Full Speed Ahead for India’s EV Industry

Article By : Stephen Las Marias

Rapid urbanization, rising fuel costs, traffic congestion, pollution, emerging economic growth, and energy security are expected to drive EV adoption in India in the next few years.

Over the past years, India has made great strides in its automotive industry development. According to the Society of Indian Automobile Manufacturers, the industry produced a total 22.65 million vehicles, including passenger vehicles, commercial vehicles, three wheelers, two wheelers, and quadricycles in April 2020 to March 2021. The 14% drop in production from the 26.36 million manufactured in the April 2019–March 2020 period is attributed to the weakening of demand due to the unprecedented effects of the global pandemic caused by the COVID-19 virus.

Nevertheless, through government initiatives and incentives, the country remains one of the largest vehicle manufacturers worldwide. According to Invest India, India is the world’s largest tractor manufacturer and second largest bus manufacturer; the global leader in two-wheeler and three-wheeler manufacturing; the world’s third largest heavy truck manufacturer; and the fourth largest car manufacturer.

In 2020, India was the fifth-largest automotive market, with around 3.49 million units combined sold in the passenger and commercial vehicle categories, according to the India Brand Equity Foundation (IBEF).

As part of its Automotive Mission Plan 2016-26 (AMP 2026), India aims to be among the top three worldwide in terms of engineering, manufacture, and export of vehicles and auto components, grow the automotive industry’s GDP contribution to over 12%, and generate an additional 65 million jobs by 2026 (Vision 3/12/65).

EV industry at full throttle

Megatrends such as rapid urbanization, rising fuel costs, traffic congestion, pollution, emerging economic growth, and energy security are expected to drive electric vehicle (EV) adoption in the country in the next few years, according to market analyst Frost & Sullivan.

(Image Source: Revolt Motors)

Driven by India’s emission norms, high cost of compliance, and lucrative incentive policies, the buoyant EV industry is likely to witness more than eight-and-a-half-fold growth, reaching 4,844,500 million units sales by 2025 from 556,036 units in 2019, Frost & Sullivan reports. Of the total estimated EV sales, electric two-wheelers, e-rickshaws, and electric auto-rickshaws will occupy a large chunk of the market, followed by electric four-wheelers and electric buses. Domestic original equipment manufacturers (OEMs) such as Tata Motors and Mahindra & Mahindra, and foreign OEMs such as Hyundai and MG have entered the sector with their flagship EVs and are expected to launch various new EV models in India.

India’s EV strategy was stipulated in the National Electric Mobility Mission Plan (NEMMP) 2020, a National Mission document providing the vision and the roadmap for the faster adoption of electric vehicles and their manufacturing in the country. This plan was designed to enhance national fuel security, to provide affordable and environmentally friendly transportation and to enable the Indian automotive industry to achieve global manufacturing leadership.

As part of the NEMMP 2020, the Ministry of Heavy Industries formulated the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme in 2015 to promote the adoption of electric/hybrid vehicles (xEVs) in the country. In the first phase of the scheme (FAME I), about 280,000 xEVs were supported with total demand incentives of around Rs 359 crore. In addition, 425 buses were deployed as sanctioned to various cities/states. Under Phase-I of FAME, around 427 charging stations have been installed.

The government approved the Phase-II of FAME, with an outlay of Rs 10,000 crore for a period of three years commencing from April 1, 2019. Out of the total budgetary support, about 86% of the fund has been allocated for Demand Incentive so as to create demand for xEVs in the country. FAME II aims to generate demand by way of supporting 7,000 e-Buses, 500,000 e-3 wheelers, 55,000 e-4 wheeler passenger cars (including Strong Hybrid) and 1 million e-2 wheelers. The creation of additional charging infrastructure is also supported under the Scheme.

As of July 29, 2021, India’s FAME II Scheme has supported 92,393 EVs through Demand Incentive amounting to about Rs 278 crore. Further, 6,265 electrical buses have been sanctioned to various state/city transport undertakings, and 2,877 EV charging stations, amounting to around Rs 500 crore, have been sanctioned in 68 cities across 25 states/UTs.

The India Government recently extended FAME II for a period of two years (up to March 31, 2024) to further support the uptake of xEVs in the country. In addition to this, it also approved a Production Linked Incentive (PLI) Scheme for the Auto Industry and Drone Industry to enhance India’s manufacturing capabilities in these sectors. In particular, the PLI Scheme for the auto sector aims to overcome the cost disabilities to the industry for the manufacture of advanced automotive technology products in India. The incentive structure will encourage the automotive industry to make fresh investments for indigenous global supply chain of advanced automotive technology products. It is estimated that over a period of five years, the PLI Scheme for Automobile and Auto Components Industry will lead to fresh investments of over Rs 42,500 crore, incremental production of over Rs 2.3 lakh crore, and will create additional employment opportunities of over 750,000 jobs. This is expected to further increase India’s share in the global automotive trade.

To read the full article, which originally appeared in the EET Recommend e-book, please CLICK HERE.

 

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