The electric mobility market in India has grown significantly over the past few years despite challenges in the ecosystem. There are six main categories used to classify the sector, and the graph below shows the players who participate in each of these categories.
Initially, small-ticket investments from risk-averse investors primarily funded early investments in the e-mobility sector. In 2015, private equity (PE) and venture capital (VC) investment in the sector totaled just $13 million. Despite the 2022 economic slowdown, $906 million was invested in the Indian EV sector, with companies securing tickets worth up to $150 million.
Large investors, including development finance institutions (DFIs), are investing heavily in the area, primarily to lower the cost of capital for the industry. Meanwhile, traditional financiers are hesitant to lend to the sector. NBFCs and venture debt funds charge high interest rates with return expectations of between 16 and 18%. DFIs and other providers of concessional capital have been active in India’s e-mobility market. For instance, The Macquarie Group and Green Climate Fund collaborated to create a platform with the primary goal of lowering the high initial cost of EVs.
OEMs in India, like in other nations, are mainly focused on investing in R&D to increase their own EV offerings. For instance, Mahindra & Mahindra recently announced a $400 million increase in EV sector investments. Another significant OEM, TVS Motors, revealed plans to raise between $200 and $400 million to support their sector expansion. Some large corporations are investing in start-ups to either quicken the pace of industry development or take advantage of cutting-edge start-up technologies through strategic alliances. For instance, Amara Raja, one of India’s largest battery manufacturers, invested in Log9, a start-up developing new battery technologies, and Bajaj Auto has invested in Yulu, a manufacturer of electric bikes.
The Government of India has been proactive in developing PLI schemes and allowing for 100% FDI to increase both domestic and foreign investment due to the significant capital requirements of this emerging sector. The Indian ecosystem has undergone significant adaptation to become more appealing to investors, and FDI inflows have increased. Between 2000 and 2022, the e-mobility sector attracted close to 6% of all FDI ($32 billion), with a sizable portion coming after 2015 as the sector began to boom. In 2021, about $6 billion or 20% of the investment was invested.
As startups dominate the Indian market, PE and VC firms have made significant contributions to the expansion. Their investment in the industry has grown over time as the ecosystem has grown. The majority of PE and VC investors prefer to concentrate their investments in business models that generate commercial returns of at least 16–18%. Traditional PE and VCs place a secondary value on the benefits to the environment. However, impact-focused investors are willing to accept slightly lower returns in exchange for an increase in accessibility to mobility, a decrease in emissions, or innovation.
Source: Investment landscape of indian e-Mobility market | USAID