Adoption of electric mobility in India will be driven by new products to be launched by automakers and component suppliers in the coming years and the effectiveness of government policies like the production linked incentive scheme and other initiatives, said brokerage firm Emkay Global in a note.
Global automakers already have a wide range of products, which are being introduced either directly (e.g., Mercedes Benz) or through collaborations (e.g., GreenPower. Also, all domestic OEMs and startups like, Ather Energy, are also indigenously developing and launching products. These launches should drive the evolution of consumer profile from ‘early adopters’ and ‘technophile purchasers’ to ‘mass adopters’ over the medium- to longer term, the brokerage mentioned.
“EV penetration is expected to be driven by stringent emission norms, incentive schemes, well-defined long-term policies, standardization of charging infrastructure and a structured approach to reduce dependency on imports. FAME-2, Production Linked Incentive and state government EV policies are expected to promote EV demand, improve localization, increase cost competitiveness and develop a complete ecosystem,” added the analysts.
The Narendra Modi government has been urging vehicle manufacturers to develop and manufacture electric vehicles to reduce vehicular emission and curb oil imports. The union government has also been incentivizing purchase of such vehicles through the second phase of the Faster Adoption and Manufacturing Electric and Hybrid vehicle (FAME) scheme.
The union government has been focusing on driving adoption of electric vehicles in the two and three-wheeler segment where the price gap has been narrowing.
Battery manufacturing capacities are expected over the medium term as lithium-ion battery cost stands at 40-50% of raw material cost and localization is necessary to achieve cost competitiveness. The government’s PLI scheme for Advanced Chemistry Cells (ACC) with incentives of ₹18,000 crores should encourage investments, according to the brokerage.
“As electric vehicle demand improves over the medium term, capacities would be commissioned, through investments from OEMs, international ancillaries (e.g., Octillion), domestic ancillaries and startups (e.g., Lohum), either on their own or through consortiums. Due to economies of scale and technological advancements, battery costs are expected to decrease to below USD100/KWH over the medium term,” the note further added.
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