IndiaInvestments & Funding

ICRA forecasts major EV component investment in India

Date: April 24, 2024. — ICRA, a credit rating agency, anticipates an investment surge in the auto component industry for electric vehicle (EV) parts in India. Over the next 3-4 years, the industry is expected to invest Rs 25,000 crore. This investment aims to enhance EV production, increase localisation, and address manufacturing challenges.

The investment forecast aligns with the growing EV penetration in India, which has reached 4.7% in FY2024, primarily driven by the electric two-wheeler segment. Advancements in localisation have been made for traction motors, control units, and battery management systems. However, the most critical and costliest component, advanced chemistry batteries, remains largely imported. These batteries account for 35-40% of the vehicle price.

ICRA’s projection also includes a substantial market potential for EV components. The Indian electric two-wheeler component market is expected to exceed Rs 1 lakh crore(INR 1 trillion) by 2030. The e-passenger vehicle component segment is also projected to reach at least Rs 50,000(INR 500 billion) crore in revenue potential for ancillaries.

The agency notes that although India currently does not manufacture battery cells, leading to reliance on imports. Domestic auto component suppliers have a significant opportunity to establish a local manufacturing ecosystem. This move is essential for achieving mass-scale EV penetration and a competitive cost structure in India.

The Production Linked Incentive (PLI) scheme, recent e-vehicle policies, and state incentives are also expected to contribute to accelerating the capex. Battery manufacturer’s ability to form alliances and create a robust framework for recycling will be key. Overcoming challenges such as technological complexity, high capital intensity, and raw material availability hinges on this.

Back to top button