India’s EV industry has substantial growth potential, with EVs currently comprising just 2% of passenger vehicles sold. Market forecasts predict a rise to 15-20% by 2030. However, S&P Global Mobility recently adjusted its forecast for EV penetration to 19% from the earlier 22% due to slower-than-expected adoption.
India’s electric vehicle (EV) market is at a significant turning point, especially with the improving relationship between India and China. The upcoming meeting between Prime Minister Narendra Modi and President Xi Jinping at the BRICS summit 2024 in Kazan, Russia, could create new business opportunities. Following China’s agreement to restore India’s patrolling rights in Ladakh, tensions between the two countries have started to ease. This positive development may lead to increased Chinese investments in India, particularly in the rapidly growing EV sector. Chinese EV manufacturers are known for producing affordable, long-range electric vehicles and have been closely watching India but held back due to previous strained relations.
Despite the potential for growth, India’s EV industry is facing several challenges. However, the Indian government is taking steps to boost this sector through a new EV policy approved in March. This policy offers incentives to international manufacturers who invest at least $500 million to set up local production facilities. Companies will have three years to establish their manufacturing units and can import a limited number of vehicles at a lower import duty of 15% on cars costing over $35,000 for five years.
With improving relations between India and China, Chinese companies like BYD and Great Wall Motors, which have encountered difficulties in the past, may reconsider their plans to enter the Indian market. They might see India as an attractive option, especially as they face high tariffs in Europe and North America. Joint ventures, like the successful partnership between MG Motors and JSW, could serve as examples of how collaboration can benefit both local and foreign manufacturers. While the need for localization may affect the cost advantage of Chinese EVs, their advanced technology and experience in production could make them strong competitors against Indian manufacturers, who are still developing their capabilities in this space.
