At Rescon Partners, we specialize in delivering insightful industry analysis that helps businesses navigate complex markets. This blog is a product of one such insightful exercise, where we delved into the electric vehicle (EV) industry in India. As global momentum shifts toward sustainable transportation, understanding the factors influencing India’s EV adoption is crucial for businesses looking to seize opportunities in this growing market.

India’s EV Market: Progress and Comparisons

India’s electric vehicle market has made notable strides, especially in the two- and three-wheeler segments. In 2023, India overtook China to become the largest market for electric three-wheelers, with over 580,000 units sold – a 65% increase from 2022. Government incentives and lower ownership costs drove this growth. However, the adoption of electric vehicles remains sluggish in the other two segments. In the case of four-wheelers, India is way behind compared to global leaders like China and Europe, as illustrated in the graph below.

 

 

This raises a key question: Why is India excelling in some EV categories but falling behind in others?

The Rise of Electric Two- and Three-Wheelers in India

India’s strength lies in its extensive two- and three-wheeler markets, driven by factors like affordability, dense urban centers, and government incentives. Three-wheelers, often used in public transportation and goods delivery, saw a significant boost in 2023, driven by government incentives such as the FAME-II Scheme and the Electric Mobility Promotion Scheme (EMPS), along with lower ownership costs. Meanwhile, China’s electric three-wheeler sales declined by 8% during the same period, highlighting India’s strategic advantage in accelerating the electrification of this segment.

India, the world’s second-largest electric two-wheeler market, saw sales surge by 40% in 2023 compared to 2022, driven by domestic giants like Ola Electric, TVS Motor, Ather, Bajaj, and Ampere, which captured over 75% of the market. This rapid expansion reflects robust policy backing, including the FAME II scheme.

Europe, however, has yet to match the scale of India’s electric two- and three-wheeler market, with countries like Germany, France, and the Netherlands only recently beginning to prioritize electric mobility in urban centers.

Why Is India Lagging in Four-Wheeler Adoption?

While India is making progress in the three-wheeler sectors, it lags behind Europe and China in four-wheeler (4W) EV adoption. Norway and Sweden, for example, boast adoption rates of over 60% in the four-wheeler category, while India’s remains below 1%.

This disparity is largely due to several challenges unique to the Indian market:

  • High Upfront Costs: India is a price-sensitive small car market and therefore high upfront cost becomes a limiting factor.
  • Limited Charging Infrastructure: Range anxiety continues to be a major barrier, with India’s charging network still in its nascent stages, particularly outside major urban areas.
  • Financing Hurdles: Limited financing options, higher interest rates, and a lack of awareness around EV incentives deter potential buyers

Key Factors Hindering India’s Overall EV Adoption

Several systemic factors are slowing India’s progress in broader EV adoption:

  • Supply Chain Dependence: A reliance on imported components, particularly battery cells, keeps costs high.
  • Underdeveloped EV Charging Infrastructure: Despite initiatives like the FAME scheme, the current 6,500 public charging stations serve over 2.8M EVs, resulting in a ratio of 1 station per 430 EVs—well below the global standard of 1 per 6 to 20 EVs. The uneven distribution of these stations, with significant concentration in urban areas, worsens the challenge.
  • Underdeveloped Repair Networks: EV repair infrastructure is still underdeveloped, leading to longer repair times and lower consumer confidence.
  • Preference for hybrid vehicles: Based on JATO Dynamics India Data, hybrid car sales, including strong and plug-in versions, rose by 27% from January to July 2024, reaching 51,897 units, up from 40,811 units in the same period last year. This increase indicates a growing preference for hybrids over fully electric vehicles.
  • Resale Uncertainty: The resale market for electric vehicles remains underdeveloped, contributing to skepticism around long-term value.

What Needs to Change for India to achieve accelerate adoption?

For India to bridge the gap in four-wheeler EV adoption and continue leading in the two- and three-wheeler markets, several key areas require attention:

  • Government Policy Stability: Long-term, consistent EV policies, especially regarding subsidies, are essential to provide confidence to both manufacturers and consumers
  • Localized Supply Chains: Reducing dependence on imported components by investing in local production can lower costs and make EVs more affordable
  • Charging Infrastructure Expansion: A more extensive network of charging stations, particularly in commercial areas like parking lots and shopping centers, can encourage adoption
  • Financing Innovations: Collaborations between Original Equipment Manufacturers (OEMs) and financing companies can make it easier for consumers to purchase EVs with competitive interest rates and flexible terms
  • Repair and Maintenance Networks: Building a robust, nationwide network of EV repair centers can improve customer confidence and reduce lead times for repairs
  • Exploring New Revenue Streams: OEMs could focus on developing new revenue streams through software services and value-added features, such as vehicle telematics or integrated digital ecosystems

Conclusion

India has the potential to become a global leader in electric mobility, particularly in the two- and three-wheeler segments. With the right mix of government policy, infrastructure development, and localized supply chains, India can also overcome the current barriers to four-wheeler adoption.

Through our Business Research services, we provide clients with actionable insights, market entry strategies, competitive analyses, and financial evaluations to ensure success in this dynamic sector. Interested in learning more about how we can support your business goals? Contact us at info@resconpartners.com for a consultation.

bushra.akhtar@resconpartners.com | + posts

Bushra specializes in conducting comprehensive analyses of companies across various industries and regions. With expertise in helping clients formulate long-term strategies using the Balanced Scorecard framework, she excels in setting up and managing IMPACT from Spider Strategies for clients, ensuring sustainable growth and performance.

ritu.jhangiani@resconpartners.com | + posts

Ritu specializes in “Go-to-Client” strategic engagements, collaborating with top-tier technology companies featured in the Gartner Magic Quadrant. She brings a deep understanding of multiple industries and global markets, with a strong focus on market assessments, competitive analysis, uncovering white space opportunities, and monitoring disruptive technologies and industry trends.