Can India Become A Key Market For Electric Vehicles?

by Trefis Team
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According to IHS Markit, “India will become the world’s fourth largest market in domestic car sales in 2017,” with an estimated sales of 3.8 million passenger vehicles — higher than the 3.64 million figure for Germany. The country now has nearly 35 car manufacturers/sellers and this number is likely to increase to 55 by 2020. Increasing population and economic development are the key factors driving car sales in the region. The country is also focusing on electric vehicles to tackle the pollution problem in its urban areas and has committed to have only electric cars by 2030. This makes the region a very lucrative electric car market, after China, given the growth potential of passenger cars and two wheelers. Several automakers are looking to introduce electric versions of their models in the region and recently Daimler AG announced that it could introduce electric trucks in the country. However, the company was skeptical that India did not have the necessary infrastructure to support electric vehicles. Given the government’s ambitious plan to go “all-electric” for cars by 2030, the infrastructure is likely to be put in place in the next decade and this could make the region a strong market for other electric vehicles.

Infrastructure, Value For Money Likely To Be Key Drivers

While the Indian government is working on a policy for electric vehicles which is likely to be announced by the end of this year, the country does not have the necessary infrastructure in place to support a large volume of electric cars. India has only 100 charging stations currently, most of which are in Bangalore, one of the key cities in the country.  A much larger network of charging stations, spread out geographically, is crucial for the success of the government’s goal to achieve 100% electric cars by 2030.  Further, Indian consumers are value conscious and there might not be takers for electric cars if they are more expensive compared to petrol and diesel versions. The market for budget cars is likely to grow in the region, forcing foreign players to build cheaper versions of their models. India’s largest auto manufacturer Maruti-Suzuki, recently announced that it would be setting up a lithium-ion battery manufacturing unit in India to support production of its electric vehicles.  The company is expected to launch electric versions of its models by 2020, however it is not very optimistic about the government’s target. Maruti Suzuki offers “value models” for Indian consumers and the company believes that cost will be an important factor in adoption of electric vehicles in the region.  Another local player – Mahindra and Mahindra (which recently tied up with Ford Motor Company (NYSE: F)) — has been manufacturing electric vehicles in the country for more than a decade, however does not generate significant revenues from this segment. For foreign auto manufacturers to succeed in India, a focus on building budget electric cars will be crucial.

India’s growing economy and increased government focus on electric vehicles can make it a key market for this segment. However, the necessary infrastructure needs to be in place and auto makers need to adapt to the unique customer preferences in the region to capture this growth potential.

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