2022 has been an exciting year for the Indian EV market. Hence it makes sense to take stock of things on where we are and what the road ahead looks like.
All the data here has been sourced by the Indian central (federal) dashboard (Vahan portal). The portal aggregates data from all the RTO (Regional Transport Offices) where vehicles are registered. However, not all states have onboarded onto Vahan. Currently of the 36 States and Union Territories, 34 have onboarded. And of the 1428 RTOs, 1341 are registered with Vahan. The data that is used accounts for 90–95% of all vehicle sales in India. Hence we will not be looking at absolute figures as they are not complete, but we can look at the share of electric vehicles in each segment and market share of various brands. As these are proportional data, they would be more closer to actual figures and we can take the data from a directional sense.
At a top level, across vehicle segments, we have seen tremendous growth in electric vehicles. The reasons are common across the segments. The Russian invasion of Ukraine and the subsequent spike in oil prices has really pushed more consumers to electric as cost of running electric starts to outweigh the higher cost of acquisition. Additionally, the Indian government’s generous subsidy via FAME II, coupled with subsidies from the state/provincial governments, have provided a helping hand.
We will divide the Indian auto segment into four broad segments as is the norm in the automotive media here. They are
1) Two-wheelers — These include all powered two-wheeled vehicles which have a maximum speed above 25 km per hour. They are broadly of two categories — Scooters and Motorcycles.
2) Three-wheelers — These are three-wheeled vehicles (Tuk Tuks, Rickshaws) and include both used for moving people and goods.
3) Passenger vehicles — These primarily include cars and other vehicles used for personal mobility with more than 3 wheels. For practical purposes, we can assume this to be equivalent to cars.
4) Commercial vehicles — These include a wide range of vehicles from large trucks, buses to mini vans and smaller good carriers.
Let us start with the star performer of 2022. Sales of electric two-wheelers skyrocketed in 2022. The share of e-two-wheelers jumped from 1.1% in 2021 to 4.1% in 2022. That is nearly a 260% jump from last year. Just to give an idea of the change, in January 2021, Vahaan portal tracked sales of 5,264 electric two-wheelers accounting for a mere 0.4% of total sales. Come back to January 2022, the portal tracked sales of 29,748 vehicles accounting for 2.62% of total two-wheeler sales. This has further increased by December 2022, with Vahaan tracking 64,476 sales accounting for 5.7% of total two-wheeler sales.
The increase in FAME II subsidy for two-wheelers helped in this turbo-charged growth. At Rs. 15,000 per kwh ($185 per kwh), it makes the battery practically free for manufacturers, thus helping them to reach price parity with ICE alternatives. Additionally the launch of Ola electric with its innovative electric scooters (S1 and S1 pro) created a lot of buzz among common folks outside of the traditional EV enthusiasts. This is reflected in Ola electric reaching the top spot within a year of launch in the two-wheeler EV space.
Outlook For 2023
While 2022 was a stellar year, expect 2023 to see the growth momentum increase further. Ola electric has announced its most affordable electric scooter S1 Air. At a price of Rs.84,999 (~$1000), it is comparable to top selling two-wheeler model from Honda motors (Honda active) in price. Honda active accounts for nearly half of the total scooter market or 12–13% of overall ICE two-wheeler market.
[Side note: Like its Japanese parent, Honda is dithering in launching electric variants in India. If Ola S1 Air succeeds, expect to see serious impact on market share for Honda in the two-wheeler market as 60% of its sales comes from the scooter segment and majority of the electric transition is happening in this segment rather than in the other (motorcycles) segment.]
Given the strong performance of Ola electric in 2022, the expectations are high for this model. Ola electric Founder & CEO expects to sell a total of 1 million units by November 2023 across all models translating to a monthly run rate of 100,000 units, which is nearly 10x of the current run rate and 2x of all electric two-wheeler sales. In addition to new brands like Simple Energy and new models and increased production from existing players like Ather Energy, I predict electric share of the Indian two-wheeler market to reach double digits in 2023. I expect to exit the year with a EV share of 13–15% in December 2023.
This is significant achievement because India has more two-wheelers than cars (nearly 5x in terms of ownership). Nearly 62% of petrol consumption in the country is accounted by two-wheelers. Hence a rapid transition into electric will result in reductions in emissions, specially in the congested metropolitan areas.
Cars (Passenger Vehicles)
Now coming to cars which are termed as Passenger Vehicles, sales of electric (BEVs) stood at 1.1% in 2022. While this is a small share, it did jump 3x from 0.33% in 2021. What makes these figures significant is that the majority (60–70%) of this is contributed by a single model — the Tata Nexon EV from Tata Motors. India is a market driven by affordability, with the average selling price of car at $12,500 and the cheapest electric car available in 2022 being higher than that.
