EV Industry in India: Opportunities and Challenges
2021-08-24

The electric vehicle (EV) industry in India is emerging as a very promising area for investment as the massive automotive industry of the country is in search for more efficient, economical, and green solutions. This article looks into the key trends, opportunities for investors, as well as challenges faced by the country in shifting to more sustainable solutions.

Overall, the entire Indian automotive market ranks 5th globally, and it is set to expand even further, as India’s economy steadily grows. Nevertheless, as of 2021, the EV industry is only roughly 1% of the total market in terms of sales numbers. This, however, is bound to change, as the reliance on traditional vehicles utilizing fossil fuels is not sustainable in the long term and discouraged by the authorities as they attempt to develop more environmentally friendly policies. As the country is urged to comply with international policies and agreements to tackle environmental challenges and global climate change, the authorities in India will continue to offer more fiscal and non-financial incentives that smaller, newer as well as larger international automotive EV producers may access.

Currently, the majority (around 90%) of electric vehicles in operation in India are domestically produced electric scooters, and such scooters do not require registration or licenses. Primarily, the sales of these scooters were driven by the favorable policies and subsidies provided by the authorities to domestic producers. On the regional level, more than 25 states have already provided a clear strategy framework to transform the shape of India’s automotive industry.

Nevertheless, today there are still a number of challenges that the EV industry is facing in India. While some of them can be turned into opportunities, the rest will require more structural modifications. Among the key difficulties, we highlight:

-          Inadequate infrastructure: There is a limited number of electric charging stations across the country;

-          Reliance on battery imports;

-          Lower mileage of EV vehicles;

-          Cost of vehicles and supplies;

-          Limited options.

The future prospects will rely primarily on two factors: the availability of capital and financing options by new and existing EV producers, as well as the future financial and non-financial incentives by the authorities on both federal and local levels. Infrastructural upgrade and the attractiveness of the market for more industry players will allow the EV market in India to realize its full potential.

At PHC Advisory we constantly monitor the regulatory and fiscal updates in the Indian market. If you would like to know more about the most recent tax developments in India, please contact us at info@phcadvisory.com.

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