Proposal for fund raising

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Case Understanding

BCS Solution Summary

Solution

The Indian automotive industry is the fifth largest in the world and is slated to be the third largest by 2030. Catering to a vast domestic market, reliance on the conventional modes of fuel intensive mobility will not be sustainable. In an effort to address this, federal policymakers are developing a mobility option that is "Shared, Connected, and Electric" and have projected an ambitious target of achieving 100 percent electrification by 2030.

By making the shift towards electric vehicles (EVs), India stands to benefit on many fronts: it has a relative abundance of renewable energy resources and availability of skilled manpower in the technology and manufacturing sectors.

Regardless of the country's ambitious targets, India's EV space is at a nascent stage. However, looking at it differently – India offers the world's largest untapped market, especially in the two-wheeler segment. 100 percent foreign direct investment is allowed in this sector under the automatic route.

The federal government is also prioritizing the shift towards clean mobility, and recent moves to amend the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME) II scheme to make electric two-wheelers more affordable, is a case in point.

In addition, multiple production-linked incentive schemes intend to create a local manufacturing ecosystem to support goals around greater adoption of electric mobility transport. This is sought to be achieved by incentivizing fresh investments into developing indigenous supply chains for key technologies, products, and auto components.

E-2W industry in India can be broadly segment into three categories - Low Speed (with top speed up to 25 Km/hr), Medium Speed (~40 Km/hr) and High Speed (60+ Km/hr). Most of the market is today concentrated in the low and medium speed categories because they fit within the mass-market price points and compare favourably on TCO as compared to the high-speed segment.

TCO for EVs for low/medium speed scooters is 25-40% lower vis-à-vis the entry range ICE 2Ws for a retail use case (20 Km/day). On the other hand, high speed e-scooters and e-motorcycles have a 15-20% higher TCO as compared to mid-range (125 CC) ICE 2Ws, ex subsidy benefit. The TCO breakeven is achieved for a high-speed e-2W at about 40 Km/day usage. 

The commercial use case of e-2Ws makes better economic sense. An e-2W offers 10-40% lower TCO at 60 Km/day usage (depending upon speed specs). Today, commercial customers buy mostly pre-owned vehicles. A medium speed e-2W still offers a 15% lower TCO than a pre-owned ICE 2W on account of very low fuel and maintenance cost.

In April 2019, Niti Aayog, the federal think tank, published a report titled "India's Electric Mobility Transformation", which pegs EV sales penetration in India at 70 percent for commercial cars, 30 percent for private cars, 40 percent for buses, and 80 percent for two- and three- wheelers by 2030. These targets, if achieved, could lead to a net reduction of 14 exajoules of energy and 846 million tons of CO2 emissions over the deployed vehicles' lifetime. Electric vehicles sold until 2030 can cumulatively save 474 million tons of oil equivalent over their lifetime, worth US$207.33 billion.

This will help India fulfil its global commitments to lower carbon emissions and increase use of cleaner sources of energy and transportation as required by the Nationally Determined Contributions (NDCs) under the United Nations Framework Convention on Climate Change (UNFCCC) and EV30@30.

Policy measures

Federal policy

Several fiscal and non-fiscal measures have been put in place to facilitate the adoption of electric mobility. They are as follows:

• National Electric Mobility Mission Plan 2020 (NEMMP): It was launched in 2013 by the Department of Heavy Industry (DHI) as a roadmap for the faster manufacture and adoption of EVs in India.
  • FAME Phase I: As part of the NEMMP 2020, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME India) Scheme was notified in April 2015, to promote the manufacture of electric and hybrid vehicle technology. It has mainly focused on four aspects - demand creation, technology platform, pilot projects, and charging infrastructure. For demand creation, incentives have mainly been disbursed in the form of reduced purchase prices.
  • FAME Phase II: Launched in 2019 for a period of three years, this scheme has an outlay of US$1.36 billion to be used for upfront incentives on the purchase of EVs as well as supporting the development of charging infrastructure. FICCI has asked for continuation of FAME II till 2025, along with short-term booster incentives to enhance demand.
  • Amendments to FAME Phase II: On June 11, 2021, the Ministry of Heavy Industry announced further amendments to the FAME II scheme to give a boost to EV demand among consumers. Under the revised policy, the subsidy per electric two-wheeler (Indian-made), which is linked to the battery size, has been increased to INR 15,000 (US$204.60) per Kilowatt-hour (KWh) from INR 10,000 (US$136.40) KWh. Furthermore, electric two-wheeler manufacturers can now give discounts of up to 40 percent to consumers, which is a significant raise from the previous cap of 20 percent. The eligibility criteria for these electric two-wheelers to qualify for subsidy under the FAME II scheme include a minimum range of 80 km on single charge and a minimum top speed of 40 km per hour. These incentives are expected to significantly lower the purchase price and lift buyer sentiment, creating a spur in market demand. The amendments in the policy have been hailed by industry stakeholders who are now expecting the EV two-wheeler industry to clock sales of over six million units by 2025. Yet, according to a recent CRISIL report, 95 percent of the e-scooters in India are not eligible for the FAME II incentive scheme, as they fail to meet the eligibility criteria.
• Ministry of Power: It has clarified that charging EVs is considered a service, which means that operating EV charging stations will not require a license. It has also issued a policy on charging infrastructure to enable faster adoption of EVs.
• Ministry of Road Transport and Highways: It has announced that both commercial as well as private battery-operated vehicles will be issued green license plates. It has also notified that all battery operated, ethanol-powered, and methanol-powered transport vehicles will be exempted from the commercial permit requirement.
• Department of Science and Technology: It has launched a grand challenge for developing the Indian Standards for Electric Vehicle Charging Infrastructure.
• Niti Aayog: The National Mission on Transformative Mobility and Battery Storage has been approved by the cabinet, and the inter-ministerial steering committee of the Mission will be chaired by the CEO of Niti Aayog. The Mission aims to create a Phased Manufacturing Program (PMP) for five years till 2024, to support setting up large-scale, export-competitive integrated batteries and cell-manufacturing giga plants in India, as well as localizing production across the entire electric vehicle value chain.

