India is confident that its new electric vehicle policies will open up the market to more global players, the country’s secretary at the Ministry of Promotion of Industry and Internal Trade said.
Last month, the government launched major initiatives aimed at strengthening the country’s position in EV manufacturing.
“This involves concessional tariffs on limited import volumes by global EV manufacturers, coupled with a rock-solid commitment to invest at least $500 million in India,” Rajesh Kumar Singh told CNBC’s Sri Jegarajah.
“And also meeting the very strict localization targets of 25% in the third year and 50% in the fifth year,” he added. “It was intended for all global EV manufacturers and domestic manufacturers.”
While much of the “buzz has been around Tesla,” Singh underlined that the initiatives will also attract other foreign automakers, highlighting that Vietnam’s leading EV maker “VinFast has already announced its intentions.”
“While I won’t name some of the other companies that are interested, we are confident that several companies will benefit from this policy.”
In February, VinFast broke ground on its integrated EV manufacturing facility in India’s southern state of Tamil Nadu. The company plans to initially invest $500 million over five years, with an expected capacity of 150,000 vehicles per year, the statement said.
Tesla CEO Elon Musk has said he is “incredibly excited about India’s future.” But he recently postponed a planned trip At the meeting, he was scheduled to meet Prime Minister Narendra Modi, citing “heavy Tesla commitments” as the reason why he could not attend.
“The door is obviously very open,” Singh told Tesla. As competition remains limited in the Indian EV sector, the entry of major players like Tesla will level the playing field, Rajeev Chaba, CEO of MG Motor India, told CNBC.
Robust trajectory
“Electric vehicles are expected to account for almost a third of the Indian PV market by 2030, indicating a robust long-term growth trajectory in the country’s automotive sector,” Counterpoint said.
Modi aims to achieve 30% EV usage by the end of this decade, a target Singh called realistic.
“For passenger cars, it would be more realistic to expect 15 to 20 percent by then,” he said. “But on the whole, if you look at all types of vehicles, including our commercial vehicles among three-wheelers and two-wheelers, we will definitely be above 30%.”
When it comes to India’s two-wheelers and three-wheelers, electric vehicle penetration is increasing sharply, the secretary added.
“We already have one of the highest in the world – almost 50% – for three-wheelers. For two-wheelers, we are already at about 10%-12%,” he noted.
“In passenger cars we have this lag – where penetration is only about 2% so far. That’s why we wanted to boost this process by creating a policy that encourages manufacturers to come to India in larger numbers and bring in their latest products. models and technology.”
India overtook China in 2023 to become the largest market for electric three-wheelers, with over 580,000 sales, the International Energy Agency said in its latest ‘Global EV Outlook’ report.
The country is also the second largest electric two-wheeler market in the world, the report said, with sales growing by 40% in 2023 compared to 2022.
“The Indian 2W EV market is dominated by the top five domestic manufacturers (Ola Electric, TVS Motor, Ather, Bajaj and Ampere), which account for more than 75% of sales,” the IEA said.
Structural problems
Yet there are several structural challenges that need to be addressed to drive electric vehicle adoption, Bain & Company highlights.
India lags significantly behind other countries in terms of charging infrastructure, “with ~200+ EVs per commercial charging point in India, compared to ~20 in the US and less than 10 in China,” Bain points out in a report.
“It’s a challenge,” Singh acknowledged. “But there is now investment in many of our larger cities, and even on some highways, in setting up the infrastructure for battery charging.”
“Our expectation is that battery charging infrastructure will be ubiquitous in the next two to three years.”
The secretary also emphasized that “range anxiety” – or the fear that electric vehicles will not have enough range to reach their destination – is another barrier that must be overcome.
“Range anxiety as an issue will hopefully not prevent the expansion of the EV space and “consumer demand for fully electric vehicles,” he said.