The automotive industry has undergone a paradigm change that began as a concept in the early 1900s and is now a reality all over the world. Technology cannot develop without the help of the entire ecosystem, and the government is the torchbearer for this cause. The immense burden of oil imports, rising pollution, and worldwide pledges to tackle global climate change are driving the massive push toward electric vehicles.
India is one of the few countries to back the EV30@30 campaign, which aspires to have at least 30% of new vehicle sales be electric by 2030. What came as a surprise, there were no gasoline cars on display at the Munich Motor Show in September 2021; instead, electric vehicles dominated the show.
Where does the Electric Vehicle Industry stand today?
India presently has the world’s fifth-largest car market and has the potential to be amongst the top three in the coming years. Electric Vehicle sales have averaged 1.5 lakh units each annum in the last two years. The Indian government has made several steps to build and promote the country’s electric vehicle ecosystem, such as:
The FAME India Scheme, which has been remodeled, aims to incentivize various vehicle sectors.
- For the supplier side, there is a production-linked incentive (PLI) scheme for Advanced Electricity Cells (ACC). As a result, indigenous development of such
batteries will be encouraged, reducing the country’s dependence on imports. - The PLI Scheme for automobiles and automotive components is also applicable to the production of electric cars. Existing automotive companies, as well as new investors who are not currently in the vehicle or auto component manufacturing business, are eligible to participate in the PLI Scheme for the auto sector.
What are the challenges?
Battery Manufacturing:
The lack of a battery manufacturing base in India is a significant barrier. In 2021, India imported more than $1 billion worth of lithium-ion cells, according to government statistics.
Consumer-Related Issues:
There aren’t enough charging stations, and it takes a long time to charge a vehicle. Furthermore, the cost of a simple electric automobile is significantly higher than the cost of a car that runs on conventional fuel.
Lack of Technology & Skilled Labour:
India is technologically behind the curve when it comes to producing the electronics that are the backbone of the electric vehicle sector, such as batteries, semiconductors, and controllers. Also, there are no designated training programs for this type of skill development.
Unavailability of Materials for Domestic Production:
The battery is the most significant component of an electric vehicle. India has no known sources of lithium or cobalt, both of which are needed in the creation of batteries; thus, we are heavily dependent on imports. Every obstacle opens the door to new possibilities; automobile sales in India average at 22 million per year, with a CAGR of 1.29 percent, and the figure will reach 25 million by 2030. If India achieves its goal of 30% electric vehicles by 2030, 7.5 million vehicles are estimated to be sold. That’s a 50X growth and a 54 percent CAGR year over year.
Although the figure appears optimistic, we also need to keep in mind that to power these vehicles, massive amounts of electricity would be required. The existing producing capacity will not be sufficient to reach the ambitious 2030 goal.
Manufacturing, component supply, charging infrastructure, financing, and e-mobility are the five primary areas where the EV ecosystem can support innovations. After, this elongated discussion on EV, let’s look at the investing opportunities:
Leading players in India’s EV business, including OLA Electric Mobility Pvt, Ather Energy, and Mahindra Electrics, are rapidly expanding their market presence. In the listed space, the stocks to track are:
- Amara Raja Batteries.
- Exide Batteries.
- Minda Industries (sensors and controllers).
- Minda Corporation (safety, communicating systems,
- Lightweighting; KPIT and TATA Elxsi (software design and architecture).
- Fiem Industries (vehicle lighting).
- Kabra Extrusiontechnik (battery storage).
- Hindalco and Nalco (lightweighting).
- Himadri Speciality Chemical.
- HBL Power System (batteries, electronics, and motors).
- TATA Power.
As a whole, the future looks bright, and this space should definitely be on your watch list.
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