The electric vehicle (EV) market in India has experienced remarkable growth due to the widespread adoption of electric vehicles (EVs). The year 2022 was a prominent period for EV sales in India, as the number of EVs sold surpassed the 1 million threshold. This was largely contributed by the sales of two-wheelers and three-wheelers since these categories meet the majority of requirements for switching to an electric fleet. Factors such as high route predictability, high economic viability and the ability to use home or private chargers for charging EVs have facilitated this shift.
Despite recent advancements, the current EV charging infrastructure in India is not adequate to meet the increasing demand for EVs. Encouragingly, the Indian EV charging sector is witnessing partnerships between various private and public companies, working together to install EV charging stations across the country. While various PSUs such as Energy Efficiency Services Limited, Convergence Energy Services Limited, NTPC Limited and Indian Oil Corporation Limited initially contributed to the EV growth in India, other companies have also entered the Indian charging station market. As of July 31, 2023, India has 9,113 public EV charging stations.
The growing charging market has opened up new opportunities for technology providers and charging infrastructure developers. In addition, several firms are expanding their footprint by securing financing and entering untapped cities. Companies are investing heavily in research and development and developing new models in order to establish their market presence.
Trends in EV sales and growth
India’s EV market experienced a surge in 2021-22, with total EV sales rising to around 450,000 from the previous sales of less than 200,000 in 2020-21. The year 2022-23 has witnessed record new registrations of around 1 million EVs, a doubling of sales over the previous year. The electric passenger three-wheeler segment has witnessed the highest growth in terms of EV penetration as the share of total vehicle sales increased from around 18 per cent in 2018-19 to over 50 per cent in 2022-23. Meanwhile, electric two-wheelers, e-cabs and e-buses remained below 10 per cent in sales penetration in 2022-23.
In absolute numbers, electric two-wheelers recorded the highest number of new registrations in the non-transport space in 2022-23, with more than 660,000 new EVs registered. Meanwhile, barely 3,000 new electric two-wheelers were registered in the transport space. In contrast, the three-wheeler space saw more than 350,000 new registrations in the transport segment and just 4,000 in the non-transport space. In the electric four-wheeler segment, there were 35,000 new registrations in the light motor vehicle category (such as cars and jeeps), approximately 1,800 new registrations in buses and 554 in the freight space.
During 2023-24, electric two-wheelers recorded the highest number of new registrations in the non-transport space, with over 317,000 new EVs registered as of August 25, 2023. Meanwhile, only 463 electric two-wheelers were newly registered in the transport space. However, the trend was entirely different for three-wheelers, which saw more than 227,000 new registrations in the transport category and just 162 in the non-transport category. In the electric four-wheeler segment, there were a total of 30,626 new registrations, of which 30,608 registrations were in the light motor vehicle category.
The rate of EV deployment varies across the country, with the highest share of EV sales in Delhi, Tripura, Assam and Karnataka, where state-level policies are supportive.
The Bureau of Energy Efficiency (BEE), in its capacity as the central nodal agency, has developed a mobile application to facilitate in-vehicle navigation to the nearest public EV charger, as well as a website to disseminate information on various central and state-level initiatives to promote e-mobility in the country, and a web-portal to enable charge point operators to register the details of public charging stations securely into the national online database without any fee.
Delhi discoms BSES Rajdhani Power Limited (BRPL) and BSES Yamuna Power Limited (BYPL) have facilitated the installation of approximately 2,300 EV charging points in Delhi. BRPL and BYPL customers can access private EV charging points through the Switch Delhi portal at their homes, group housing societies, multi-storey apartment complexes, resident welfare association offices and commercial shops. The Delhi government is providing a one-time subsidy of Rs 6,000 for the first 30,000 charging points as well.
The National Highways Authority of India is also developing wayside amenities (WSAs) along highways and expressways. EV charging stations have been designated as a mandatory facility across all WSAs. To this end, the government has initiated the installation of 137 EV charging stations on national highways. According to data provided by BEE, a total of 419 public charging stations are reportedly operational on national highways across the country.
