Chennai: Electric vehicle penetration in India will reach 50 per cent by FY33, led by strong and sustained government support. Incentives of Rs 1.8 trillion between FY24 and FY28 would lead to battery demand of 250 GWh and entail capex of $30-33 billion, finds Axis Capital.
In passenger vehicles, EV adoption will likely be more gradual and EV penetration is likely to remain at 6-7 per cent till FY26 given that major model launches are planned in CY25-26. The penetration may reach around 40 per cent in the next 10 years.
In the case of two-wheelers, despite recent uncertainty around the continuation of FAME subsidies, EV penetration in scooters will continue to increase significantly over the medium term and as battery prices reduce in the next 3-4 years, an increase is expected in penetration even within the motorcycles segment. Motorcycles will likely require bigger batteries due to the requirement for higher driving range and speed. Overall EV penetration in two-wheelers may increase to around 25 per cent over the next five years and around 70 per cent by FY33.
Three-wheelers and buses will see more brisk adoption of EVs with around 50 per cent penetration over the next five years and 80-100 per cent penetration in the next 10 years.
Meanwhile, high incentives are needed to drive EV adoption and battery demand of 250 GWh by FY33. Incentives comprise 30-40 per cent of the pre-subsidy price of EV passenger vehicles and two-wheelers. Overall incentives will cost the exchequer Rs 1.8 lakh crore through FY23-28. Sufficient scale, localization, and innovation can shrink the cost of EV ownership enough in the next five years to significantly lower the need for incentives. India will need capex of $30-33 billion to build the required lithium-ion battery capacity of 330 GWh (250 GWh demand with 75% utilization) in the next 10 years.
Localization of battery packs has begun in India and will reach 100 per cent in the next 1-2 years. However, cell manufacturing will likely begin in 2-3 years given the technological limitations of domestic companies and limited interest from global players until direct incentives and volumes pick up.
