New Delhi: EV penetration in India is going to reach 50% by the financial year 2032-33. Provided with constant financial support from the government. Battery demand of 250GW could be achieved with incentives of INR 1.8 tn over FY24-28 and an initial capex of USD 30-33 bn. This is stated in the report on ‘EV Batteries: Battle to control EV supply chain’ by Axis Capital.
Sufficient scale, localization and innovation can shrink the cost of EV ownership in the coming 5 years to significantly reduce the need for incentives. The US requires capex of USD 30-33 bn (excluding major backward integration) to develop a necessary lithium-ion battery capacity of 330 GWh (250 GWh demand with 75% utilization) in the coming 10 years (70-75% of demand just for LFP).
localization in India is tech and restrictive incentives. However, localization of battery packs (20-25% of battery cost) has commenced in India expected to reach 100% in coming years. Cell manufacturing is expected to begin in 2-3 years. India’s battery PLI scheme is limited and restrictive in the timeliness, technology and value addition it imposes, apart from low actual incentives.
What drives the future of EV India?
There are several reasons from stated in the report that could increase EV adoption in India. Some of them are the strong government support. The new model launches by OEMs covering different price point segments. Also the development in the TCO of EVs led by a potential reduction in battery prices.
The EV adoption will be increased from FY27 as major model launches are expected to be in CY25-26. In the coming decade the adoption rate is expected to be 40%.
In the 2W segment the penetration is expected to be at a higher rate, which will further increase with reduction in battery prices. The battery cost reduction in coming years can significantly boost the motorcycle demand. Motorcycles require bigger batteries thus making current TCO comparison unfavorable compared to ICE bikes.
There is an expectation of this segment where more than 50% will be EVs in the coming 5 years and around 80-100% adoption will be in a decade.
Factors driving the EVs demand in India
The need for strong government support is essential. The EV adoption is at infancy to reduce the ownership cost of an EV, as it costs more than normal ICE vehicles. The government is providing incentives to make the adoption faster at both manufacturing and consumer level. It can be through several ways like reduced GST rates, Auto PLI Scheme, benefits that come under FAME Scheme, and many more. As per this report the incentives in cumulation can account for up to 30-35% of pre-subsidy prices of PVs and 35-40% in case of electric 2Ws.
As per the report the overall government incentives (direct cash support + reduced GST/ road tax collection on EVs vs ICE) could be approximately INR 1.8 tn (USD 21 bn) in the coming five years.
The upliftment can be brought through new model launches in the PV segment, with a limited number of EV models available at decent price points (25% by FY26E). For overall PV industry, the report states that EV penetration will increase steadily for the coming few years.
The reduction in battery or EV prices can further increase the adoption. According to the TCO break-even for EVs vs ICE at present can take 5 years for PVs (50,000 kms and assuming annual run of 10k kms). For 2Ws it can be 3 years (25,000 kms), even with the government’s incentives.
Further the report added that EVs are not beneficial in terms of profit for OEMs with an EBITDA level (5-10% negative EBITDA margin for most OEMs).
The report also states that Global EV volumes have increased to approximately for 8 mn units in CY22 from 1.6 mn units in CY19 (includes only BEVs and not PHEVs) – global EV penetration was around 10% in CY22 as compared to an increase of 2% in CY19.
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