India's electric vehicle industry records $ 3.37 Bn investments during JJ'21
The pandemic of Covid-19 and its economic impact on India did not deter astute investors from pursuing opportunities in the electric car and e-mobility industries. This is backed by the volume and value of financial transactions.
Between January and July 2021, e2W, e4W, EV component manufacturers, electric commercial vehicle manufacturers, and last-mile delivery services invested a total of Rs. 25,045.31 crore (US$ 3.37 billion).
Electric commercial vehicles took the lead with a 32% share of investments. Oye! is an electric vehicle startup. Rickshaw aims to invest Rs. 3,700 crore (US$ 499.22 million), or 15% of the total. Omega Seiki Mobility held 9% of the market, and the company aspires to become a global brand and India's largest commercial vehicle manufacturer. Ashok Leyland intends to divest its entire electric vehicle (EV) business to Switch Mobility, a 100 percent subsidiary, over the next five years, with an investment of Rs. 1,485 crore (US$ 200.36 million).
M&M invested 28% in Electric 4W, contributing Rs. 3,000 crore (US$ 404.77 million) and contributed 12%. It has already spent Rs. 1,700 crore (US$ 229.37 million) in India's electric vehicle (EV) sector, with an additional Rs. 500 crore (US$ 67.46 million) set aside for a new research and development (R&D) centre.
Hyundai Motor Company of South Korea announced a February 2021 investment of Rs. 3,200 crore (US$ 431.76 million) and a July 2021 investment of Rs. 743.31 crore (US$ 100.29 million). The company's future electric vehicle is expected to be a compact SUV.
The e2W space received a total investment of 23% in the first seven months of 2021, led by Triton Electric Vehicle Pvt. Ltd. with 8%, TVS Motor Company with 4%, and Hero Electric, Ampere, and Ather Energy with 3% each.
C4V, Lohum, Ruchira Green Earth, and Sona Comstar all invested 19 percent in EV component manufacturers. C4V, a prominent manufacturer of lithium-ion batteries based in the United States, donated 16% of the total investment.
“Given the early stages of EV technology development, large investments in research and development, both in terms of automotive platforms and battery technology, are necessary. EVs are the way forward for the automotive sector in the face of tougher emissions regulations and more environmental awareness. As a result, traditional OEMs and their vendors, as well as startups such as OLA and Ather, are investing in the industry to establish a presence. The overall cost of ownership of electric vehicles is decreasing as a consequence of demand incentives under FAME II (which were recently doubled), state legislation, and rising fuel prices.” Mr. Shamsher Dewan, ICRA's vice-president, stated.
This trend shift can be attributed to the long-term growth potential it offers investors, as well as changes in consumer behaviour as people prefer their own vehicles to shared mobility as a result of the pandemic, the increasing popularity of E2Ws due to their performance and futuristic features (such as IoT connectivity), and growing awareness among the younger generation.
“Numerous states, including Andhra Pradesh, Maharashtra, Karnataka, and Tamil Nadu, have begun to implement a variety of effective manufacturing rules and incentives. The entry of significant enterprises such as Hero, TVS, Bajaj, and Ola encourages investors. The sector has been able to thrive despite Covid-19 due to a favourable ecosystem in terms of localization during the previous year, according to Mr. Sohinder Gill, CEO, HeroElectric.
India's EV and mobility service providers raised Rs. 1,652.15 crore (US$ 222.91 million) in fundraising in the first seven months of 2021, led by Ola Electric, which raised Rs. 743.31 crore (US$ 100.29 million) and contributed 45 percent. This 10-year loan will be utilised to finance and complete Phase 1 of the Ola Future facility, which will serve as the company's global manufacturing hub for electric two-wheelers.
On July 11, 2021, Hero Electric raised new capital in the form of part one of a Rs. 220 crore (US$ 29.68 million) Series B investment deal led by Gulf Islamic Investments (GII), which accounted for 13% of the total amount.
“As a result of a lack of charging infrastructure, import dependence on a few EV components, a lack of financing options, and limited demand, investors remain cautious to increase their investment in the EV market. Demand for electric vehicles has been stifled by high upfront prices, with EV sales accounting for less than 1% of total vehicle sales. However, recent policy announcements by numerous state governments, as well as FAME II subsidy assistance, should help the e2W and e3W segments become early adopters of electric vehicles in India,” Mr. Shamsher Dewan stated.
“The EV industry faces a number of internal and external challenges, including a lack of awareness, a lack of financing, with financiers unwilling to take a risk on financing EVs for individuals, and adapting to changes in the product portfolio in terms of production, manufacturing, and component supply,” Mr. Sohinder Gill explained.
According to independent study conducted by the CEEW Centre for Energy Finance (CEEW-CEF), if India achieves its 2030 target, the Indian electric vehicle industry will be worth US$ 206 billion by 2030. This will require a total expenditure of more than US$ 180 billion in vehicle manufacturing and charging infrastructure.