EV Sales Cross Record One Million Units In 2022. What's Next?

The year 2022 saw India reach a milestone of 1 million electric vehicle sales for the first time since the country started manufacturing battery-powered vehicles.

This was a twofold growth over the previous year, and came after customers shrugged scars of EVs catching fire in early 2022.

Some of the major factors that drove EV sales included several benefits and incentives to the original equipment manufacturers under state and central government policies, such as FAME-2. That helped to create an ecosystem for faster adoption of EVs.

The prompt action taken by the government to implement safety standards for EVs after the fire-related incidents was also crucial in soothing ruffled nerves.

The first phase of Battery Safety Standards-AIS-156 was implemented on Dec. 1. This mandated battery management systems on every EV to tackle issues related to performance of batteries under high heat and temperature and provide early warnings to users.

Under the second phase of the policy, that will take effect from April 1, IP67 norms for waterproofing of batteries will become mandatory.

At present, there are around 28 states that either have a draft EV policy or have implemented the policies in their states benefiting the industry.

States are competing with each other for establishing EV manufacturing hubs. Almost all large states are incentivising customer purchase of EVs through a mix of upfront state subsidy, GST registration charges, and incentivising the setup of charging infrastructure.

Tamil Nadu, which is progressing as a hub of EV manufacturing, provides incentives related to full reimbursement of GST paid on the sale of vehicles, 100% exemption on electricity tax, and a subsidy on the cost of land.

Government policies such as FAME-II, Advanced Cell Chemistry and the Production-Linked Incentive schemes are accelerating the development of EVs in India.

EVs present an opportunity of almost Rs 3 lakh crore for various stakeholders in India in the five years through fiscal 2026, a recent Crisil Ratings analysis said.

According to the report, the opportunity includes potential revenue of about Rs 1.5 lakh crore across vehicle segments, for original equipment manufacturers as well as component manufacturers, and around Rs 90,000 crore in the form of disbursements for vehicle financiers.

“With shared mobility and insurance accounting for the balance, EV adoption continues to surge as more people shift from internal combustion engine vehicles,” the report said.

The focus on financing and incentives to retail customers, apart from original equipment makers, battery swapping policy and bringing EV financing under priority sector lending are some of the demands that the industry expects will get fulfilled in 2023. Adoption is also set to increase with customers realising the cost benefits of EVs compared to ICE vehicles.

Overall sales of EVs in 2022 rose 210% year-on-year to 10,03,026 units, according to data on Vahan—a web portal run by the Ministry of Roads, Transport and Highways.

In comparison, sales of diesel vehicles rose 16.21% year-on-year, petrol vehicles was up 9.4% YoY and petrol CNG was up 61% YoY.

Electric two-wheelers led the growth with a four-fold increase in sales. Total two-wheeler EV sales rose 306.57% YoY to 6,24,192 units.

Three-wheelers sales had a two-fold increase at 3,38,492 units sold, while four-wheeler sales have some catch-up to do as its sales grew almost three-fold to 32,844 units.

In 2022, the adoption of EVs has been great and it is going to get even better, said Banwari Lal Sharma, chief executive officer-consumer business at CarTrade. 

“Come 2025, CNG will lose its shine, electric will be driven more, and battery-driven cars will be rationalised by the day,” Sharma said.

Due to the Ukraine-Russia crisis, CNG prices have shot up making such vehicles almost unviable. Therefore, it does not make any sense to carry on with CNG vehicles, Sharma said.

With phase two norms coming in 2023 and significant clarity on all policy fronts—such as battery swapping policy—2023 is expected to be stable for the EV industry with a robust supply chain.

“We are hoping that the recent outbreak in China should not impact the supply of batteries,” Pratik Kamdar, co-founder of Neuron Energy said.

“If the supplies are not impacted at all and the demand increases, we expect these vehicle manufacturers to bring up to 10,000 to 20,000 units per month. So, we are expecting another 500% year-on-year growth in 2023,” Kamdar said.

The proposed policy will introduce disruptive business models such as battery-as-a-service leasing, so that electric vehicle owners need not own the battery—which is about 50% of the total vehicle cost—bringing down upfront costs below ICE counterparts.

Companies like ChargeUp are already working in the space for two-wheelers and three-wheelers.

Apart from the lower cost of ownership—by around 40%-50%—EV owners will get up to 20% incentive on the subscription or lease cost of the battery, Varun Goenka, CEO & Co-founder at Chargeup, told BQ Prime. These will be over and above those given for buying clean vehicles, he said.

