Electric vehicles (EVs) present an opportunity of almost INR 3 lakh crore for various stakeholders in India in the five years through fiscal 2026, says an analysis by CRISIL.
The opportunity includes potential revenue of about INR 1.5 lakh crore across vehicle segments for original equipment manufacturers (OEMs) and component manufacturers, and INR 90,000 crore in the form of disbursements for vehicle financiers. Shared mobility and insurance account for the balance, the agency said in a press release.
The rating agency said that EV adoption continues to surge as more people shift from internal combustion engine (ICE) vehicles. Data on the Vahan portal shows that the share of electric three-wheelers (3Ws) increased to almost 5% of 3Ws registered in fiscal 2022 from less than 1% in fiscal 2018. For electric two-wheelers (2Ws) and buses, the percentages rose to almost 2% and 4%, respectively.
The shift is not limited to large cities either. Smaller towns are also entering the fray, driven by the government’s fiscal and non-fiscal measures. As per Vahan statistics, the contribution of the top 10 districts in nationwide sales of electric cars and 3Ws dropped from 55%-60% in fiscal 2021 to 25%-30% in fiscal 2022. For 2Ws, the percentage declined from 40%-45% to 15%-20%, CRISIL said.
Drivers of EV adoption
The drivers of EV adoption are the rising fuel prices and higher cost of ICE vehicles that impact their affordability. Government support for EVs is also playing a big role. Central schemes such as Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME-India), Phased Manufacturing Plan, and Production Linked Incentive has jump-started the country’s EV journey. Startups with new-age business models as well as OEMs with an established businesses have evinced interest in manufacturing EVs. Many state governments have also provided demand incentives, and capital assistance for setting up greenfield manufacturing plants, CRISIL added.
In addition, CRISIL’s analysis of the total cost of ownership suggests electric 2Ws and 3Ws attained parity with ICE vehicles last fiscal even when running a mere 6,000 km and 20,000 km, respectively, annually. By 2026, the analysis indicates, the adoption of 2Ws and 3Ws will rise even without subsidy, due to parity of ownership cost with ICE vehicles.
Hemal Thakkar, the director, CRISIL Limited, said, “Considering the improving cost parity and the government’s focus on electrification of vehicles, we should not be surprised if EV penetration reaches 15% in 2Ws, 25%-30% in 3Ws, and 5% in cars and buses by fiscal 2026 in terms of vehicle sales.”
Several new trends and business models are expected to emerge as all that growth materialises.
Battery-as-a-service and public charging stations, for one, typically have a pay-per-use model and aim to reduce the initial outgo of the customer, improve viability, address range anxiety and, in turn, increase asset utilisation.
Mobility-as-a-service is yet another new trend. It focuses on shared mobility by linking operations with charging infrastructure. Here, too, the vehicle and charging infrastructure are deployed on a pay-per-use model.
Then there is micro-mobility, which provides last-mile distribution of cargo by way of micro-rental of electric 2Ws and 3Ws, operating on a self-drive rental model. The model is asset-light and based on open-source operations, where the user can hire and deploy vehicles.
Jagannarayan Padmanabhan, the director, of CRISIL Limited, said, “In sum, the emergence of EVs is an opportunity for both the present and new industry participants to innovate and capitalise on the quickly evolving passenger and cargo mobility. To address the ecosystem challenges of the EV industry, the government is considering rolling out a structured battery swapping policy. Such facilitations will go a long way in realising the EV potential. In addition, improvement in the availability of finance will push EV adoption.”