Investments pouring into Indian EV sector

The Covid-19 pandemic and its damage to the Indian economy did not deter the discerning investors from lapping up opportunities in the electric vehicle and e-mobility sector. A large number of financial deals and the funds involved vindicate this fact.

Collective investment done by e2W, e4W, EV component makers, electric commercial vehicles, and last-mile delivery companies was recorded at INR 25,045.31 crores during January-July 2021.

Electric commercial vehicles led the investments with a 32% share. The e-mobility startup Oye! Rickshaw invested INR 3,700 crore and accounted for 15% of the total investment. Omega Seiki mobility claimed 9% as it aims to become a global brand and India’s leading commercial vehicle player. Ashok Leyland wants to shift its entire electric vehicles (EV) business to its 100% subsidiary Switch Mobility in a few years and thus invested INR 1485 crore.

Electric 4W saw an investment of 28% where M&M invested INR 3000 crore making its contribution at 12%. It has already invested INR 1,700 crore in India’s EV business, with another INR 500 crore earmarked for a new research and development (R&D) centre.

South Korea’s Hyundai made an investment of INR 3200 crore in February 2021 while the second announcement of investment was INR 743.31 crore in July 2021. The company’s upcoming electric vehicle is expected to be a mini-SUV.

Investment in January-July in 2021 in EV space in India

*Cumulative

The e2W space saw a total investment of 23% where Triton Electric Vehicle Pvt. Ltd. led the investment with 8%, TVS Motor Company invested 4% and Hero Electric, Ampere, Ather Energy invested 3% each in the seven months of 2021.

EV component makers recorded a total investment of 19% by companies like C4V, Lohum, Ruchira Green Earth and Sona Comstar. The US-based C4V, a leading company in the lithium-ion cell manufacturing sector, invested 16% of the total investment.

“Given the nascent stage of the EV technology evolution, sizable investments are required in R&D and product development, both on the automobile platforms and battery technology. In the backdrop of tightening emissions and increasing awareness on the green environment, EVs are the way forward for the automobile industry. Hence, it is attracting investments from entrenched OEMs and their vendors, as well as startups like OLA and Ather to gain a foothold in the market.

The demand incentives provided under FAME II (which have recently been increased), the launch of state policies and rising fuel prices are making the total cost of ownership of EVs more attractive,” said Shamsher Dewan, vice-president, ICRA.

This change in trend could be attributed to the growth potential it offers to its investors from a long-term perspective along with the change in consumer behaviour as people prefer their own vehicles over shared mobility, an aftermath of the pandemic, increasing popularity of E2Ws due to the performance and futuristic features (such as IoT connectivity) they offer and growing awareness among the younger generation.

“Various states have started giving a lot of good policies and incentives for manufacturing like Andhra Pradesh, Maharashtra, Karnataka and Tamil Nadu. Big players entering the market like Hero, TVS, Bajaj, and Ola give a lot of confidence to investors. The ecosystem, in terms of localisation, has been favourable for the past one year because of which the industry was able to survive despite Covid-19,” Sohinder Gill, CEO, HeroElectric, said.

Funding raised in January-July 2021 period by EV firms in India

The funding in the seven months of 2021 was recorded at INR 1652.15 crore in India’s EV and mobility service companies which was led by Ola Electric with a funding of INR 743.31 crore thereby contributing 45%. This 10-year debt is towards the funding and financial closure of Phase 1 of the Ola Future factory, Ola’s global manufacturing hub for its electric two-wheelers.

Electric two-wheeler maker Hero Electric raised fresh capital in the form of part 1 of Series B funding of INR 220 crore, led by Gulf Islamic Investments (GII) on 11 July 2021 thus contributing 13% in the total funding.

However, investors are still finding it difficult to invest more money in the EV market due to lack of charging infrastructure, import dependence on a few EV components, lack of financing options, and low demand.

High upfront prices of EVs have impacted demand and EV sales remained less than 1% of conventional vehicle volumes. Nevertheless, recent policy announcements by various state governments and the FAME II subsidy support should help e2W and e3W segments in becoming early adopters of EVs in India,” Shamsher Dewan said.

“There are certain internal and external challenges associated with the EV industry like lack of awareness, lack of financing with financers not taking a risk for investing into financing EVs for individuals and meeting the changes that have come in the product portfolio in terms of its production, manufacturing, component supplies,” Sohinder Gill said.

According to an independent study conducted by the CEEW Centre for Energy Finance (CEEW-CEF), the EV market in India will be worth USD 206 billion by 2030 if India maintains steady progress to its 2030 target. This would necessarily entail a total investment of more than USD 180 billion in vehicle manufacturing and charging infrastructure.

Source : Economic Times