India’s EV Economy: The Future of Automotive Transportation
Electric vehicles (EVs) have gained significant traction in recent years as a cleaner and more efficient alternative to traditional gasoline-powered cars. With advancements in battery technology, a growing network of charging infrastructure, and increasing consumer demand, EVs have become a viable option for many drivers around the world. Changing the way we think about driving, these vehicles are powered by electricity stored in a battery, rather than gasoline, and use electric motors to turn the wheels.
India is the third largest automobile market globally in terms of sales, ahead of Germany and Japan. There is now a push for manufacturers and policymakers to collaborate to shift demand towards greener options. The automotive sector is a major contributor to India's economy, accounting for 7.1 percent of its GDP and providing significant employment. The Economic Survey 2023 predicts that India's domestic electric vehicle market will see a 49 percent compound annual growth rate (CAGR) between 2022 and 2030, with 10 million annual sales by 2030. Additionally, the electric vehicle industry is projected to create around 50 million direct and indirect jobs by 2030.
The Indian government has set a target to achieve 30 percent electrification of the country's vehicle fleet by 2030, and has introduced several incentives and policies to support the growth of the EV industry. The industry was given a major boost in the FY24 Union Budget for the production of electric vehicles, adoption of hydrogen fuel, and embracing changing technologies.
In the 2023-24 Union Budget, Finance Minister Nirmala Sitharaman announced a budget allocation of INR 35,000 crore for crucial capital investments aimed at achieving energy transition and net-zero targets by 2070. Furthermore, she stated that the government will support Battery Energy Storage Systems with a capacity of 4,000 MWH through viability gap funding. For electric vehicle manufacturers, the government has already launched initiatives such as the Faster Adoption of Manufacturing of Electric Vehicles Scheme – II (FAME – II) and the Production Linked Incentive Scheme (PLI). The Budget has allocated INR 51.72 billion (approximately $ 631 million) towards its FAME-II scheme to subsidize and promote the adoption of clean energy vehicles. This represents an 80 percent increase in budget allocation from previous years. The reduced custom duty on Lithium-iOn batteries used in electric vehicles and excise duty exemptions on natural gas and biogas could result in more foreign electric vehicles being imported to India.
Prominent Indian automobile manufacturers like Tata Motors and Mahindra & Mahindra have begun producing EVs, and several international companies have also entered the market. Swedish luxury carmaker Volvo Cars is exploring possibilities to set up a new electric vehicle manufacturing facility outside China and India is a contender in the race.
The charging infrastructure is being expanded with investments from both government and private companies in setting up charging stations. The nation's first EV charging plaza was established by EESL in July 2020, and in just one year the number of charging stations has multiplied over five times. The increasing popularity of EVs in the national capital highlights the success of the Delhi EV Policy launched in 2020. In December 2022, EVs accounted for 16.8 percent of all vehicle sales in Delhi, marking a YoY growth of 86 percent.
India's electric vehicle market is poised for significant growth in the coming years. With supportive government policies, increasing consumer awareness, and advancements in technology, the country is well positioned to transition towards a more sustainable and eco-friendly mode of transportation. As the demand for EVs increases, it presents a tremendous opportunity for both local and international companies to invest in and contribute to the growth of India's EV ecosystem.