India has positioned itself as one of the world’s leading markets for electric vehicles (EVs) with many local players now offering their electric vehicle offerings. The adoption of electric vehicles can be seen in different vehicle segments as well as different business segments. Favorable plans and policies have been developed by the government, such as the National Electric Mobility Mission Plan (NEMMP), Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles Scheme (FAME) Scheme to drive the transition to EV ambition from India.

In addition to this, many state governments have announced their electric vehicle policies with varying goals that would increase the demand for electric vehicles in their respective states. Some states, such as Maharashtra and Delhi, have policies aimed at stimulating demand, while other states such as Uttar Pradesh and Tamil Nadu intend to boost the supply of electric vehicles by encouraging local manufacturing. of electric vehicles.

India has also committed to net zero emissions by 2070 at the Conference of Parties (COP26) and the country has taken many initiatives related to clean mobility to boost the adoption of EV2s. Electric mobility has thus become the preferred choice in India due to the international commitments that India has made, the incentives to purchase EVs and the efforts and initiatives that are being taken to raise awareness among the public.

Gaps in the electric vehicle industry that can be treated as emerging opportunities

Although the government has made significant policy changes, original equipment manufacturers (OEMs) have made efforts to break down barriers through innovation, and consumers have demonstrated their willingness and willingness To accept this change, the country still needs to introduce more initiatives to stimulate the push on the supply side. , including local manufacturing of electric vehicles and components. In terms of value, an electric vehicle is made up of 35% battery, 25% transmission, 20% chassis and 20% systems and other equipment.

Currently, India imports the majority of these components as there are limited manufacturing facilities in the country. India has matured in the segment of manufacturing conventional transmissions and chassis, but there is still a lot to be done in manufacturing them for specific EV applications including lightweight chassis, electric transmissions, etc.

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Moreover, electric vehicles are technologically advanced and need semiconductor chips to operate their electronic components such as wireless communications, autonomous vehicle systems, firmware, mobile applications, connected vehicle services and security. Thus, manufacturers of electric vehicles are facing immense pressure due to lack of components. It is therefore imperative that the government supports the industry in devising innovative strategies to increase domestic manufacturing in line with the “Make in India” philosophy.

In addition to EV components, there is also a need to improve EV charging infrastructure to meet the growing demand for EVs. This electric vehicle charging infrastructure includes EVSEs (electric vehicle power equipment), battery storage systems and other related components. These components are assembled to manufacture the final product in India, but are still largely dependent on imports.

Many startups and SMEs EVSE (Small and Medium Enterprises) are now focusing on indigenizing these components. This indegeneracy can be further enhanced by government incentives/rebates and the creation of favorable ecosystems for companies to set up manufacturing facilities.

The future of India’s EV ecosystem should be to encourage domestic manufacturing

Batteries contribute the largest share of the cost of electric vehicles, around 35%. Additionally, the potential for chassis, body and BMS (Battery Management System) localization is high, while the localization of specialized components such as batteries and motors might be limited. Moreover, in order to facilitate localization in India, the phasing of investments can start with assembly and then gradually move to manufacturing.

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This gradual transition will help import substitution of key automotive components and improve its export share, meeting global demand, shifting towards electric mobility and making India “Atmanirbhar”. An indicative phasing strategy for key components has been presented below:

The current budget must therefore focus on ensuring a strong supply of products and services in the automotive field of electric vehicles. It should take into account taxation as well as incentive mechanisms for the manufacture of electric vehicles. Various national and state-level tax rebates and incentives available for EV manufacturing can be combined with rigorous implementation plans to stimulate component sourcing and EV manufacturing. In addition, the government can create an enabling policy environment to support new technology partnerships and tie-ups of international players with Indian players, which will lead to further localization and expansion of electric vehicle manufacturing in India.

The offer can be further enhanced with targeted investments in EV R&D and EV components to cater for local manufacturing. The workforce must also have advanced training and skills upgrading for upcoming developments in the electric vehicle automotive industry. There is also a need to add incentives and rebates for manufacturing various electric vehicle components to reduce import dependency. Import of finished products should be discouraged while encouraging domestic manufacturing.

To facilitate this, the budget may include EV industry-specific manufacturing support proposals focused on supporting the implementation of localized manufacturing of electric vehicles and components as well as infrastructure components such as EVSE, charger components and connectors.

The author of this article is Sumit Mishra, Director, Deloitte India and Sahil Bhandare, Consultant, Deloitte India. All views are personal.

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