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India's electric vehicle market is charging up

2022 may be the year when mobility in India really starts to get electric.

While the big automakers focused on high growth markets in the West and Asia continue to grab headlines, new companies electrifying motorcycles, auto-rickshaws, and passenger cars are poised for growth in India.

Companies like EVage, Gayam Motor Works (and its Biliti Electric subsidiary), Power.Global are just a few of the new entrants that have emerged to compete in India's massive electric mobility market over the past year.

The trend is continuing into 2022.

Ola Electric, a manufacturer of electric scooters and a spinout from the ridesharing company Ola Cabs, is now worth $5 billion thanks to a new $200 million investment announced on Monday.

Meanwhile, Ather Energy, which develops electric vehicles and charging equipment, recently received the equivalent of a $55 million investment from the big motorcycle manufacturer HeroMoto Corp., according to reports in local Indian media.

There were more than 470 electric vehicle companies registered in India as of March 2021, according to research notes from the analyst firm Sanford C. Bernstein & Co. cited by TechCrunch.

"There is a significant interest that has emerged in this space owing to Government's policy push. [The Indian government] has been pushing companies to shift to EVs as a broader policy of reducing dependance on crude and to help reduce urban pollution," wrote Venugopal Garre, an analyst with Sanford C. Bernstein & Co in an email. "The driver for Auto incumbents however now getting serious about EVs is the risk of losing market share long-term, as startups such as Softbank backed Ola Electric are scaling up and gathering funding. Most of the EV ecosystem is currently being developed around the motorbike ecosystem which is a large market and easier to handle for EV companies given low range requirements."

In part, new entrants are responding to the powerful signals from the Indian government referenced by Garre.

The nation has boosted subsidies for electric two-wheelers through the Department of Heavy Industries (which is a great band name), providing incentives for Rs 15,000 ($200) per kilowatt-hour. Up to 40 percent of the cost of an electric vehicle is now covered under the cap.

There's also surging demand from delivery services like the Walmart-owned Flipkart and the $5.6 billion Indian food delivery giant, Swiggy.

So far, these companies have not seen enough good options to meet the requirements they've put in place.

“It’s not plug and play,” said Mahesh Pratap Singh, head of sustainability and responsibility at Flipkart. “When we scanned the landscape there wasn’t much from a supply and reliability perspective, or a viable commercial option out there. That led us to believe you’ve got to put one big bold ambition out there and really nudge the entire ecosystem and shape it, rather than just being a consumer.”

India needs more than just better electric vehicle options -- the country is also woefully behind in the development of its charging infrastructure.

The country will have to install more than 400,000 charging stations to meet the flood of over 2 million electric vehicles that could be on Indian roadways by 2026, according to a report from Indian business organizations and the consulting service Grant Thornton Bharat cited by Quartz.

Government and private industry are beginning to step up. A 2021 directive required all public use buildings -- including malls, hospitals, hotels, offices, and schools -- to set aside 5% of their parking spaces for electric vehicle charging.

Plans are in place to add electric vehicle charging stations at roughly every 60 kilometers of highway. And India's state-owned oil company is on course to build 10,000 electric vehicle chargers over the next three years, Quartz reported.

The race to capture a share of this market remains open, but winners are beginning to emerge, according to Garre.

"In the motorbike space its Hero Electric – an independent unlisted company, not linked to Hero MotoCorp, followed by Ampere, a startup now owned by a listed company and Okinawa, another start up lead. The other two catching up are Ola electric and Ather Energy," Garre wrote. "In the [passenger vehicle] space, it is not appropriate to consider any company as leading the race, although domestic OEMs such as Tata Motors and M&M have a better local presence and pipeline."

Despite the presence of some early leaders, which manufacturer will ultimately win the EV mobility race in India is anyone's guess. The number of electric vehicles in India should hit 25 million by 2025 and 70 million by 2030, according to estimates from Sanford C. Bernstein analysts. That's up from about 1 million electric vehicles today.

"In the motorbike space, there is immense opportunity for new OEMs, as the product is more like consumer electronics. We see the EV penetration in annual motorbike sales to be over 60% by 2030 – providing a large market opportunity," Garre wrote. "There is room for innovative models to emerge across various sub-sectors catering to either consumers or commercial requirements. There is also room for service providers – who may develop a battery charging/swapping ecosystem and an opportunity for financial sector companies to participate in a leasing ecosystem."


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