As application-based integration continues to evolve, home/private charging solutions are assisting users in energy management, remote monitoring, warranty and service management, while application integration in plug-and-play operations is simplifying the public charging process. Apart from traditional offline channels, online sales as a distribution channel is gaining global traction, with Indian original equipment manufacturers gradually embracing the concept. A major Indian two-wheeler EV player has already adopted the direct-to-consumer (D2C) sales model for their e-scooters.
Meanwhile, the EV financing sector is mostly dominated by small non-banking financial companies (NBFCs) and fintech companies as they offer easy financing solutions. While established players continue to evaluate their entry into EV financing, small NBFCs and fintech companies are leveraging this gap with the help of technology. The lending rates are sub-par as compared to internal combustion engine financing terms; however, the situation is improving as more players are focusing on EV financing terms. With the entry of large public and private banks, NBFCs will start offering better financing conditions in terms of disbursal percentages and lower interest rates.
Policy support measures
The government is making significant efforts to promote the nationwide expansion of EV charging infrastructure. The Indian government supports EV deployment through the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) II scheme, aiming to reduce primary oil consumption and pollution in cities as well as to globally establish battery and EV manufacturing capacity at scale. The government, in its 2023-24 Budget, allocated Rs 51.72 billion to the FAME II scheme, a 78 per cent increase from the amount earmarked in the previous budget. The FAME II subsidy accounts for 85 per cent of the total budget allocation of Rs 61.45 billion for the Ministry of Heavy Industries. Moreover, one million electric two-wheelers, 500,000 electric three-wheelers, 55,000 electric cars and 7,090 electric buses are to be supported by FAME II through subsidies. Additionally, an allocation of Rs 10 billion has also been provided under FAME II for EV charging stations.
Along with the national policies, 26 states have announced EV-focused initiatives with the goal of promoting EV usage and EV component manufacturing. These policies provide a variety of incentives to boost EV demand, manufacturing, and infrastructure development.
The production linked incentive scheme aims to offer Rs 189.12 billion in incentives for building a 50 GWh ACC manufacturing capacity. Additionally, NITI Aayog has laid out a strategy to capture the huge storage opportunity in the EV segment, with a target of localising 80 per cent of the value chain by 2030. Further, the Ministry of Power also released revised guidelines and standards for charging infrastructure in 2022.
While most Indian states have some form of time-of-use tariffs available, these are mostly limited to commercial and industrial users and current cost-recovery frameworks in India. Simultaneously, many states have already issued specific EV charging tariffs across India, and the open access minimum load requirement has been reduced to enable the direct supply of renewable power to charging stations with loads exceeding 100 kW.
The fixed or demand charge for an electricity connection is imposed based on either the sanctioned load for the connection or the maximum power demand recorded during the billing period. This charge must be paid regardless of the actual power consumption. Energy charges, on the other hand, constitute the variable portion of an electricity tariff, calculated based on the total volume of energy/electricity consumed throughout the billing period. States such as Gujarat, Haryana, Karnataka and Mahaashtra have introduced demand charges, while others, including Andhra Pradesh, Delhi, Chhattisgarh, Telangana and Uttar Pradesh have only notified energy charges. Each state establishes its own rates for different consumer categories, resulting in differences between the two components of the tariff: energy and demand charges.
Challenges and the way forward
There are several challenges associated with EV infrastructure development, particularly concerning land allocation, grid connectivity, economic viability for developers, applicable standards and interoperability. The increased availability of tariffs capable of incentivising system-friendly charging will also play a crucial role. These issues should be addressed to foster a robust and collaborative ecosystem. To achieve this, various stakeholders must collaborate to enhance and identify cost-effective solutions to facilitate on-site development.
According to a report published by Fortune Business Insights, the Indian EV market will grow at a compound annual growth rate of 66.52 per cent between 2021 and 2029 and will be valued at $113.99 billion by 2029. The government is set to play a crucial role in driving this growth.
Backed by government support for the expansion of the EV market, the increasing installation of EV charging stations, and the rapid trajectory of EV sales in India, the country is poised to maintain a strong foothold in this space for the foreseeable future.