Is India In The Throes Of A Boom in Mass-Market EVs?

Electric Vehicles (EVs) have witnessed stupendous growth in India over the last few years, with two-wheeler and three-wheeler EV sales going through the roof.

According to the Federation of Automobile Dealers Associations, 40 per cent of the three-wheeler being sold are EVs.

On the EV two-wheeler side, sales of high-speed scooters accounted for 1.16 per cent of the overall market in 2021. While two-wheeler EVs do not have a similar penetration rate, the absolute numbers of vehicles sold and the growth rates indicate strong buyer interest.

High-speed two-wheelers saw a 425 per cent jump in sales in 2021, with nearly 1.43 lakh units being sold. The total sales would reach 2.34 lakh units if one were to include slow-speed scooters. Over the first six months of the current financial year, EVs contributed to 3.6 per cent of total two-wheeler sales. However, electric passenger vehicles accounted for 0.5 per cent of total sales in 2021.

India’s electric passenger vehicle market is dominated by Tata Motors, which holds around 85 per cent of the EV market, followed by MG, which holds an 11 per cent stake in the market.

While other companies in the Indian market, such as Mahindra and Mahindra and Maruti Suzuki, have taken a cautious approach to EVs, Tata Motors has rapidly expanded its EV business. The EV business was spun-off into a separate entity, and it raised capital from investors last year to scale up its offerings.

Other players followed a similar model and spun off EV units to explore fundraising opportunities. At upwards of Rs 20 lakhs, MG’s electric offering, MG ZS Electric EV, priced significantly higher than Tata Motors’ offerings, is making it an out-of-reach product for several market segments. In contrast, Tata Motors’ electric offerings are priced under Rs 15 lakh, making them accessible to a wider audience.

Affordability is one of the main pain points for EV-makers since there is a significant price difference between internal combustion engine (ICE) vehicles and electric vehicles (EVs). So far, most EV models have catered to a smaller audience base that can afford to pay a higher price for these vehicles, with batteries making up a bulk of the costs.

Market participants have resorted to different means to make EVs affordable and convenient. Japanese OEMs such as Toyota and Suzuki have been sceptical of EV adoption due to several factors, including affordability, and have allocated significant resources towards hybrid vehicles. Other players are looking toward battery-swapping in order to reduce the upfront cost of the EV. Some OEMs have taken a wait-and-watch approach in order to check the demand for EVs, and not eat into their own ICE market.

India, which is a price-sensitive market, has been a tough nut to crack for EV-makers since higher prices would mean lower volumes of sales – which could ultimately mean that the returns do not justify the investments made in the country. However, there are several signs that India could see an increasing number of mass-market offerings in the electric passenger vehicle space.

Tata Motors is the first original equipment manufacturer to sell an EV at sub-Rs 10 Lakh rates. The recently launched Electric Tiago has an introductory price of Rs 8.49 lakhs – the first Indian electric car to have a price under Rs 10 lakhs.

The second-cheapest electric car in India is the Tigor EV, which is also manufactured by Tata Motors. The relatively low prices for the cars have allowed Tata Motors to grow its volumes in the EV business quickly. The company sold 19105 EVs in FY22 and has already sold 9283 EVs just in the first quarter of FY23. The pace of EV sales is likely to accelerate with the attractive pricing on the Tiago EV.

However, an increasing number of players are focusing on low-price cars suited for the mass market. Hyundai, Kia, MG, Volkswagen and several other auto players are looking to launch a mass-market battery-operated car over the next one or two years.

Mahindra and Mahindra (M&M) will be launching electric SUVs on its new platform, Inglo electric platform.

Of India’s big three passenger vehicle OEMs, which consist of M&M, Tata Motors and Maruti Suzuki, two have already announced their focus on pure electric vehicles.

Suzuki sees CNG and hybrid vehicles as the next logical step into the electric transition. These vehicles are significantly less expensive than pure battery-operated EVs, making them suited to India’s mass market, according to Maruti Suzuki.

Chinese carmaker BYD is looking to enter the Indian market and has already established showrooms in some cities. BYD, China’s largest electric car manufacturer, has strong expertise in large-scale EV manufacturing, unlike Indian manufacturers, who would have to build every product from scratch. One of BYD’s cars, BYD Dolphin, sells for CNY 96,800 (Rs 11 lakh), making it one of the most affordable electric vehicles in the world – though the selling price is likely to be helped by subsidies.

There are a large number of EVs in the luxury segment, but the mass-market passenger vehicles are limited in number. The Indian luxury car market is relatively small and is unlikely to offer enough opportunities for multiple players to operate profitably with a sole focus on the luxury space. Hence, companies would have to focus on the mass market in order to grow. Though Tata Motors dominates the mass-market four-wheeler EV space, competition will likely increase significantly over the next few years.

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