States/union territories policy

Over 27 states and UTs have formulated strategy plans for transforming mobility to provide their citizens with safe, inclusive, economic, and clean transport options. While some states like Karnataka and Tamil Nadu have had a head start due to preplanned public policies, targeted investor incentives, as well as support infrastructure, other states too have drafted policies to stimulate market demand and create infrastructure.

Many leading battery producers like Amara Raja Batteries, have picked up the cue from theses incentives to orient new investments into green technologies, including in lithium-ion batteries.

Responding to the opportunity that India's EV industry presents, leading players like OLA Electric Mobility Pvt, Ather Energy, and Mahindra Electrics are rapidly growing their market presence. Moreover, certain states like Karnataka and Tamil Nadu are rolling out innovative and timely investor-friendly policies besides building necessary infrastructure.

Recently, the American electric vehicle and clean energy company Tesla Inc. marked its entry into India by incorporating its subsidiary, Tesla India Motors and Energy Pvt Ltd, in Bengaluru.

In February 2021, Ather Energy, India's first intelligence EV manufacturer moved its US$86.5 million factory from Bengaluru (Karnataka) to Hosur (Tamil Nadu). Ather Energy's factory is said to have an annual production capacity of 0.11 million two-wheelers.

In March 2021, Ola Electric, the subsidiary of the unicorn Indian ride-hailing start-up, also announced that it would be setting up the world's largest electric scooter plant in Hosur (which is a two and a half-hour drive from Bengaluru) over the next 12 weeks, at a cost of US$330 million, and aiming to produce 2 million units a year. By 2022, Ola Electric wants to scale up production to pump out 10 million vehicles annually or 15 percent of the world's e-scooters.

Meanwhile, indicative of the market interest for electric two-wheelers in India, Ola Electric reportedly clocked INR 11 billion (US$149.26 million) in sales over a two-day purchase window. Ola Electric's website allows scooters to be reserved and the next sales window opens November 1. The electric scooters are manufactured at the Ola Futurefactory near Krishnagiri in Tamil Nadu.

On September 9, 2021, Greaves Cotton announced its entry into the multi-brand electric vehicle retail segment under the brand name AutoEVMart. According to reports, this platform will present consumers with a wide range of electric vehicles to choose from – from Ampere Electric to other brands in the EV space. Thus, AutoEVMart will serve as a marketplace for electric vehicles in India, offering e-two-wheelers and e-three-wheelers, among others, along with EV accessories. Greaves Cotton envisions first-of-its-kind multi-brand retail stores for clean tech or electric mobility in Bengaluru. 

Recently, Sterling and Wilson Pvt Ltd (SWPL), India's leading engineering, procurement, and construction company announced its entry into the electric mobility segment in India. It has signed a 50-50 joint venture with Enel X, to be incorporated on April 1, 2021, to launch and create innovative charging infrastructure in India.

There have also been positive developments in the expansion of charging infrastructure across the country – states like Andhra Pradesh, Uttar Pradesh, Bihar, and Telangana are setting impressive targets for the deployment of public charging infrastructure to increase uptake of electric vehicles in the country.

The key reasons why these states are doing better than others are local fiscal sops, better logistics, an investor-friendly government policy, business facilitation through easier access to authorities, supply chain connectivity, and the availability of suitable land.

Karnataka was the first state to introduce a comprehensive EV policy and has emerged as a hotspot for EV businesses in India, both in EV and EV ancillary manufacturing as well as R&D segments. Tamil Nadu is also leaping forward at a commendable pace, owing to its supply ecosystem, larger land parcel, proximity to ports, and proactive investor support through administrative portals like Guidance Tamil Nadu.         

Nevertheless, while growth in the EV industry is on an upward tick, it has much ground to cover to be able to realize the government's ambitious 2030 target. The COVID-19 pandemic not only slowed the industry's progress, but also dampened overall market demand.

Still, market sentiment has retained positivity in some segments. In FY 2020, EV sales for two-wheelers in India increased by 21 percent. For EV buses, the sales for the same period increased by 50 percent. In contrast, the market for electric cars remained grim, registering a five percent decline. As for total EV sales, after suffering an initial setback in 2020, sales appear to be slowly picking up. In January 2021, 15,910 units of EVs were sold in India, and out of these, the maximum units were sold in Uttar Pradesh, followed by Bihar and Delhi.

Ultimately, the scope of India's EV market growth rests on availability of capital for original equipment manufacturers, battery manufacturers, and charge point operators as well as improvements to infrastructure and diversified options for consumers.

Realizing India's EV ambition will also require an estimated annual battery capacity of 158 GWh by FY 2030, which provides huge investment opportunities for investors. Enabling policy support measures are a critical need at this juncture.

The government appears to be aware of this. It has been rolling out incentives to boost market demand in priority segments like electric two-wheelers, and localizing production of key components like ACC battery storage as well as electric vehicles and auto components through respective PLI schemes. Besides, several Indian states have now passed EV policies intending to attract industry investments and make EV adoption more viable proposition for the consumer market.

We intend to enter the market with a disruptive technology and vibrant team that can help our country achieve its growth objectives and carbon emissions goals. To setup the factory and distribution channel we would require ₹50 crore at the onset. This will help us reach monthly capacity of 1,200 units. We will look to expand it

Conclusion

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