How EVs are becoming a lucrative option for Private Equity Investors | The Financial Express

How EVs are becoming a lucrative option for Private Equity Investors

The two-wheelers and three-wheelers segment is likely to see the most growth in the EV industry because of fixed-duty cycles.

These EV fluids will be used by Piaggio’s range of electric passenger and cargo models and Switch Mobility’s electric models like Switch EiV 12 and Switch EiV 22.
The EV industry has racked up investments of over $6 billion by 2022

By: Pratik Kamdar, Co-Founder, Neuron Energy

There is no doubt that the future of India’s transportation is going to be electric. There is a slow but gradual shift towards electric vehicles amid high fuel prices, increasing choices among people to switch to e-mobility and policy push from the government. As India looks to cut down its massive carbon emissions, its target is to have at least 30% of its private vehicles, 70% of its commercial vehicles and 80% of its 2 and 3-wheelers electric by 2030.

As India’s EV growth story leaps and bounds, private equity investors are cashing in on the current phase in India. While the country has seen fewer private takers for electric vehicles due to the high costs and lack of charging infrastructure, three-wheelers and two-wheelers form the majority of the EV share in India. The two-wheelers and three-wheelers segment is likely to see the most growth in the EV industry because of fixed-duty cycles.

The EV industry has racked up investments of over $6 billion by 2022. According to a report by the Indian Private Equity & Venture Capital Association, it is estimated that the industry will gain $20 billion by 2030. A study by CEEW Centre for Energy Finance (CEEW-CEF) says that while aiming to achieve the 2030 target of increased adoption, the Indian EV market will need investment worth $180 billion in charging infrastructure and vehicle production. The Niti Aayog has also estimated the EV financing market in India to be worth $50 billion by 2030.  

The EV ecosystem is huge, comprising vehicle and auto component manufacturing, research and development (R&D) among others. Many parts of the entire ecosystem are growing at a rapid pace as many big companies, as well as startups, aim to facilitate and achieve a lot at various stages. India Energy Storage Alliance’s report projects the EV battery market’s growth at a CAGR of 30% till 2026. Thus, it is a lucrative business for private equity firms as there are a lot of avenues to make money, most of the companies need funding and the returns for investors are huge.

Projections paint a strong growth story 

Private Equity investors have plenty of reasons to put their money in the fast-growing Indian EV industry. If India intends to meet the ambitious targets it has set for itself by 2030, then its EV market is estimated to be worth $206 billion, as per a study conducted by CEEW-CEF. Another IVCA-EY-Induslaw report has predicted that the EV industry may create 10 million direct jobs and 50 million indirect jobs by 2030. The Automotive Mission Plan of 2016–26 adds that the industry may add more than 12% to the GDP by 2026. 

Immense scope of growth

Private Equity Investors are attracted by a number of incentives to invest in India’s EV story. With 100% Foreign Direct Investment allowed in India’s two-wheeler EV segment, it makes for the largest untapped market in the world. The government has also given permits for 6,315 electrical buses, sanctioned 2,877 charging stations in 68 cities, and 1,576 charging stations across nine expressways and 16 highways. Potential is also ripe for huge growth in the market as indigenous manufacturing of lithium-ion batteries will help reduce costs and make it a viable option for those looking to buy electric 2 or 4-wheelers.  

Boost in EV sales 

India is expected to record 10 million annual EV sales by 2030, registering a compound annual growth rate of 49% in the decade. With sales of 2.77 lakh units, two-wheelers registered a 404% increase in sales during April-September 2022 compared to the sales in the corresponding period last year. The return on investment in electric three-wheelers is greater due to their extensive use in public transportation.

Three-wheeler sales also saw a jump as Q1FY23 (April-June 2022) reported a sale of 72,405 electric three-wheelers compared to 4,016 units in the corresponding period last year. 2021-22 had also seen EV sales rise 3 times from 1.34 lakh to 4.28 lakh in 2020-21. One of the reasons for the higher EV sales is due to govt’s Faster Adoption and Manufacturing of Electric Vehicles (FAME) India Scheme Phase II which provides incentives for the purchase of electric vehicles. 

The EV industry also continues to be a magnet for private equity players globally as $9.45 billion were invested by October 2022 in electric vehicles and components. Localising lithium-ion battery production, developing supply chains and more emphasis on R&D are the need of the hour to increase the adoption of EVs in the country. Ever-increasing investments in the sector will definitely allow EV companies to take greater strides in turning these goals into reality. 

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First published on: 29-01-2023 at 09:22 IST