Electric vehicle penetration in India may still be at a nascent stage. The electric passenger vehicle (ePV) penetration in the last financial year, for instance, was just 1.8 per cent. But aided by slew of new launches lined up this year, growth is expected to pick up pace and the ePV penetration could reach 15 per cent by 2030, according to a study by BNP Paribas.
Homegrown Tata Motors, which currently leads the ePV market, rival Mahindra and Mahindra are set to launch several new ePVs over the next 12-18 months. India's largest car maker Maruti Suzuki too is expected to launch its first electric car in 2025.
Limited charging infrastructure across the country has been a bottleneck for driving EV penetration. But another major reason is the cost and the price differential between EV and their ICE (internal combustion engine) counterparts, noted BNP Paribas.
For instance, the average price of Tata Nexon EV is almost 60 per cent higher than its ICE variants. Similarly, compared to the ICE variant, the price of Tata Tiago EV is 55 per cent higher, it pointed out.
Launching affordable EVs could accelerate demand for EVs in a price sensitive market like India, analysts say. "We see inflection in electrification to be at least a year away. FY25 will be a critical year for the industry given multiple EV model launches (some of which could be at lower price points) from market leaders, Tata Motors, Hyundai, and M&M and most importantly the potential entry of Maruti Suzuki, the market leader in the ICE segment," said Kumar Rakesh, research analyst at BNP Paribas Securities India.
A potential entry of Tesla in India could also accelerate India's EV value chain localisation, BNP Paribas feels.
Reuters had reported in April that Elon Musk was likely to announce $2-3 billion investment in India to set up a new factory. Tesla's chief Elon Musk, however, deferred his visit to India, citing work obligations.
Rakesh says if Tesla does set up its next plant in India, it could drive significant localisation and accelerate India's EV manufacturing capabilities. The cost of car manufacturing in India is already attractive relative to peers, given that the cost of setting up plants in the country is lower. Tesla's entry could lower EV manufacturing costs and thus will be positive for the entire industry, feels Rakesh.
"While disruption risk to incumbents remains from Tesla’s entry, given the low penetration of passenger vehicles in the country, we see the entry of a global player as positive for driving motorization rate, and overall industry demand," he said.
Rakesh pointed to the sports utility vehicle (SUV) market, which has seen the highest number of model launches in recent years. New launches and entry of new players has driven a surge in SUV sales in India, but this has not impacted incumbent players, he noted.
As such, India's share in global automotive growth is seen rising over the next few years. BNP Paribas expects India's automotive industry to grow at a compounded annual growth rate of 7 per cent over 2023-2027, which is much higher than the 1.3 per cent CAGR growth that S&P Mobility expects for the global auto industry in the same period.
By 2027, India will contribute 20 per cent of the global incremental automobile production, estimates Rakesh.
