India’s EV sector revenue pool expected to hit $100 billion by 2030 | The Financial Express

India’s EV sector revenue pool expected to hit $100 billion by 2030

Penetration to reach 35-40% from the current 2%

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Indian EV sector has already seen $3.7 billion private equity and venture capital (PE/VC) investments over the past three years, and this number looks set to increase significantly as the industry transforms.

India’s electric vehicle (EV) value chain revenue pool is expected to reach a size of $76-100 billion by 2030, potentially translating to $8-11 billion profit pool, according to a report by Bain & Company.

“The Indian automotive market is poised for rapid EV growth, due to the convergence of factors including government incentives, improving cost-competitiveness and original equipment manufacturer (OEM) investment, along with increased customer readiness and awareness,” the report noted.

Deepak Jain, a partner at Bain & Company and co-author of the report, told FE that contributors to the auto revenue and profit pools in 2030 will be significantly different from those in today’s automotive industry. “While 40-50% of revenue pool will come from auto OEMs, it will be significantly altered in the nature and composition,” he said. “New business opportunities such as battery (13%), charging (8%) and mobility (6%) will emerge. Unified platforms will become the next big play as many EV ecosystem players are looking for forward or backward integration to create a broader e-mobility ecosystem.”

Indian EV sector has already seen $3.7 billion private equity and venture capital (PE/VC) investments over the past three years, and this number looks set to increase significantly as the industry transforms.

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Findings from the report indicate that 35-40% of all vehicles sold in India by 2030 will be EVs, up from 2% in 2022. “Two-wheelers and three-wheelers will be vanguards for EV adoption, achieving 40-45% penetration by 2030,” Jain said. “This is driven by several factors, including highly competitive total cost of ownership (TCO), limited need for public charging infrastructure given the adequacy of home charging for daily use, investments in building compelling product offerings with comparable performance to internal combustion engine (ICE) vehicles, and early adoption by delivery and logistics fleets.”

The four-wheeler electric passenger vehicle (PV) segment (broadly electric cars) is expected to fall behind the adoption curve. Higher requirements for product performance and build-out of public charging infrastructure, plus higher capital cost and TCO gaps, serve as barriers to adoption. This segment is still expected to account for 15-20% of total PV sales by the end of this decade.

But despite lower penetration and volumes, electric PVs will constitute the largest segment of the revenue pool of about 41% by value, followed by electric two-wheelers (33%).

The report added that electric buses will see a penetration curve similar to that of electric PVs by 2030, driven in large part by state transport undertakings focused on fleet electrification for intracity transport.

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“While we believe that deep EV penetration in India by 2030 is a realistic scenario, five key areas need to align to make it a reality,” added Mihir Sampat, partner at Bain & Company and co-author of the report.

These are:
—Global battery prices need to fall 20-30% over the long term to drive competitiveness;
—OEMs need to build a sustainable EV-specific business model for the Indian market;
—A sustained focus on safety, particularly for batteries;
—Continued regulatory and incentive support from governments;
—India’s charging infrastructure will need to significantly expand to support the projected volume of EVs on the road.

This electrification-led disruption of the automotive value chain in India will create several opportunities for investors and new participants. The report outlined six emerging business models:

  1. Battery cell manufacturing, packaging and BMS: India’s EV industry today largely relies on imported battery packs for vehicles. But there is a push to localise large parts of the battery value chain and increase domestic value add. This is partly driven by government localisation targets and incentives, opening opportunities for new players to participate.
  2. EV components: Substantial demand for localised EV-specific components has created opportunities for component suppliers. Players choosing to make an EV component play will have opportunities to extend global markets and non-automotive consumer segments, making this an attractive long-term opportunity.
  3. Software and telematics: The Asia-Pacific has the fastest-growing automotive telematics market in the world, with a CAGR of approximately 31%. As the third-largest provider after China and Japan, India’s telematics market was approximately $4.5 billion in 2021 and is poised to grow at a CAGR of 30% over the next five years. There is significant room to grow, with multiple emerging applications across predictive and preventive maintenance, driver monitoring, and other vehicle-tracking use cases.
  4. New-age OEMs: The emergence of new, EV-first OEMs has been playing out within the two-wheeler and three-wheeler space in India, where multiple new players such as Ampere, Ather, Okinawa and Ola have been early movers and are looking to challenge ICE incumbents, for share in this space. These new players have attracted and developed talent and capabilities in EV-critical areas that traditional OEMs are relatively weaker in, such as software and telematics.
  5. EV charging infrastructure: Still at its infancy, fragmentation and incentives for participation in India’s EV charging infrastructure market have created attractive opportunities for both disruptors and conglomerates. While a viable economic model for charging point operation or battery swapping is yet to emerge, it is likely that a sustainable model will develop, allowing a portion of value accrued through the significant operating cost savings for consumers to go to charging infrastructure players over time to build a sustainable and scalable business.
  6. Mobility-as-a-Service (MaaS): The TCO benefits of EVs combined with customers’ emerging preference for green and sustainable solutions will lead to the rise of electric mobility offerings in the Indian market. This will encompass B2C electric ride-hailing offerings, rental mobility offerings, and B2B MaaS platforms seeking to provide an integrated solution for fleet operators to electrify their fleets. A sustainable and replicable city-level operating model could allow rapid growth and scale given the rise in underlying demand across these segments and the professed push for electrification.

“India’s automotive market is on the cusp of full-scale transformation. Stakeholders with the vision and agility to navigate and differentiate in a rapidly evolving landscape have multiple opportunities, but there is no single roadmap for stakeholders to follow. Each will have to calibrate which parts of this profit pool they want to participate in, control, or influence based on their starting points and end objectives,” the co-authors of the report added.

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First published on: 15-12-2022 at 06:15 IST