Electrifying the Future: A Comprehensive Analysis of Investments, Technology, Infrastructure, and Policy Landscape in India's EV Industry

Outline of the Report

1. Introduction

• Definition of EV Charging Infrastructure
• Importance of EVs in India's Transportation Landscape
• Overview of Private Equity, Venture Capital, and Fund Investment in the EV Sector

2. Investments in EVs (PE/VC Funding)

2.1. Major Investments in EV Manufacturers

• OLA Electric, EULER, Ather Energy
• Total investments of ~US$550 million in the last two years

2.2. Technology Development

• Range, faster vehicles, quick charging, temperature-resistant batteries

2.3. Investment Growth

• Increase from US$181 million (2020) to US$1,718 million (2021)
• Annual growth rate of 849%

2.4. Impact on Operations

• Boost in last-mile delivery
• Potential operational savings for fleet operators

3. PE/VC Investments in EV Industry in India

3.1. Investment Trends

• Total investment, total deals, average investment

3.2. Investment by Stages and End-Markets

3.3. Future Expectations

• Short-term headwinds
• Long-term acceleration in EV adoption

4. Charging Infrastructure

4.1. Current State

• 1,742 charging stations in the country

4.2. Future Projections

• Increase to 100,000 units by 2027
• Accommodate ~1.4 million EVs on the roads

4.3. Challenges and Opportunities

• Lack of charging infrastructure as a major challenge
• Importance of fast charging
• Potential to tip the scales in favor of EVs

5. Conclusion

5.1. Summary of Key Findings

5.2. Implications for Investors, Manufacturers, and Policy Makers

5.3. Recommendations for Future Development and Investment

6. Appendices

6.1. Relevant Legislation and Policies

1. Introduction

1.1. Definition of EV Charging Infrastructure

EV Charging Infrastructure refers to the network of charging stations and facilities that provide the necessary energy to recharge electric vehicles (EVs). There are two main types of public charging options available in India:

1. Fixed Charging: Traditional charging stations where EVs are plugged in to recharge.
2. Battery Swapping: A method where depleted batteries are replaced with fully charged ones.

Major OEMs like Tata Motors, Ather, and Ola Electric are actively establishing exclusive charging infrastructure, and there are prominent third-party players providing both fixed charging and battery swapping solutions for various vehicle segments, including two-wheelers, three-wheelers, passenger vehicles, and e-buses.

1.2. Importance of EVs in India's Transportation Landscape

1. Environmental Impact: Transition to EVs is vital to reduce vehicular pollution levels and align with the global framework for climate change.
2. Economic Growth and Employment: The EV industry can have a positive impact on economic growth and create new employment opportunities.
3. Charging Infrastructure Challenges: Currently, there are 1,742 charging stations in India, expected to increase to 100,000 units by 2027 to accommodate ~1.4 million EVs. The lack of charging infrastructure is a significant challenge, but an adequate presence of charging points, especially for fast charging, can favor EV adoption .
4. Barriers to Adoption: Unavailability and slow development of charging infrastructure, high operating costs, and load on electricity DISCOMs are some of the barriers to EV adoption in India. Policymakers are taking steps to address these issues, including the development of smart, low-cost AC charge points .

1.3. Overview of Private Equity, Venture Capital, and Fund Investment in the EV Sector

1. Investment in EV Manufacturers: Companies like OLA Electric, EULER, and Ather Energy have attracted massive investments (~US$550 million) in the last two years to develop better and safer EVs .
2. Investment Growth: The EV market has seen strong attention from PE/VC investors in India, with investments increasing from US$181 million (2020) to US$1,718 million (2021), recording an annual growth rate of 849%.
3. Charging Infrastructure Providers: Various third-party players are providing charging solutions, and OEMs are establishing exclusive charging infrastructure, indicating a growing investment landscape in this area.
4. Future Projections: The expected increase in charging stations and the government's support in setting up charging infrastructure indicate a promising future for investments in the EV charging infrastructure space.

2. Investments in EVs (PE/VC Funding)

2.1. Major Investments in EV Manufacturers

1. OLA Electric, Euler Motors, Ather Energy: These EV manufacturers have attracted substantial investments, totaling approximately US$550 million in the last two years. The funds are being utilized to develop better and safer electric vehicles.

