Prime Minister Narendra Modi has articulated a bold vision for India to achieve Viksit Bharat (developed India) status by its centenary in 2047.

Complementing this, during COP27, the government committed to achieving net-zero emissions by 2070.

While these objectives may appear distinct, they are intrinsically linked, as both envision a future of sustainable growth, cleaner air, and greener industries.

The role of the transportation sector

The transportation sector is central to these transformative goals. Road transport alone accounts for approximately 20% of urban pollution in India, and emissions from manufacturing, logistics, and after-sales services further exacerbate the issue.

According to an IQAir report, 42 of the world's 50 most polluted cities are in India, underscoring the urgency for intervention. In response, the government is making significant efforts to accelerate the growth of the electric vehicle (EV) sector.

A sector poised for growth

India's transition to electric mobility is well underway, with the logistics sector spearheading the adoption of EVs for last-mile deliveries using two- and three-wheelers. This early adoption has facilitated greater consumer acceptance, with EVs increasingly being chosen as second vehicles.

Government initiatives, such as the FAME schemes, have been pivotal in promoting EV adoption through attractive subsidies. Additionally, the reduced Goods and Services Tax (GST) of 5% on EVs, compared to 28% for internal combustion engine (ICE) vehicles, has further accelerated growth.

FAME subsidies have also mandated local value addition, leading to the development of a domestic EV ecosystem. Components such as battery packs, battery management systems, motors, and motor controllers are now being manufactured locally.

Moreover, chargers, both AC and DC, along with key components like rectifiers and programmable logic controllers (PLCs), are also being produced in India. With state-level incentives adding to this momentum, the sector is poised for further expansion.

However, achieving the net-zero target will require significant investments. By 2070, it is estimated that original equipment manufacturers (OEMs) will need to invest over USD 323 billion to fully decarbonise the transportation sector.

While this represents a substantial financial commitment, it also presents a tremendous opportunity. Companies investing early in EV infrastructure, vehicle production, and battery technology are likely to reap significant long-term rewards.

Opportunities for OEMs and investors

Although OEMs face high initial investment costs, the recent successful IPOs of Ola Electric and the anticipated IPO of Ather Energy provide positive momentum for the sector. Companies such as Hero Motors, an early investor in Ather and Altigreen (a three-wheeler logistics and passenger OEM), and TVS Motors, an investor in Ultraviolette, are already positioning themselves to capitalise on the growing EV market. By 2050, EV sales in India are projected to reach USD 300 billion, creating a substantial opportunity for growth.

The maturation of India's EV sector will necessitate robust public charging infrastructure and locally produced battery packs. Significant progress has already been made, with over 16,000 CCS2 chargers deployed nationwide and numerous start-ups and SMEs working on "cell-to-pack" technologies.

Companies such as Amara Raja have invested heavily in ventures like Log9 Materials, and dedicated suppliers for components such as battery management systems, motors, and connectors are emerging in ecosystems centred in Tamil Nadu and Maharashtra.

Additionally, energy giants such as HPCL and BPCL are installing chargers at their outlets, while Indian Oil Corporation (IOCL) is partnering with Phinergy to develop aluminium-air battery packs. The development of battery-swapping technology is also gaining traction, offering enhanced flexibility and convenience for consumers. These advancements highlight the potential for significant returns for investors supporting the infrastructure that will underpin India's EV revolution.

The importance of batteries

Batteries are rapidly becoming the cornerstone of the EV industry. The Indian government is actively promoting domestic battery manufacturing through production-linked incentive (PLI) schemes.

As advancements in battery and charging technologies reduce charging times without compromising cell longevity, EV adoption is expected to increase significantly. The electric two-wheeler segment is likely to lead this growth, driving demand for batteries and components, which will further reduce costs and promote scalability.

Financing challenges and opportunities

One of the primary obstacles for the EV sector is financing. The higher upfront costs of EVs, compared to conventional vehicles, remain a barrier for many consumers. While start-ups such as Alt Mobility, Oto Capital, and Leaf Round are providing innovative financing solutions, traditional financiers have been slower to enter the market, resulting in higher loan costs for EVs.

However, traditional financial institutions, including banks and non-banking financial companies (NBFCs), are beginning to show interest, which is expected to bring parity to EV financing costs over time.

Expanding opportunities across the value chain

The EV sector offers investment opportunities across the entire value chain. From raw materials such as lithium and cobalt to battery manufacturing, charging infrastructure, and after-sales services, the potential for growth is substantial. The rapid expansion of charge point operators and the development of battery-swapping technology are further enhancing consumer adoption and sector scalability.

With the continued development of EV infrastructure and technology, India is well-positioned to achieve its ambitious sustainability goals. By investing in one electric vehicle, one battery, and one charging station at a time, the nation is paving the way for a cleaner, greener, and more sustainable future.