With government support via subsidies and higher awareness, the electric vehicle (EV) industry in India has flourished in the past couple of years and this is set to spur the components industry capital expenditure (capex) in the next three years.
The EV industry growth is boosted by factors like better product offerings, improved charging infrastructure and a galore of financing options as well as government support.
In the financial year 2023-24, EVs accounted for 4.7 per cent of the total vehicle market share in India, with electric two-wheelers leading the charge, followed by electric three-wheelers and buses.
Key EV parts still imported
Currently, only about 30-40 per cent of the EV supply chain is localised in India.
While some components like chassis parts are locally manufactured, key ones like advanced batteries are still imported, making up a significant portion of the vehicle cost.
This crisis situation presents an opportunity for local auto parts makers to step in and fill the gap but in the last few years, this has been happening at a snail’s pace.
Also, there is an opportunity for advancements in technology for parts that are traditionally used in internal combustion engine (ICE) vehicles and this may lead to a better vehicle experience.
India relies on imports for battery raw materials
A senior executive at ICRA Limited said India lacks the ability to produce battery cells locally, relying heavily on imports.
For India to achieve widespread adoption of EVs and offer competitive pricing, it needs to establish its own battery manufacturing ecosystem.
The executive added that the demand for EV batteries will soar in the coming years and called for local production.
Challenges in EV battery manufacturing
However, setting up such an ecosystem comes with challenges like complex technology set up, high capital requirements and getting a steady supply of raw materials (which India lacks right now).
EV two-wheelers, passenger vehicles to see surge in sales
ICRA predicts that EVs will make up a significant portion of two-wheeler and passenger vehicle sales by 2030, creating a lucrative market for EV components.
Huge market potential for EV parts
It estimates that the market potential for electric two-wheeler components will surpass Rs 100,000 crore (Rs 1 trillion) by 2030, and for passenger vehicle components, it will be an additional Rs 50,000 crore (Rs 0.5 trillion).
If auto component firms can localise, the growth in domestic auto component suppliers will surge and they can come up with value offerings.
Estimated investment in EV components
Auto ancillary companies have started pumping money into EV components in a bid to capitalise on this growing market.
Around Rs 25,000 crore is likely to be infused into EV components over the next three-four years, with a significant portion allocated to battery cells.
Government schemes and incentives are set to further give a fillip to investments in this space.
While the transition into EVs will impact traditional engine and transmission components, opportunities in new products and exports are expected to offset some of these effects.
E-Vroooom’s views
The EV industry in India is on a rapid growth trajectory, driven by government support and technological advancements but for capex in India’s EV components to get a boost in three years, localisation of critical components and battery challenges need to be tackled.
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