The electric vehicle (EV) industry is entering the new year on the back of blockbuster sales in 2022 when it clocked one million units, a growth of over 300%, as reported by the Ministry of Road Transport and Highways through its Vahan Dashboard.

The higher sales were driven by supportive government policies. Over the past couple of years, several states, including Rajasthan, Chhattisgarh, Chandigarh,   Assam, Maharashtra, Delhi, and Gujarat, have introduced policies to incentivize the sales of EVs and facilitate manufacturing.

Electric vehicle industry stakeholders are optimistic about the year ahead and expect higher sales traction in 2023.

Chetan Maini, Co-founder, and Chairman of Sun Mobility, an EV charging solution provider said, “While the ecosystem has witnessed an influx of scooters, three-wheelers, cars, and buses in the last year, the space will also see a trend of providing custom-made solutions for shared mobility this year. We can also hope to see pilots of technological innovations around larger commercial vehicles.”

As the market matures, both existing and new EV manufacturers will be incentivized to introduce more product options, boosting consumer interest.

“We can expect the sales volume of electric vehicles this year to be at least twice of 2022. We are looking forward to more affordable cars and robust electric two-wheelers entering the market in 2023,” said Akash Gupta, Co-founder & CEO of Zypp Electric, a B2B delivery and shared electric mobility app.

Emergence of new business models

The industry is working on solutions to address existing challenges and expect solutions in the shape of viable business models, industry stakeholders said.

“Different business models are expected to emerge, including partnerships between EV makers and charging station companies, with the latter further collaborating with real estate developers for residential and commercial properties. Charging stations will cater to various needs, including fast charging for pitstops on long journeys and slow charging for vehicles parked for longer periods in places such as offices or residential spaces,” said Akshit Bansal, Founder & CEO of Statiq, an EV charging network provider.

Further, the EV segment of the ride-hailing industry is also looking at the new year with excited anticipation.

Anmol Singh Jaggi, CEO and Co-founder of BluSmart, an EV ride-sharing company said, “The ride-hailing industry is also expected to see significant growth in 2023, with electric vehicles expected to be the preferred mode of transportation due to an increase in charging stations and its environmental benefits.”

Technological advancements

The industry stakeholders said that at this juncture, substantial investments are being lined up for research and development (R&D) which could lead to breakthroughs in many technological hindrances facing wider EV adoption.

Arun Pratap Singh, Group COO and Co-Founder of Matter, an EV manufacturer, said R&D in the sector would create technology-driven energy solutions that are tailored to India’s grid infrastructure, and its extreme climatic conditions while being cost-effective.

Maini said developments in integrated solutions such as shared mobility powered by battery-swapping technology would enable zero downtime for charging and virtually unlimited range, an inflection point for EVs vis-à-vis conventional transport.

Lack of affordable financing options

However, there is a cautionary note from the industry on the lack of affordable financing options which has been a persistent problem for the sector, Sameer Aggarwal, Founder, and CEO of Revfin said.

The fledgling sector needs rapid infrastructure building to attract consumers to the alternate transport option.

Vikrant K. Aggarwal, Co-founder of EVI Technologies said that the industry would need large financial expenditures, grants, and loans to make the EV ecosystem affordable and reach out to rural areas.

“Overall, the EV sector will see a much-wanted growth in the FY23 onwards propelled by sub-segments such as EV financing, motor, and its controller, vehicle intelligence system, battery swapping and battery-as-a-service and comprehensive charging infrastructure network”, he added.

Cost of EV

The price variation for a four-wheeler internal combustion engine (ICE) and a comparable EV can be substantial. For instance, Tata sells its 1.2-liter, petrol-fueled Tiago at ₹544,900 (~$6,663) ex-showroom in Delhi, while the EV version of the car with a 19.2 kWh battery is nearly 54% more expensive at ₹849,000 (~$10,382).

This is reflected in the otherwise booming sales of EVs in 2022, which was dominated primarily by two- and three-wheelers but the four-wheeler passenger cars were less than 5% of the total sales.

“Price parity is emerging in the two- and three-wheeler segments and sales are booming in these categories. In fact, in many cases, we are seeing electric vehicles proving to be more cost-effective than conventional ICE vehicles. Add to it the lower running cost and EVs emerge as a very attractive option,” Rohit Pathania, Senior Manager – Energy and Mobility at the OMI Foundation said.

However, Pathania conceded that despite subsidies, the four-wheeler EVs are not yet competitive with their ICE counterparts, even though ownership costs over the life of the vehicle are competitive today in certain use cases.

“Thus, the uptake is slower, but it is being driven by economic considerations,” Pathania added.

Both Central and state governments provide subsidies to individual EV buyers. The Central government program disburses ₹15,000 (~$183)/kWh with a cap of ₹150,000 (~$1,834) on two-wheelers. The state government schemes have similar programs with varying subsidies.

Further, an EV buyer can claim a ₹150,000 exemption in the payable income tax on their loan meant for the purchase of EVs.

The four-wheeler EV prices will likely remain substantially higher than ICE in the new year as many EV components are dependent on imports. However, experts said that the prices would stabilize in the near term as greater localization of component manufacturing takes place.