Government Subsidies Imperative for Increasing Sale of Electric Cars in India

The Indian electric car market is projected to grow at a CAGR of 34.5% during the forecast period. This growth can be primarily driven by the schemes and subsidies offered by the government and the increasing concerns regarding environmental degradation. Due to high pollution levels in major cities of India, people are opting for cars functioning on alternate sources of energy, such as electricity. Thus, the market is expected to increase its revenue from $71.1 million in 2017 to $707.4 million by 2025.

According to the World Air Quality Report 2019 by IQAir Air Visual, India is the fifth most polluted country in the world. This ranking is based on the data compiled for particulate matter (PM) 2.5 pollution. As per IQAir, India exceeded the World Health Organization (WHO) target for annual PM2.5 exposure by 500% from 2018 to 2019. This ultra-fine PM2.5 pollutant is emitted by fuel-based vehicles and is extremely harmful. Due to the growing pollution levels, the Government of India has laid down stringent norms to curtail air pollution and decided to replace conventional fuel-based automobiles with electric vehicles.

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To deal with fuel-based pollution, India has implemented Bharat Stage VI (BSVI) emission norms from April 2020. Adoption of these norms acts as a driver for the Indian electric car market growth. Under BSVI standards, diesel vehicles have to cut down hydrocarbon + nitrogen oxides (HC+NOx) emission by 43%, NOx levels by 68%, and PM levels by 82%. Also, petrol engines have to reduce NOx emissions by 25%. Keeping in tune with the increasing pollution and stringent emission norms, people are shifting toward electric cars.

The technology segment of the Indian electric car market is categorized into plug-in hybrid electric vehicle (PHEV), battery electric vehicle (BEV), and hybrid electric vehicle (HEV). Of these, the BEV category accounted for the largest market share in 2017 and is expected to maintain its dominance in coming years as well. Its dominance is because of the subsidies provided by the government on BEVs that are higher than the subsidies offered for PHEVs and HEVs. Additionally, factors such as lower upfront cost, declining battery price, and availability of BEV models are expected to amplify the market growth during the forecast period.

At present, the Indian electric car market is dominated by few players, therefore, consolidated in its essence. The market is currently dominated by Mahindra Electric Mobility Ltd., as it had ventured into the electric car sector much before other Indian automobile producers by acquiring Reva Electric Car Company in 2010. Other players in the market include Honda Motor Co. Ltd., BMW AG, Toyota Kirloskar Motor Pvt. Ltd., and Volvo Car Corporation, which are involved in the production of HEV models. With the increasing demand for electric cars, established players, such as Tata Motors Ltd. and Hyundai Motor Company, have entered the market in recent years.

In coming years, the state of Maharashtra will account for the largest share in the Indian electric car market. This can be ascribed to the implementation of the Electric Vehicle Policy by the state government in 2018. Through this policy, the Maharashtra government aims to boost the market by supporting the production of electric vehicles, offering subsidies, and developing charging infrastructure. On the other hand, the market in Tamil Nadu is expected to showcase the fastest growth during the forecast period.

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Thus, increasing support from the government and growing concerns about environmental pollution will amplify the market growth during the forecast period.

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This release was published on openPR.