Sales of electric vehicles in India is estimated to cross 9 million units by 2027 building on the investment of $1.7 billion made in the industry in 2021 by private equity and venture capital investors, a corpus which has reached $666 million in 2022 so far.
This will be supported by a favourable startup ecosystem using technological adaptation, environment and social aspects in innovation, thus giving in the process a boost to the growth in ESG and climate specific funds.
Many new and first-time investors are joining the bandwagon and electrification has levelled the playing field across the value chain, according to a research on “Electrifying Indian Mobility” by the Indian Private Equity and Venture Capital Association (IVCA) in collaboration with EY and IndusLaw.
Moreover, given that technology is evolving faster than ever, the players need to make multiple bets to survive and grow during this transition, points out Srihari Mulgund, New Age Mobility Partner of EY-Parthenon. “Hence, capital becomes a strategic lever as we embark on this journey to electrify mobility,” says Mulgund.
The other big emerging enabler in the EV ecosystem in India is the improving cost viability of electric vehicles and rising consumer demand for environmentally cleaner mobility which is increasing the share of EVs in auto components.
There is enough potential for EVs to take up as much as 9-11 per cent of auto component space by fiscal 2027 from the negligible one per cent now.
The transition could even drive revenue of the EV components’ market in India towards a compound annual growth rate of 76 per cent to Rs 72,500 crore in fiscal 2027 from Rs 4,300 crore last fiscal, indicates a CRISIL analysis of 220 manufacturers, which account for a-third of the auto components market.
Of the auto segments, two-wheelers are seen driving India’s adoption of EVs with penetration rising to 19 per cent from 2.5 per cent currently and passenger vehicles (PVs) with penetration of 7 per cent from less than 1 per cent currently, over the next five fiscals, indicates CRISIL analysis.
According to Naveen Vaidyanathan, Director, CRISIL Ratings, almost 90 per cent of EV component supplies will be for two-wheelers and PVs. Components such as batteries will comprise 60 per cent of EV component revenue by fiscal 2027, drivetrains and electronics will comprise 15 per cent each and others 10 per cent offering an opportunity for auto component makers to diversify their revenue base.
The brisk pace at which production facilities are being planned and set up to manufacture two-wheelers and PVs and the equally strong momentum in developing and launching electric models is leading companies to step up investing in developing electric components, both with ICE original equipment manufacturers (OEMs) and with new-age EV makers.
India’s leading tyre manufacturer CEAT has launched a new range of Energy Drive tyres specifically designed for four-wheeler EVs. Normally, EVs operate as silent vehicles with high torque, making the tyre noise more evident but the Energy Drive tyres come with a patented sound absorbing material which reduces noise by filtration and absorption of vibration.
These innovations are timely to meet the demand of new facilities to manufacture electric PVs like Omega Seiki Mobility’s new and third integrated manufacturing facility in Haryana with an investment of $10 million to produce 15,000 electric three wheelers per annum.
Omega Seiki Mobility as the first OEM to have 2,3 and 4 wheelers in its product portfolio, offers last mile service under its brand “UNOXpress” and is currently running its fleet in 20 cities. The company will ramp up the manufacturing capacity to 50,000 units in the next three years by investing another $20 million (Rs 150 crore).
“We have an order book of 50,000 plus cargo electric three wheelers,” says Uday Narang, Founder and Chairman, Omega Seiki Mobility which has invested $50 million in all the three facilities and recently inaugurated a manufacturing facility in Pune for making electric cargo and passenger vehicles.
The electric vehicle manufacturing unit for India and exports at Chakan, Pune with an initial investment of Rs 40 crore will have capacity of 6,000 electric three wheelers per annum. With a good feedback on its electric PV, the company is looking to launch another facility in Chennai which will only cater to OSM electric PVs.
There is more excitement for component makers as Hero Electric moves to set up a second state-of-the-art manufacturing facility with an annual production capacity of 200,000 vehicles to promote indigenous capabilities in both domestic and international markets.
Adding to the EV component pipeline demand is Hero’s rollout of its first batch of electric scooters from Mahindra Group’s Pithampur plant in Madhya Pradesh. Earlier this year, Hero Electric had announced its five-year partnership with Mahindra as part of its growth and expansion plans to cater to the growing demand for E2Ws in the country.
The opportunity in electric PV components is being unleashed by companies like Toyota Kirloskar Motor (TKM) which has launched the new Urban Cruiser Hyryder, Toyota’s first Self-charging Strong Hybrid Electric SUV and the first of its kind, in the B SUV segment in India.
Toyota has contributed significantly towards developing the EV component share and advancing electrified vehicle technologies in India with a focus on local procurement of electric powertrain parts, aligning with the "Make in India" initiative promoted by the government.
Ola has ambitious plans to cater to the emerging EV landscape in India with products across two-wheelers (both bikes, scooters) and cars, targeting both mass and premium segments. There will be a huge demand for EV components as per the plan to make 10 million 2Ws and 1 million PVs annually and carry out 100 per cent conversion of internal combustion engines (ICE) 2W industry to EVs by 2025.
The idea is to launch four 2Ws and three PVs by 2025, a mass-market scooter in 2022, premium and mass-market bikes in 2023 and a sports bike in 2024. A foray into the PV segment is likely 2024 with the launch of a premium sedan and SUV in 2024 followed by a mid-market SUV in 2025.
However, the transition to EVs will create both opportunities and challenges for domestic auto component makers, according to Crisil. For makers of traditional auto components, about 75 per cent of revenue comes from body parts, chassis, suspension, electrical, braking, lighting, and seating. As these are parts of EVs, too, growth is unlikely to be a challenge for such components.
The report points out that the actual challenge is for the balance 25 per cent of auto component suppliers catering specifically to ICE engines and transmission components. These include parts such as starters, alternators, fuel injectors, radiators, gear box, clutch, pistons, cylindrical block and exhaust system critical in an ICE vehicle but redundant in EVs.
Since a majority of the auto component makers cater to multiple end-segments, Crisil finds that companies are also supplying EV components and increasing non-auto and industrial products in their portfolio to mitigate risks.
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