Investment Opportunities for Foreign Businesses in India-E-Mobility Market
As nations around the world are moving towards net zero emission targets, the adoption of sustainable alternatives is rising in every industrial sector. In this regard, the transportation sector has been witnessing a rapid increase in e-mobility solutions.
According to reports, the global e-mobility market is set to reach a valuation of USD 2305.33 billion by 2030, indicating a 26.94% CAGR. Additionally, increasing government regulations to curb climate change impact and reducing costs of lithium-ion batteries are acting as drivers for this segment.
Thus, foreign businesses are actively searching for new markets in order to take advantage of this sunrise sector. In this regard, India can be an excellent choice. However, given the level of competition in this particular market, having a proper India market entry strategy is essential.
E-mobility Sector and Its Global Impact
E-mobility includes the use of electric powertrain technologies to power vehicles instead of an Internal Combustion Engine (ICE). This makes them eco-friendly, and energy-efficient and serves as a sustainable solution for the dual problems of dwindling oil resources and rising carbon emissions.
Surveys state that the transportation sector alone accounts for roughly 30% of the global energy demand. Thus, decarbonizing this industry segment with the help of e-mobility will help to create a healthier, cleaner, and more sustainable future for all individuals.
The advantages of adopting E-Mobility solutions are as follows:
- Reducing Greenhouse Emissions
One of the major reasons behind the adoption of e-mobility solutions is to curb greenhouse gas emissions. As EVs run on an electric powertrain, they do not release carbon dioxide or any other harmful gasses. Thus, they serve as an effective solution to reduce the effect of global climate change.
Additionally, unlike vehicles with internal combustion engines, electric cars do not generate any noise. Hence, they also solve the problem of noise pollution.
- Availability of Several Options
A significant benefit of e-mobility is the sheer versatility it offers. Electric powertrains can be installed in shared mobility solutions like public buses, ferries, bicycles, scooters, and motorcycles.
The wide variety present in the EV segment will satisfy the use case of several types of consumers. This will increase overall adoption, resulting in lucrative business opportunities for companies in this sector.
Although the initial cost of buying an electric vehicle may be high, its associated expenses are comparatively low. For example, electricity is way cheaper than petrol or diesel. Thus, to recharge an EV for a 100 km journey, it will cost car owners a little more than USD 1.
Moreover, these vehicles have a lesser number of parts in their assemblies. Hence, there are fewer instances of mechanical breakdowns, resulting in lower maintenance costs.
Keeping these factors in mind, there is massive scope for companies to enter and expand in this sector.
Future of India’s E-Mobility Sector – Opportunities and Risks
As per experts, the Indian e-mobility sector is estimated to reach a market value of USD 113.99 billion by 2029, exhibiting a 66.52% CAGR. But, this industry is still in a nascent stage. Thus, before foreign businesses plan to enter this market, they must know both the opportunities and risks.
Opportunities
Here are the opportunities that foreign companies can get by investing in the Indian e-mobility sector:
On a global scale, India has one of the largest domestic consumer markets. Reports state that between 2020 and 2022, electric car sales figures increased from 19,100 to 4,42,901 units. This indicates a growth of 2,218% in the aforementioned period.
Despite the high numbers, a majority of Indian consumers still rely solely on ECE vehicles. But, given rising oil prices and increasing efforts by the government to promote EV adoption, EV sales are bound to rise in the near future.
This creates ample scope for foreign businesses to set up their operations in this market.
- Strong Government Support
To boost its e-mobility sector, the Indian Government allows up to 100% FDI under the automatic route. Moreover, as per the Electricity Act of 2003, companies do not need to apply for a separate license in order to build a charging station.
There is also a product-linked incentive scheme for local Advanced Chemistry Cell (ACC) battery production. This will help reduce the cost of making batteries, which in turn will help lower EV manufacturing prices.
Risks
The risks associated with investing in this sector are as follows:
- Lack of Charging Infrastructure
One of the biggest risks in the Indian e-mobility sector is the lack of proper charging infrastructure. There are approximately 1,742 charging stations in the nation, which is currently not enough for the rising number of electric vehicles.
Furthermore, charging an EV at home might take between 30 minutes to 12 hours. This factor solely depends on the vehicle’s battery size and the charging point’s speed.
- Dependence on Imports for Making Batteries
Lithium is one of the main raw materials when it comes to manufacturing EV batteries. But, India currently lacks ample reserves of this metal, making the country rely solely on imports. This raises production costs which can be a concern for foreign businesses.
However, given the country’s policies to develop charging infrastructure and localize battery production, these factors will not be much of a problem. But, to ensure firms make the right decisions while establishing their business in India, devising an India market entry strategy is essential.
Why Foreign Businesses Need the Right Indian Market Entry Strategy?
Given the vast scope of India’s consumer market, several international EV companies are already expanding their business in the e-mobility sector. Thus, to start a company here, having a proper India market entry strategy is a must.
In this regard, opting for market strategy consulting for Indian firms can be an effective solution. There are several organizations like Tecnova which have time-tested entry, expansion, and growth strategies. Moreover, they can help foreign companies conduct competitor analysis and help find apt solutions for
Reference
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