2.2. Technology Development

• Range, Faster Vehicles, Quick Charging, Temperature-Resistant Batteries: Range: Manufacturers are working on extending the range of EVs to make them suitable for long-distance travel.
• Faster Vehicles: Efforts are being made to increase the speed of electric vehicles.
• Quick Charging: Development in quick charging technology is underway to reduce charging times.
• Temperature-Resistant Batteries: Research is being conducted to create batteries that maintain composure under varying temperature conditions.
• EULER: Working on e3W with higher payload, range, and gradeability.
• Ather Energy: Funded by Hero Motor Corp to develop e2W technology and vehicles.

Akshay Gupta, Executive Director, Kotak Infrastructure Funds: "I expect temporary headwinds in mobility electrification such as short-term increase in prices or eventual withdrawal of subsidies. However, in the long term, EV adoption will accelerate aided by non-fiscal government policy support and favorable unit economics. Commercial fleets will lead the transformation followed by private passenger vehicles".

2.3. Investment Growth

1. Increase from US$181 million (2020) to US$1,718 million (2021): The EV market in India has seen a significant increase in investments from PE/VC investors, growing from US$181 million in 2020 to US$1,718 million in 2021.
2. Annual Growth Rate of 849%: This substantial increase in investments represents an impressive annual growth rate of 849%, reflecting strong attention and confidence in the EV segment.

Rutvik Doshi, Managing Director, Athera Venture Partners: "Electrification of Vehicles is inevitable and over the next 10 years we will see 30-40% vehicles electric. The infrastructure needed for electric vehicles will lag the deployment of vehicles by a few years. Hence, we at Athera believe that the adoption will happen in phase. The commercial and cargo segments will be the first to get electrified as they are most price sensitive and do not need extensive charging infrastructure. This will be followed by passenger 2 wheelers and ultimately passenger vehicles. We have already invested in Euler motors and are keenly following this space and will continue to invest more".

2.4. Impact on Operations

1. Boost in Last-Mile Delivery: Investments in the EV segment can enhance operations in last-mile delivery, a critical aspect of the logistics and e-commerce sectors.
2. Potential Operational Savings for Fleet Operators: Implementing EVs across scale can generate significant operational savings for fleet operators, making the transition to electric mobility economically attractive.

3. PE/VC Investments in EV Industry in India

3.1. Investment Trends

• Total Investment in EV Industry (US$ million):2015: 13
• 2016: 8 million
• 2017: 421 million
• 2018: 258 million
• 2019: 181 million
• 2020: 1,718 million
• H1 2022: 666 million
• Total Deals in EV Industry:
• 2015: 3
• 2016: 5
• 2017: 7
• 2018: 21
• 2019: 29
• 2020: 20
• 2021: 33
• H1 2022: 24
• Average Investment in EV Industry (US$ million):
• 2015: 13 million
• 2016: 8 million
• 2017: 3 million
• 2018: 164 million
• 2019: 103 million
• 2020: 59 million
• 2021: 506 million
• H1 2022: 143 million

3.2. Investment by End-Markets

3.3 Investment by Stages

3.4. Future Expectations

• Short-term Headwinds: Temporary headwinds in mobility electrification are expected, such as a short-term increase in prices or eventual withdrawal of subsidies.
• Long-term Acceleration in EV Adoption: In the long term, EV adoption will accelerate, aided by non-fiscal government policy support and favorable unit economics.
• Commercial fleets will lead the transformation, followed by private passenger vehicles.
• Electrification of vehicles is inevitable, and over the next 10 years, 30-40% of vehicles are expected to be electric.
• The infrastructure needed for electric vehicles will lag the deployment of vehicles by a few years, but the adoption will happen in phases, starting with commercial and cargo segments.

4. Charging Infrastructure

4.1. Current State

1. 1,742 Charging Stations in the Country: As of now, India has only 1,742 charging stations to cater to the existing electric vehicles (EVs). This number is a clear indication of the nascent stage of charging infrastructure in the country.

4.2. Future Projections

1. Increase to 100,000 Units by 2027: The number of charging stations is expected to increase exponentially to 100,000 units by 2027. This growth will be in line with the increasing demand for EVs in the country.
2. Accommodate ~1.4 Million EVs on the Roads: The projected 100,000 charging stations will be required to accommodate the expected 1.4 million EVs that will be on the roads by 2027.

