EV Industry a Rs 500 Billion Opportunity in India by 2025: Avendus

In a new report by Avendus Capital, the firm predicts that the EV industry in India could represent a Rs 500 billion opportunity by 2025.

In a new report by Avendus Capital, the firm predicts that with the present and projected level of EV penetration in the country, the electric vehicle (EV) industry in India could represent a Rs 500 billion opportunity by 2025.

As per the report “Electric Vehicles: Charging towards a bright future”, the current COVID-19 environment is expected to accelerate the rate of adoption of EVs in the medium term as customers look for environment friendly and cost-effective personal mobility solutions, and also because online commerce is fast becoming the norm, with a focus on the delivery of everything.

Koushik Bhattacharyya, Director & Head – Industrials, Avendus Capital, explained “Over the past decade, the economics of the technology used in this sector has improved significantly, and today, EVs make economic sense across multiple use cases. The inevitability of the transition to EVs is accepted by the world, however, the timeline for mass adoption is still a topic for debate. But we believe that we are moving quickly towards a mobility regime where EVs become mainstream.”

A detailed analysis reveals that the Total Cost of Ownership (TCO) in the case of low and medium-speed electric two-wheelers, e-autos /e-ricks and commercial applications of 4Ws, is already lower than their counterpart ICE vehicles. For high-speed 2W EVs and other use cases such as retail 4Ws, CVs, the TCO will become favourable as the battery prices drop further.

Further explaining the EV opportunity in India, Bhattacharyya added, “India represents the fourth largest automobile market in the world and the second-largest two-wheeler market with ~ 20 million units. It is also a country with massive dependency on oil imports, with a USD 112 billion oil import bill in FY19. Pollution in many Indian cities has reached alarming levels. All these factors combined, make a strong case for EV adoption in India.”

The report further details that two and three-wheelers will lead the electrification movement in India in the medium term. The report expects 9 percent penetration by FY25 in the two-wheeler segment. With the right macro environment, the number can further go up to 16 percent. It is expected that this segment will grow to be Rs 120 billion by FY2025. E-rick has also emerged as a large market in India in a very short time frame. A large part of this market is still unorganised and based on Lead Acid batteries. However, this market is expected to rapidly shift to Li-ion and by FY25, 40 percent of the e-Rick market is expected to be Li-ion based.

Ankit Singhal, Vice President – Industrials, Avendus Capital further explained “e-auto makes economic sense on a TCO basis. We expect to see intensive action in this space going forward. We expect ~20 percent EV penetration in the E-Auto category by FY25. We expect this segment to be Rs 40 billion by FY25. In the medium term, we expect the EV adoption in the four-wheeler category to stay limited to commercial/ fleet applications. The overall penetration in the e-4W segment is expected to be ~2 percent. With the right macro environment, the number could go up to 5 percent. We expect this segment to be Rs 100 billion by FY25.”

On the commercial vehicle side, E-buses are expected to lead the category. The regulatory push will drive this category, rather than TCO. “We expect EV adoption in the bus category to be ~13 percent by FY25. Speaking on the commercial vehicle segment”, Singhal added that “We expect this segment to be Rs 60 billion by FY25. Light Commercial Vehicles (<3.5 tonnes) in the EV category also make TCO sense and we forecast about ~4 percent EV adoption in this segment by FY25, translating into a Rs 15 billion market opportunity.”