Investment landscape of indian e-Mobility market

Since 2018, EV adoption in India has increased at a rate of 55% per year. The market is expected to grow at a rate of 49% until 2030. Especially in the electric 2-wheeler (E2W) and electric 3-wheeler (E3W) segments adoption has been high. However, some challenges remain:

• Investment constraints There is some information asymmetry amongst investors speed of evolving technology. Additionally, financiers are unable to assess company assets due to uncertainty around useful life, salvage value and the lack of a secondary market.

• Limited availability of end-user financing options Most traditional financiers are still hesitant to finance EVs and have limited products tailored to the e-mobility sector. Additionally, rates for leasing EVs are extremely high, usually upwards of 20%.

• Inadequate supporting infrastructure Consumers are hesitant to adopt EVs because of range anxiety and limited public charging infrastructure available in the country.

Investments despite challenges

Still, India has seen significant investment into its e-mobility sector. The government has also made the sector completely open to foreign direct investment (FDI).

Most of the investment has been directed toward EV OEMs, charging infrastructure, and Mobility as a Service (MaaS). Investment into the battery manufacturing sub-sector has been picking up, encouraged by government incentives such as the PLI (production linked incentive) scheme for advanced cell chemistry batteries. Investment into the battery sector can have a catalytic impact on EV adoption by driving prices of EVs down. The EV auto components sector, however, is still currently highly dependent on imports due to the advanced technology.

Innovate in order to adapt

To adapt to the dynamic e-mobility market, Indian companies are continuously innovating. Not only companies that have scale and strategic partnerships are increasingly attractive to investors. Companies that are focused on meeting challenges specific to the Indian sub-continent and indigenise their product to avoid supply chain bottlenecks also gain investor’s interest. Additionally, companies that are integrating various segments of the e-mobility value chain have been able to stand out in the sector.

Future EV market leaders

An estimated cumulative investment opportunity of over $200 billion in the next 8-10 years puts India in a position to become the largest EV market by 2030. Many OEMs have established separate EV subsidiaries and are raising finance at the subsidiary’s corporate level. As demand for EVs increase, there will be significant increase in the investment requirement both upstream and downstream.

A maturing sector

The sector is currently fragmented and is expected to consolidate in the coming years. For investors, it is critical to identify companies that offer a unique value proposition, and show strong traction as they consider the expected performance of their investments in the sector which will benefit from companies’ ability to scale or be seen as a merger or acquisition target.

The sector is capital-intensive. This means there will be a growing need for debt to further finance growth with a lower cost of capital. Additionally, for end-users, affordability will also be critical in increasing adoption of EVs. 

India offers a large market for EVs. Add this to its market leadership in the overall automobile sector, and it is safe to say the country is on pole position to become a global leader and hub for EV investment.

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