India Ratings and Research (Ind-Ra) opines that the total demand for electric vehicles (EV) in India could grow at a CAGR of 39% during FY22-FY32. The proliferation of commercial EV charging stations, which provide plug-in chargers on the road, would play a pivotal role in EV penetration. The agency believes EV penetration for the overall automobile industry would reach 40% by FY32 from about 4% in FY23. India would require around 63,000 charging stations and cumulative investments of INR269 billion for setting up the charging stations over the next five years to cater to the growing demand for power for operating EVs. In the next decade, in line with the growth in EV sales, the agency believes the country could need 0.23 million charging stations, entailing a total investment of INR1.05 trillion by FY32. Several corporates and foreign players have started undertaking capital expenditure to set up charging infrastructure to capture a share of this growing market.
Lower Total Cost of Ownership (TCO) of EVs – Ind-Ra expects the TCO in present value terms (discount rate 5%) for two-wheelers to decline by 40% over the typical life cycle of seven years (assuming running/years of 8000km, mileage of 40km/litre for internal combustion engine  vehicle and range of 74km/charge for EV, loan-to-value of 80%, applicable expenses such as maintenance, insurance, taxes, etc and Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) incentives for EV). On similar lines, for passenger vehicles (personal usage) and passenger vehicles (commercial usage), the calculations indicate savings of 10% and 30%, respectively, in the TCO. Ind-Ra has considered the battery replacement cost for the vehicles in the third and sixth years and the vehicle’s feasible running life to be seven years.
Favourable Policies for EV Demand & Infrastructure: Government schemes such as FAME and production linked scheme for advance chemistry cells, the government’s focus on expanding the footprint of the electric charging infrastructure, and sustained increase in the prices of petrol and diesel could lead to secular growth in the demand for EVs. The reimbursements through the FAME scheme aim to proactively promote more EV sales by reducing the TCO of these vehicles. State governments are also offering capital subsidies for installing charging stations, which will help to improve the electric vehicle charging infrastructure in the next three-to-five years. In addition, state governments have been offering capital subsidies for installing charging stations, which will help to improve the EV charging infrastructure in the next three-to-five years.
Cost of Setting Up Charging Stations: A typical public charging station has a slow charger of 3kwh power, two medium chargers of 20kwh power, and two fast chargers of 60kwh power. An electric vehicle supply equipment management software is required to be installed in the chargers, and the commercial electricity connection charges are high because of high voltage requirements for the fast charger. The costs are estimated to go up in line with inflation as well as demand pick-up in the EV industry.
Charging Stations to Witness Investments of INR1.05 trillion Over the Next Decade: To estimate the number of charging stations that need to be set up and the investment required for the same, Ind-Ra has assessed the total power requirement, using the agency’s internal estimates of the EV sales for next 10 years and proportion of EV owners across vehicles who would need access to charging stations. The below table highlights Ind-Ra’s assumptions regarding the number of charging stations needed for the entire population of EVs across vehicle types in FY23. Ind-Ra expects the proportion of EVs that would utilize charging stations to gradually increase over the long term, with the growing penetration of charging stations and battery swapping stations in the EV ecosystem, supported by the push from the government; the same has been considered in the agency’s calculations.
The agency has estimated the supply of electric vehicle charging stations based on the installation cost of an EV charging station, the capacity of each station, and capacity utilization (likely to be 10% initially, with a gradual improvement). Thus, considering the demand-supply dynamics, Ind-Ra has calculated the number of charging stations that would be required to cater to EV sales and the demand for charging infrastructure. Ind-Ra has increased the number of charging stations by a factor in order to take into consideration the competition from other charging station players and geographical distribution of the charging stations in tier II/III cities as well.
As per government data, there were about 1,000 commercial charging stations in the country at FYE22. The agency opines that, in the next decade, India might need 0.23 million charging stations, entailing a total investment of INR1.05 trillion by FY32 to cater to the growing demand for EVs and the resultant requirement of power.
The proliferation of charging stations in India would lead to the growth of charging station manufacturers as well as charging station operators (CSO). Charging station manufacturers would be responsible for providing complete charging point solutions for public and private charging, including hardware and software installation, maintenance of the hardware, and additional support services. Some of the major charging infrastructure manufacturers are Delta Electronics Inc, ABB India Ltd, Exicom Power Solutions Ltd, and Okaya Power Ltd. CSOs would be responsible for operating a network of chargers, which includes electric vehicle charging, customer support, and network solutions (standalone or in partnership with a network service provider). The Ministry of Power has categorized electric vehicle charging as a service, and thus, the charging station providers would not need licensing under the Electricity Act, of 2003. Some of the companies that offer CSO services are Energy Efficiency Services Limited, Tata Power Ltd, and Magenta Group Ltd.
The NITI Aayog has proposed to categorize the loans to purchase EVs under the priority sector lending segment. The inclusion of EVs under this category would reduce the cost of finance and also provide an impetus to demand, thus increasing the penetration of EVs in India. However, lenders need to be cautious in the financing of EVs and EV charging stations, considering the nascent stage of the segment and the risks involved.
