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Ratings Agency ICRA recently said that the electric two and three-wheeler volumes are expected to account for 8-10% and 30% of new vehicle sales in the country by 2025, respectively. The reason it cited was low operating cost and attractive subsidy support, among others. But the penetration levels in cars and trucks are likely to remain low in the medium-term.
The agency said that globally, EVs now account for 4.4% of new car sales during CY2020 and their share is likely to cross 5% this calendar year.
As electric two-wheeler (2W) and three-wheeler (3W) segments have a relatively lower dependency on commercial charging infrastructure because of a limited span of commute, they can also adopt battery swapping to allay charging-related concern for commercial applications.
Also, operating cost metrics continue to favor electric 2W and 3W for commercial operations. In fact, the e3W over the life of the vehicle will be much more cost economical than its CNG counterparts, says ICRA.
However, it believes that while the transition to EVs is inevitable, the pace of penetration will be relatively gradual in India unlike global markets like China, Europe, and the US.
Mr. Shamsher Dewan who is the Vice President and Group Head – Corporate Sector Ratings, ICRA, said that it was heartening to see positive and proactive policy measures taken by the central government as well as various state governments to accelerate EV transition in India.
However, affordability and range anxiety remain key challenges, especially in the passenger car and truck segment and penetration levels are likely to remain low over the medium term.
He also mentioned that the absence of a local supplier ecosystem and high dependency on imports make things tougher. Nonetheless, segments like scooters, 3W and small commercial vehicles have already achieved total cost of operations (TCO) parity with conventional vehicles due to the low operating cost and attractive subsidy support, and are thereby expected to become early adopters of EVs in India. The share of EVs is likely to reach about 8-10% level in 2W, and over 30% in 3W by 2025. The penetration levels in cars and trucks are likely to remain low in the medium term.
Lack of financing remains a key deterrent to higher EV penetration and that battery prices need to be reduced by a further 40 percent to make any meaningful inroads in the Indian electric car market, noted ICRA. The rating agency expects the recently announced production linked incentive (PLI) scheme for auto components and ACC batteries to provide much-needed impetus for localising manufacturing in the sector.