India Electric Car Market Overview
The share of electric cars in India remains low when compared to the developed countries. However, the electric car sales have grown significantly over the last few years and would continue to grow strongly over the long term. While rising middle class and government push for a sustainable development are benefiting the sales of electric cars in the country, lack of infrastructure and high cost of electric cars are posing challenges to the sales of these cars in India.
An electric car uses one or more, fixed or detachable, electric batteries for propulsion. The batteries could be charged at a charging station. A hybrid electric car combines fossil fuel and electric power for propulsion. The battery is charged by regenerative braking in which the heat dissipated by brakes is used to charge the battery. The batteries of plug-in hybrid type electric cars can be charged either by regenerative braking or plugging in a charging station. Over the last decade, electric cars have seen significant growth and penetration in the global automotive sales.
Stringent emission norms in India would ensure more acceptance of electric cars in the country. India would follow the toughest global emission norms Bharat Stage (BS)-VI from the current BS-IV by 2020, skipping the BS-V, showing the government’s commitment to reduce the pollution levels in the country. Under the National Electric Mobility Mission Plan (NEMMP) 2020 and Faster Adoption and Manufacturing of Electric Cars (FAME), the government introduced subsidies on electric cars (USD 2,154 for cars) to increase its production to around 6-7 million by 2020. The government also has plans to replace all cars by electric ones by 2030. Such initiatives would spur the sales of electric cars in India over the forecast period.
The Indian government has plans to increase its renewable power capacity from 30% in 2016 to 40% by 2030. Electric cars can become a viable solution to store the intermittent renewable energy in the country. Rising middle class would emulate the western car buying habits ensuring increasing sales of electric cars. Moreover, low car penetration (19 cars per 1,000 people) also ensures significant opportunities for electric car companies in long term.
Despite the above drivers, the electric cars account for a negligible share in total car sales in the country. Lack of infrastructure in the form of charging stations is the biggest challenge affecting the sales of electric cars in India. The growth of electric cars would be dependent on penetration of electric car charging stations. India has less than 500 charging points and metro cities alone would need millions of charging points to realise the targets of FAME and NEMMP.
With no lithium deposits in India, the manufacturers would look for other options to power the electric cars or import lithium from other countries, in order to commercialise electric cars on a large scale. This could restrict many companies to start battery manufacturing plant in the country. Moreover, the battery prices could fluctuate based on the exchange rates and global supply of lithium affecting the prices of electric cars.
A typical Indian car customer is highly cost sensitive and high price of electric car could adversely affect the market demand. Even though the running cost of an electric car is low (6kms per 1KWh), it is the high battery cost, which increases the upfront or showroom price of electric car, making owning an electric car expensive for an average Indian customer. High upfront cost of electric cars (compared to conventional cars) could hamper their sales over the forecast period. However, declining prices of lithium ion batteries is a positive sign for the India electric car market.
India Electric Car Market - Competitive Landscape
Given the nascent stage of electric car market in India, the competition is low, with only Mahindra and Mahindra manufacturing electric cars in the country. However, competition is set to increase given the huge market potential of electric cars in India. Maruti Suzuki has plans to start commercial production of electric car in its Gujarat plant by 2019. TATA Motors is expected to showcase electric version of Taigo in Auto Expo 2018. Moreover, its Nano car is also being changed to an electric car. Hyundai motors also has plans to start assembling electric cars in the country by 2019.
India Electric Car Market Segmentation
Battery Electric Cars
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