Article

India EV Profile: Robust Growth, But Penetration Remains Low

Fitch Solutions / Autos / India / Wed 24 Aug, 2022

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Key View: We forecast passenger EV sales growth of 219.9% y-o-y in FY2022 to reach over 45,000 units sold annually. We also highlight that as many non-EV vehicles are in very short supply (due to chip shortages and the prioritisation of EV production), the local EV market is gaining more interest from consumers. Additionally, we note that the very high levels of pollution in Indian cities (especially following the drop in pollution amid the Covid-19 lockdown) will likely see more consumers gravitate to EVs. We forecast India's passenger EV penetration rate to reach just 1.22% of total passenger vehicle sales in 2022. As more EV models become available in India over 2022-2026, we will likely see stronger EV uptake; however, it will depend heavily on if the Indian government continues to severely tax imported vehicles and components from Mainland China.

Electric Vehicle Market - Historical Data And Forecasts (India 2020-2031)

Indicator 2020 2021 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f
Passenger electric vehicle sales, units 5,905 13,813 44,189 65,634 87,619 110,710 133,772 157,170 180,857 204,690 228,573 252,399
Passenger electric vehicle sales, % y-o-y 73.7 133.9 219.9 48.5 33.5 26.4 20.8 17.5 15.1 13.2 11.7 10.4
f = Fitch Solutions Forecast. Source, CEA, OEM Financials, Fitch Solutions

Latest Developments And Key Drivers

  • Over FY2021 (April-March) electric vehicles (EV) (four-wheel vehicles) sales in India increased by around 154.0% y-o-y to reach an annual sales volume of just over 16,000 units which represents a passenger EV sales penetration of only 0.42% of the market's total passenger vehicle sales.
  • In July 2021, India's Rajasthan state became the 16th state to announce a local EV incentive policy. the EV policy will reimburse EV buyers' GST based on battery capacity and could be up to 2.5% of the value of the vehicle. Around the same time, India's Ministry of Road Transport and Highways issued a notification to exempt battery-operated vehicles from the payment of fees for issue or renewal of registration certificate.
  • Prime Minister Narendra Modi’s five-point climate plan, announced at COP26, marks a significant milestone in the country’s climate ambitions. On November 2, Modi outlined a number of enhanced targets, to reduce India’s greenhouse gas emissions:
  1. India will increase its non-fossil fuel power generation capacity to 500GW by 2030.
  2. India will generate 50% of its power from renewable sources by 2030.
  3. India will reduce its total carbon emissions by 1bn tonnes by 2030, versus a business-as-usual scenario.
  4. India will bring down the carbon intensity of its economy by 45% by 2030.
  5. India will achieve net zero emissions by 2070.
  • We forecast passenger EV sales growth of 219.9% y-o-y in FY2022 to reach over 45,000 units sold annually. We also highlight that as many non-EV vehicles are in very short supply (due to chip shortages and the prioritisation of EV production) the local EV market is gaining more interest from consumers. Additionally, we note that the very high levels of pollution in Indian cities (especially following the drop in pollution amid the Covid-19 lockdown) will likely see more consumers gravitate to EVs. We forecast India's passenger EV penetration rate to reach just 1.22% of total passenger vehicle sales in 2022.
  • As more EV models become available in India over 2022-2026, we will likely see stronger EV uptake; however, it will depend heavily on if the Indian government continues to severely tax imported vehicles and components from Mainland China.
  • We stress that one of the most significant barriers to EV adoption in India is the lack of a local EV supply chain (mining, refining, battery cell and pack production) given that the government has implemented very restrictive import policies for autos and components, especially from China which currently produces over 80% of the global battery supplies. This means higher EV cost, long delays at ports and a slow supply of EVs.
  • On February 1 2022, Indian Minister of Finance Nirmala Sitharaman presented the central government budget for the fiscal year of 2023 (April 2022 – March 2023). The budget aims to narrow the fiscal shortfall from a government estimate of 6.9 of GDP in FY2021/2022 to 6.4% in FY2022/2023. This budget announced steps to promote local battery swapping stations (this is to keep EV prices low as buyers can rent a battery instead of having to buy it), boost the country's EV charging infrastructure and open up defence R&D to private players.
  • According to local reports, India will develop an EV charging network along its major motorways. The first round aims to install around 80 new EV charging stations.
  • In July 2022, India also announced its intention to invest around USD10bn (or around 50,000 electric buses) in its electric bus fleet to aid in decarbonising the road transport sector. Indeed, in August 2022, Switch Mobility announced an order from India for 5,000 electric buses.

Robust Growth, But Penetration Remains Low

India - EV Fleet By Type & EV Fleet Penetration (2019-2031)

e/f = Fitch Solutions estimate/forecast. Source, CEA, OEM Financials, Fitch Solutions

This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2021 Fitch Solutions Group Limited. © Fitch Solutions Group Limited All rights reserved. 30 North Colonnade, London E14 5GN, UK.

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