge in demand as well.

To achieve end-to-end EV manufacturing localization, India needs to invest in developing a robust supply chain for EV components, including batteries, motors, and power electronics. The country also needs to invest in research and development to develop indigenous technologies and innovations for EV manufacturing.

While it is difficult to predict an exact timeline for achieving end-to-end EV manufacturing localization in India, next five years will witness a dramatic increase in localization due to investments in battery cell manufacturing and supply chains. The Government’s policies and PLI schemes will also play an important role in enabling this transition. 

Traditionally, EV manufacturers in India faced challenges like high input costs due to import dependence, limited availability of raw materials, and a lack of skilled labor. EV manufacturers also faced several bottlenecks in developing a robust supply chain for EV components, such as batteries, motors, and power electronics. 

To address this, Etrio has taken a few strategic shifts in its approach to EV production – like partnering with key component manufacturers, diversification of supplier base, and leveraging its own R&D team to develop technology to ease dependence.

Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme has been instrumental in supporting initial deployments of EVs. However, the process of FAME disbursement has not stabilized and it has been financially burdensome for most innovative EV OEM start-ups to sustain long reimbursement times. 

In addition, as the technology improves and the cost of the battery cells follow the expected downward trend, total cost of ownership of EVs is expected to decrease thus making them more attractive than their ICE counterparts. While this is true for certain segments of EV markets, most of the upcoming segments such as LCVs, M/HCVs and others need support for foreseeable future. While the industry and policy makers are currently considering the merits and demerits of extending FAME-II when it expires in March 2024, we strongly believe that the EV industry needs this support to scale further.

Finally, despite aggressive targets set by the Honourable Prime Minister for EVs, the support for commercial EV financing from the public sector banks and other lending institutions has been lagging. Government should draft policies to foster robust financing environment for EVs. 

According to the National Skills Development estimates, EV Industry will create 10 million direct jobs and 50 million indirect jobs by 2030. For this, the industry needs to create an enabling ecosystem for the training and development of the workforce across all key roles and strengthen the talent pipeline. However, Universities and Engineering institutions have initiated several programs and courses for EV Engineering. Due to the world-wide sustainability and Net-Zero push, younger students in increasing numbers are getting engaged with EV industry. This will create the talent pool that is necessary for meeting the needs of EV industry.

In order to facilitate wider usage of EVs, industry, and policymakers must standardize charging guns and adapters to ensure interoperability between different vehicles and charging stations. Standardization will also help reduce the cost of charging guns, which currently averages around Rs. 12,000-15,000 per unit for light commercial and passenger vehicles. With standardization and increased volume, this cost could potentially drop to Rs. 8,000 per unit in the next three to five years.

The growth of EV charging infrastructure in India needs to be supported by a strong and reliable electric grid. A report by the Brookings Institute suggests that the total electricity demand for EVs at a 33% penetration rate by 2030 will be 37 TWh, less than 2% of the total projected electricity demand. However, expected demand for fast charging, fluctuation in peak EV charging demand, and regional concentration of EVs can create local and regional grid stability issues. Policymakers and industry experts are exploring the distributed design of charging infrastructure, management of EV charging loads, and off-grid charging stations powered by solar energy.

To meet global Net Zero goals, it is crucial for EVs to be powered by electricity generated from renewable sources. The share of renewables in India’s power generation stands at 11.8% in 2022-23. India's renewable energy installed capacity is expected to grow from 165 GW in 2022 to 450 GW by 2030. However, renewable energy generation sites may not always be in close proximity to areas of electricity demand from EVs. Policymakers are planning investments in interconnected grids to move renewable power seamlessly across the country and are encouraging off-grid charging solutions powered by solar energy.

In the next few years, the EV ecosystem in India is expected to mature, with strategic partnerships between EV manufacturers, charging infrastructure developers, grid operators, and energy providers. Driven by the goal of 100% commercial EVs sold by 2030, India’s EV ecosystem is gearing up through innovative intelligent EV designs by new-generation OEMs focused on lower energy consumption per kilometer per kilogram of payload, higher capacity batteries offering greater range, development of efficient and fast charging technologies, increased renewable energy capacity, and supportive government policies to not only increase EV adoption but also improve EV-energy grid integration.