“We believe that early implementation of the battery swapping policy will scale up the electric vehicle ecosystem in India,” Goenka said.

At 26% interest rate, the cost of financing EVs is very high. Hence, there is need for the government to bring EVs under priority sector lending.

At present, most of the incentives under government schemes are to original equipment manufacturers and not much for retail customers.

“Bringing EVs under priority sector lending will ensure faster adoption,” said Gaurav Rathore, founder of EVeez, a subscription-based EV services provider. EVeez offers all inclusive electric mobility as a service (eMaaS) subscriptions to gig riders, individuals, small to medium businesses, logistics companies & two-wheeler fleet operators. "Our comprehensive eMaaS offering removes all major barriers to EV adoption - encompassing end to end support, insurance, battery swaps, consumables, and GPS/telematics; all with no lock in period to give maximum flexibility to users," Rathore said.

Animesh Das, senior director-motor underwriting at ACKO, said they have developed a performance-based battery warranty programme, where they have tied-up with EV manufacturers—such as Ola, Ather, Ampere and Bounce—to provide warranty on their EV batteries.

“Customers' biggest concern is the replacement cost for batteries, which is almost 50% of the cost of the EVs. We provide two-wheeler customers the option to take warranty for up to Rs 4,000 on their purchase. If the batteries fail in the fourth or fifth year, we provide the replacement for their batteries,” said Das.

Commercial EV charging stations are expected to be a contributing factor in the penetration of these vehicles.

In the next five years, it is estimated that there will be over 63,000 charging stations with a significant investment from government schemes. The proliferation of charging stations in India would lead to the growth of charging station manufacturers as well as charging station operators.

“All of us are hyper-focused on two-wheelers and a few of us are looking at four-wheelers,” said Ankit Doshi, director at Waaree ESS, a lithium-ion battery manufacturer.

“If we look at the developed countries, U.S., Australia, Norway and even China, where EV penetration has been really high, the growth has been driven by heavy vehicles such as trucks, tractors, and buses along with the refrigerated vehicles,” Doshi said.

According to Doshi, these are the countries who have gone through the learning curve. “If we can learn from them and focus on making policy that does not just focus on two-wheelers, but holistically takes all the segments into account instead of any one, then we can achieve our goals.”

A study by Berkeley Lab highlights that India has the potential to become the world leader in electric vehicle production. Conducted in collaboration with the University of California, Los Angeles, the research underlines that making the transition from diesel-fueled trucks to electric-charged ones will enable the country to meet the goal of net zero greenhouse gas emissions by 2070.

The adoption of four-wheelers is dependent on strong charging infrastructure. But, the density of infrastructure is poor in the country at present, Kamdar of Neuron Energy said.

There is a requirement for installation of new chargers that should go hand-in-hand with the outlay of four-wheelers being sold in India, Kamdar said.

“There will be big impetus on charging infrastructure by the government. Government might come out with a new Fame subsidy, specially for charging infrastructure where the capital expenditure will be subsidised by the government significantly,” Kamdar said.

The other challenge would be—load on the power infrastructure. The transformers and availability at load points need a significant upgrade, especially in dense metropolitan cities to ensure that EVs are generously adopted and charged timely.

Grid availability and grid readiness has to be kept in mind, and that might be a challenge, Kamdar said. It is not a short-term challenge that can be overcome through policy, but infrastructure upgrades might take place over the next five to seven years, he said.

At present, India imports 88% of the oil it uses. Freight trucks use nearly 60% of the total petroleum consumed by the country’s transport sector.

The study has revealed that electric trucks would be more affordable to operate than diesel. Electric trucks would be instrumental in enhancing India’s energy security and reducing the goods transport cost. Based on India’s current grid emissions, electric trucks would reduce greenhouse gas emissions to 9% from 35% per km as compared to diesel trucks.

Through 2027, sales of all EVs are expected to grow at a 68% CAGR, said Ayush Lohia, CEO of Lohia Auto.

That would result in increased business potential for the entire automotive sector, from hardware suppliers, engineers and producers to service providers, he said. It is also likely to allow automotive industry's independent vendors to enter the niche battery market, he said.

EVs will need routine maintenance and servicing just like conventional vehicles and more companies will start up to serving electric vehicles, according to Lohia.

The resultant ecosystem will promote environment friendly corporate practices, he said, making use of bicycles and e-scooters for inner-city excursions more seamless.