Electric Vehicles penetration in India will reach 50pc by FY33: Axis Capital

The report noted that Indian OEMs will seek greater control of battery supply (Tata Motors and Ola have announced plans). Localisation of battery manufacturing in India is currently a challenge given technology barriers and limited global interest, a meaningful leap is contingent on a progressive recasting of PLI for battery manufacturing. China controls the global EV ecosystem, while the US has entered the fray with an aggressive localisation policy.

Incidentally, China controls 65-70pc of global battery capacity and 55-85pc of global supply of battery components, having sold 5 million EVs with 21pc penetration in CY22. In India, localisation of battery packs (20-25 pc of battery cost) has begun and will reach 100pc in next 1-2 years. However, cell manufacturing will likely begin in 2-3 years.

The report mentioned that EV adoption will increase significantly across automotive segments over the next 10 years driven by strong government support, multiple new model launches by OEMs across price points and improvement in the TCO of EVs led by a potential reduction in battery prices.

In the passenger vehicle segment, EV adoption will likely be more gradual with FY27 being the inflexion point (expect 6-7pc EV penetration likely till FY26) given that major model launches are planned in CY25-26E. The penetration will reach 40pc in the next 10 years, the Axis Capital report said.

In the two-wheeler segment, despite recent uncertainty around continuation of FAME subsidies, it is believed that 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 EV penetration even within the motorcycles segment. Motorcycles require bigger batteries due to the requirement of higher driving range and speed and therefore, currently TCO comparison is unfavourable compared to ICE bikes. Overall EV penetration in 2W will likely increase to over 25pc over the next five years and around 70pc in FY33, the report pointed out.

Coming to three wheelers and buses, these segments will see more brisk adoption of EVs (due to the B2B nature of the business and higher daily running with more than more than 50pc penetration  over the next five year (FY28E) and 80-100pc penetration in next 10 years.

New model launches in PV segment

In the passenger vehicle segment, very few EV models are available at relevant price points (less than Rs 2 million) and with decent specs. Domestic OEMs like Tata Motors and recently M&M have launched EV variants of existing ICE models, while global OEMs such as MG, Hyundai, Kia and BYD have launched global EV models in India (largely to test the market) but at much higher price points that inhibit volumes, the report said.

The Generation 1 EV models launched by domestic OEMs are based on the ICE platform and are therefore quicker to launch and capex requirement is very low. However, OEMs have limited flexibility in terms of design and the ability to offer a higher driving range to customers.

Over the next two years, launches in EVs will be more from Tata Motors for their generation 1 and 2 models (this will drive 4x volumes for the company by FY26E) and most other OEMs (M&M will lead the pack here) are looking to launch 'Born EV' models (or Generation 3 models) on specifically designed EV platforms from CY 2025-26E onwards. Therefore, while EV penetration will increase substantially for Tata Motors (more than 25pc by FY26E), for the overall PV industry, the report says, the EV penetration will ramp up gradually over the next 2 to 3 years. FY27 will be the inflexion point for EV adoption in India after which there would be an accelerated shift towards EVs in PV segment.