Indian Automotive Sector: Shift To Electric Mobility

The automotive industry is among the core sectors driving the Indian economy. As per 2021 reports, The contribution of the automobile sector to the overall GDP of India stands at 7.1 per cent and 49 per cent of the manufacturing GDP, with an annual turnover of Rs 7.5 lakh crore and export of Rs 3.5 lakh crore. At present among the top five, the Indian automotive sector is expected to be the world’s third-largest automotive market in terms of volume by 2026. 

The sector has evolved significantly over the last four decades, especially in the past four to five years where it has witnessed a massive push for electric mobility. The government is aggressively promoting electric vehicle (EV) adoption, subsidies under the FAME-II scheme in India being some of the prominent ways of doing so. Simply put, the industry is transitioning for the better but not without the challenges. 

Tech with a cause 

“We are living in one of the most disruptive and interesting times in the industry as the demand for mobility grows but paradoxically, this growth comes with challenges such as climate change, congested cities and increasing safety concerns. We are in an era marked by a centurial shift due to growing sustainability issues and supported by emerging trends in electromobility, connectivity, digitisation and automation,” observed Kamal Bali, President and Managing Director, Volvo Group India. 

While technology has disrupted every industry, in the case of the auto sector, the impact is directly on the future of a Sustainable India.  

“It was simpler in the past when it was about petrol and diesel. However, when it comes to future technologies, many combinations and many aspects are being continually discussed and constantly changing. The government also believes that there are many pathways to achieve carbon neutrality,” added Naveen Soni, the president of Lexus India explaining that the role of technology ultimately is to provide solutions to people’s problems.  

Citing the example of Lexus focusing to make all its vehicles electric by 2035, he explains how the self-charging hybrid electric vehicles will play an important part in paving the way toward carbon neutrality. 

Brakes and turns:

While the move towards green is beneficial for all stakeholders from the planet to people, the Indian automotive industry is riddled with challenges. The race to become the automotive leader began once again with electrification plans. While experts called now the right time for new players to enter the market and claim leadership positions, the pandemic, Ukraine, components shortage and the recent EV fires have all become a series of setbacks.  

In the past two to three years, the Indian auto sector has witnessed many young players enter the electric two-wheeler and three-wheeler space with the hope to disrupt the sector. This opened opportunities for investors and shareholders and consumers started adopting EVs as well. The electric two-wheeler explosions left a dent in the momentum. People are cancelling bookings in record numbers, widening the gap in the market again. 

These are coupled with some of the other challenges in the electric mobility plans such as the lack of standardisation, charging infrastructure, especially on the highways for longer commutes, lack of service options, limited EV driving range for commercial and passenger vehicles and the correct battery chemistry for electric vehicles. 

Despite these, industry captains gathered at the BW Auto World Summit 2022 were positive about India’s electric future. 

The right road:

“The Indian auto market is already the fifth-largest. Our aim to be the third-largest by 2030 is ambitious and rooted in reason. Covid and semiconductors shortage are significant challenges but there is a big turnaround in the coming years,” said Prashanth Doreswamy, President and CEO of Continental India, adding, “We are looking forward to an increase in content per vehicle through assistance vehicles, connected features, electrification and such.” 

Doreswamy pointed out that 50 per cent of car sales in India at the moment are hatchbacks. “If you electrify hatchbacks, they will cost much higher today, so passenger cars still have a few years to see new EV models but cars are becoming more software-defined. Bringing these into cars will require high technology. It will require redesigning and reevaluation,” he said. 

Yet another challenge in India’s electrification plans is the power crisis. India is facing a coal shortage which is affecting the power supply immensely. Since power is the main source of electric vehicles, the government needs to overcome this shortcoming soon. 

“Solar power plants and EVs can be looked at as a good combination in the future as it reduces the load on the local grid. India is already at the pilot stages for such projects and in the next few months, if any one of them becomes successful, it could be replicated across the country. We, as a country, are blessed with sunlight and we must take advantage of it,” added Shubhankar Chaudhry, CEO of One Moto India. 

Need of the hour:

The Indian automotive industry is expected to record strong growth in the upcoming years, recovering from the pandemic effects. EVs are likely to witness an increase in sales, especially the two-wheelers segment that dominates the Indian market in terms of volume, in the next two years. Consumer behaviour is inclined towards the green option. 

“If someone wants to buy a combustion engine, whether a petrol or diesel vehicle, they can purchase it within the next two to three years at best. After 2025, most of the vehicles will be electrified and only limited manufacturers would produce petrol and diesel vehicle,” noted Maxson Lewis, Founder & CEO of Magenta. 

While some of the changes are in the right direction, the need of the hour in the automotive industry is to identify the roadblocks that may come in the future and develop a corresponding strategy. Top of the list in this is skilled labour, robust research and development centres, low production and manufacturing cost, more affordable EVs with a standard driving range along with an ecosystem to incorporate EVs into consumers’ lifestyles. 

Opportunity of a lifetime: 

“The chance to create real value is bigger than ever before. We are setting ambitious targets we couldn’t have imagined a decade ago. Automotive couldn’t have spoken of net-zero emission but now as a country, India is looking at this target by 2070, and the auto industry will achieve it sooner,” said Volvo Group India’s Kamal Bali. 

For him, the most “satisfying factor” in this transition is protecting the people in the next generation.  

“This is one of the crucial phases for our nation, as the auto sector and its young talent come together to fulfil the needs of a very aspirational India. The world of mobility and auto will see a complete overhaul, providing leaders once in a lifetime chance to be part of the disruption, where ICE engines will give way to motors, products will give way to services, vehicles, infrastructure, drivers, passengers and everyone on and off the road will speak to each other,” Bali added. 

India is also a major exporter of automobiles and has strong growth expectations in the coming years. Recently, Prime Minister Narendra Modi has also urged the industry to make India a semiconductor hub of the world, based on the principles of high technology, high quality and high reliability. 

The likes of alternative fuels and energy carriers, automation, new transport concepts with hub-to-hub and last mile, connectivity and new business models mark the future roadmap for the auto sector in India.