A major reason for the low share is the lack of options to customers. The Indian car market is dominated by three groups — Japanese brands (Suzuki & Toyota), Korean (Hyundai & Kia), and Indian brands (Tata Motors & Mahindra & Mahindra). Among them only Tata Motor has to-date made serious efforts at affordable electric cars. The Korean brands do have electric car offerings in their portfolio, but with a starting price of $30,000 which is 3x the average selling price, the potential is limited. Meanwhile Japanese brands like everywhere else are not even interested in offering electric and might think of doing so in 2030! They are still looking at introducing obsolete hybrid technology to India.
Outlook For 2023
2023 is expected to be a breakthrough year for electric car market in India. The electric market leader Tata Motors is launching the most affordable electric car yet in India, the Tata Tiago, starting at $10,500. The car has already seen enthusiastic response with the first 10,000 bookings getting closed within 24 hours, forcing the manufacturer to extend the first booking size to 20,000. The car has a waiting period of 4 months even before launch. The car is expected to go on sale in Q1 of 2023 and market analysts expect the car to sell 3000 to 5000 units per month, equivalent to 1–2% of overall car market (including ICE variants). We also have Mahindra & Mahindra launching the XUV400, its first electric SUV, the all-electric SUV will be priced from INR 15.99 lakh (about $19,500) similar to Tata Nexon EV (the current market leader). The Mahindra & Mahindra XUV400 is also expected to start delivery in Q1 2023. Adding all this up, we can expect the electric market share to hit 2–4% in 2023 with an exit share of 4+% in December 2023. While this is still far behind the likes of Europe and China, being the third largest vehicle market (4th if EU is included as one) the pace of electrification is still important.
India is the largest market for three-wheelers which includes both passenger and cargo vehicles. India has around 6 million of these on road. Among all the vehicle segments, this segment has really leaped forward with respect to electrification. The electric share of three-wheeler market stood at 54% in 2022 up from 43% in 2021.
We can expect the momentum towards electrification to continue in 2023, albeit at a slow pace. Bajaj Auto, which has 60% share in the ICE three-wheeler market and whose brand is synonymous with three-wheelers, is yet to come out with an electric variant. Additionally, a significant share of the market (31% in 2022) is made of CNG variants. Even after the Russian invasion of Ukraine, the running cost differential between the electric and CNG variants is not significant enough to push the market completely to electric. I expect the electric market share to hit 60–65% in 2023.
Commercial vehicles in India span a wide range of vehicular segments and include buses, heavy duty trucks, light passenger and cargo vans among others. As expected and seen globally, the penetration of electric vehicles in this segment is limited. The share of electric vehicles in the overall commercial vehicles segment is 0.3% in 2022. This has remained similar (with a slight dip) from 2021 when the share was 0.37%. Let us look at the broad sub-segments of this category.
Buses — Like the rest of the world, this is where most of electrification is taking place. Buses in India are a mix of private owned vehicles and government owned ones. Government owned ones include both municipal and within city urban transportation ones and long distance intra-city travel. Overall this segment accounts for 20% of total commercial vehicle sales in India. Majority of the electrification is happening in the municipal/city transportation segment. There are 28 states and 8 union territories (federally administered) which each running different services in the cities in their jurisdiction, hence expect the transition to happen in bits and pieces with different agencies following different models. One thing to be noted is the union government (federal) initiative to pool in all the electric bus requirements into a single tender and thus achieving economies of scale. This is expected to expedite the transition.
Trucks — Primarily speaking, these are equivalent to the semis in the US and not be confused with the cybertruck category. They do both short and long haul cargo transportation. Including both medium and heavy duty trucks, this segment accounts for 20% of the commercial vehicle sales in India. There is minimal electrification in this segment with only one or two electric variants in the market for medium haulage. See this to continue for the next few years until we see more offerings at an affordable price available in the market.
Vans — This segment is currently has seen little electrification, however it is ripe for disruption. This segment accounts for 60% of the overall commercial vehicle segment. A combination of growth of organized and e-commerce retail players by the likes of Amazon and Flipkart combined with aggressive net zero targets by these companies is pushing electrification in this segment. These organization are big customers for this vehicular segment with need for first and last mile logistics. Tata Motors again has launched its offering of a small four-wheeler cargo delivery vehicle, the Tata Ace EV. Deliveries of the same have started in Q1 2023. With an order book of 39,000 vehicles from the above e-commerce companies, one can expect the electric share of vehicles sold in this segment to grow, depending only on the ramp of supply by Tata Motors.
We can see that Indian vehicular electrification is finally gaining pace across segments with some segments racing ahead and some still lagging behind but still moving ahead. Summarizing, we see that each of the segment is on the various points of adoption S-curve.
2023 will be a break out year for both two-wheelers and cars and commercial vehicles should finally see some transition towards electric, while the three-wheeler market will continue its steady progress.
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