4.3. Challenges and Opportunities

1. Lack of Charging Infrastructure as a Major Challenge: The current lack of charging infrastructure is one of the biggest challenges for the EV sector in India. The limited presence of charging points means customers cannot opt for quick top-ups or charging their vehicles in emergencies.
2. Importance of Fast Charging: An adequate presence of charging points, especially for fast charging, is crucial for the success of EVs. Fast charging can tip the scales in favor of EVs, especially as cars and two to four-wheelers are expected to be used for long-distance transport.
3. Potential to Tip the Scales in Favor of EVs: The development of sufficient charging infrastructure, including fast charging stations, has the potential to tip the scales in favor of EVs. The government's support in setting up charging stations and providing incentives and subsidies is well underway to ensure seamless adoption of EVs as mainstream vehicles.

4.4. Additional Insights from the European Context

• European Union Charging Infrastructure: The EU has 0.3 million public charging points, with the Netherlands having the highest density of 47.5 stations per 1,000 km.
• Growth in Europe: The growth in EV charging infrastructure across Europe is due to increased adoption of EVs, digital applications like ChargeMap and PlugShare, and governmental initiatives.
• Netherlands Example: The Netherlands started with 400 charging stations in 2010 and reached 75,000 in 2021, thanks to government initiatives like cost reductions and tax returns for purchasing and installing charging stations.

5. Conclusion

5.1. Summary of Key Findings

1. Record Year for EV Sales: 2022 has seen a significant increase in EV sales, validating the shift from ICE to EVs.
2. Government Support: The Indian government has been proactive in supporting the EV industry with policies and incentives.
3. Investment Growth: PE/VC investors poured in around $1.7 billion in the EV industry in 2021, and the number has reached approximately $666 million in 2022.
4. Charging Infrastructure: The current state of charging infrastructure is at a nascent stage with 1,742 charging stations, projected to increase to 100,000 units by 2027.
5. Challenges and Opportunities: Barriers to EV adoption include lack of charging infrastructure and high costs, but there are opportunities for growth with government initiatives and technological advancements.

5.2. Implications for Investors, Manufacturers, and Policy Makers

1. Investors:

• Growing Investment Opportunities: With the growth in ESG and Climate-specific funds, investment momentum in the EV industry is expected to continue.
• New and First-Time Investors: As startups and companies grow, new and first-time investors are joining the bandwagon, indicating a favorable investment climate.

1. Manufacturers:

• Technological Advancements: Indian startups and traditional companies are adapting to technological changes to meet consumer preferences.
• Potential for Hydrogen Fuel Cells: Hydrogen fuel cells present a cleaner, efficient, and effective alternative to traditional lithium-ion batteries.

1. Policy Makers:

• Supportive Policies: The government's proactive stance with EV policies and incentives is driving the industry forward.
• State-Level Policies: Many states are coming up with state-level policies to support the EV industry, including subsidies, tax exemptions, and competitive interest rates on financing.

5.3. Recommendations for Future Development and Investment

1. Address EV Financing Concerns: There is a need for the government and the investor community to come together to address EV financing, a current concern for the industry.
2. Promote Fast Adoption Across Segments: Fast adoption of EVs across all segments is essential for a green frontier.
3. Invest in Charging Infrastructure: Focus on developing charging infrastructure, including fast charging, to support the growing number of EVs.
4. Explore Alternative Technologies: Consider the potential of hydrogen fuel cells as a more sustainable form of mobility.
5. Encourage State-Level Initiatives: Continue to support and encourage state-level policies that align with national electric mobility policies.
6. Monitor Environmental Impact: Ensure proper disposal of lithium-ion batteries and explore environmentally friendly alternatives to mitigate negative environmental impacts.

6. Appendices

6.1. Relevant Legislation and Policies

1. FAME I and FAME II: These policies govern the sale and distribution of EVs in India, offering concessions such as subsidies on purchases, exemptions from road tax, and competitive interest rates on financing.
2. PLI Schemes: Production Linked Incentive schemes are also in place to promote the usage of EVs.
3. State EV Policies: More than 10 states in India have published their final EV policies that support national electric mobility policies. These policies may differ in terms of targets, manufacturing incentives, consumer-centric incentives, and charging infrastructure investments.
4. Hydrogen Fuel Cell Consideration: An environmentally friendly alternative to traditional lithium-ion batteries, hydrogen fuel cells are being considered as a more sustainable form of mobility.
5. Registration Charges Waiver: Among other initiatives, registration charges for all kinds of EVs across the country have been waived.