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The electric car (e-car) market in India is expected to make up about 12 per cent of the total passenger car market in the country by FY26, supported by the improving ecosystem and faster adoption of electric vehicles on the back of lower maintenance costs and rising fuel prices.
The adoption of electric cars globally has witnessed a surge, with sales in the first half of 2021 surpassing 2020 numbers. Similar trends can be observed in India too.
The growth in the electric vehicle (EV) market is not at the same scale as in other countries. For instance, while the share of battery electric vehicles (BEVs) in the total number of passenger vehicles sold in Europe was 5.4 per cent, the same in India was a minuscule 0.2 per cent in FY20.
However, it is estimated that the share of e-cars will grow to 12 per cent of all passenger cars by FY26, clocking 514,365 units in e-car sales which translates to a CAGR of 152.94 per cent from FY21 to FY26, said a report by JMK Research
E-car sales have increased post-2019 in India, with a 361.78 per cent y-o-y increase in 2020. 2021 registrations, as of July, have already crossed 2020 sales figure.
EV ecosystem
While positive steps have been taken by the Centre to promote and accelerate the growth of an EV ecosystem in India, recent restructuring in FAME-II policies suggest that the government has shifted its focus on electric two-wheelers (E2Ws) to generate demand to achieve short-term growth.
However, from a long-term perspective, e-cars are expected to play a pivotal role, especially in the aftermath of the Covid-19 pandemic with a surge in the need for personal mobility.
Switching to e-cars from traditional fuel-driven cars has many advantages even in the present scenario. According to JMK Research’s recent analysis, e-cars may demand a higher upfront cost versus its ICE counterparts, but the TCO (total cost of ownership) over a 5-year and 10-year period will be 35–56 per cent lower for e-cars, depending on the driving scenario.
Nevertheless, there are some notable barriers when it comes to choosing e-cars over ICE cars, the major one being the lack of options in the market presently.
Lack of affordable options
Over the last four years, e-car sales in India have been driven by two players — Tata Motors and Mahindra — which together account for 80 per cent of the total market. They are priced between ₹8 lakh and ₹14 lakh. However, the absence of options in the affordable segment (price < ₹8 lakh) could be a factor for slower adoption of e-cars.
Going ahead, with the increasing focus on local manufacturing of EV components and batteries, prices are expected to drop further and cause more players to enter this market, as well as existing players to switch to EV offerings.
Other notable barriers to e-car adoption are range concerns, lack of charging infrastructure, absence of financing mechanisms and safety concerns among end-users regarding the batteries.