India: Electric vehicle sales surge by over 160% y-o-y in FY23

Propelled by robust growth in the two- and three-wheeler segments, electric vehicle (EV) sales surged 163% in FY'23 to cross the 1 million-mark for the first time ever. As per latest data, 11.8 lakh EVs were sold during the last financial year. However, data shows that despite tax incentives, the sales of electric-powered passenger and commercial vehicles continue to be tepid.

While EVs are making a dent in the two-wheeler and three-wheeler segments, the share of passenger cars and commercial vehicles is a meagre 4.2% of total electric vehicles sold.

Opportunities for EV production:

Growing demand: With the increase in petrol and diesel prices, demand for EVs is growing. Domestic manufacturers have the opportunity to increase their market share due to the gap in the market for suitable replacements for conventional vehicles. This is the perfect time for Indian manufacturers to produce cost-effective and good-quality EVs.

Low-cost manufacturing: India's manufacturing prowess and access to natural resources have allowed it to produce low-cost, high-quality EVs with a vast pool of skilled and unskilled labour, making it an ideal manufacturing hub. This has attracted multinational corporations to establish bases in India. India's ability to produce EVs and parts at significantly lower prices could cement its dominating position in the market, especially as the transition to EVs gains momentum with rising petrol and diesel costs.

Skilled workforce: India has a lot of skilled and unskilled labour that can be trained to improve the quality of electric vehicle (EV) production. This will create more jobs, both professional and unskilled, as EV manufacture and sales increase.

Domestic battery manufacturing: India has significant reserves of lithium, a crucial component of EV batteries. This presents a great opportunity for the country to benefit from the booming EV industry. By increasing its production of domestic batteries, India can reduce their reliance on foreign sources and subsequently lower EV prices.

Road ahead

Lack of charging infrastructure: To make EVs more accessible in India, there needs to be more charging stations installed along major roads, highways, and public places, as well as in more remote locations. This is currently a major obstacle to the scalability of EVs in India.

High cost: While EVs are ultimately a more cost-effective choice for consumers, high upfront costs mean that subsidies and other incentives are needed to make them more accessible in markets sensitive to pricing. The cost of batteries and other components drives up the initial expense of owning an EV compared to a fossil fuel-based vehicle.

Limited availability of lithium: India has a lot of lithium, which is important for making EV batteries, but it is faced with the problem of extracting it efficiently for mass production of EVs.

Conclusion

India's production and supply networks for EVs have substantial prospects but face several obstacles. To help India tap into its true potential concerning EV manufacturing and adequate scaling, the government will have to offer incentives and ensure a sustainable supply chain for raw materials.