Opinion EVs could be the game-changer India needs

To unlock this potential, India’s EV sector will need to address significant challenges related to general automobile components, batteries, and charging stations through a combination of policy and financial incentives to create both supply and demand. This, in turn, will send a clear signal about the country’s move towards a complete EV value chain and really help shift the needle. The good news is that much of this is already in the works and, if it takes off, the payoff will be significant: the transition to EVs in India could be worth an estimated $206 billion by 2030 (according to the CEEW Centre for Energy Finance) and generate as many as 50 million direct and indirect jobs (IVCA–EY–Induslaw report).

On the demand side, consider how electrifying bus fleets across the country could be a major game-changer. There are an estimated 2 million buses on India’s roads today, many operated by private operators. Putting in place better financing incentives and innovative business models, along with charging infrastructure, could help transform these fleets. Doing so would reduce petrol and diesel costs for operators, enhance the experience for customers, and improve local air quality: a triple win.

Along with efforts to support the shift for larger forms of transportation – buses as well as private vehicles – there are also exciting financing solutions for two- and three-wheelers. The International Finance Corporation is exploring debt and equity solutions that could help operators expand their electric bus and truck fleets. We have also made equity investments in companies such as Mahindra Last Mile Mobility, a subsidiary of Mahindra & Mahindra, to support expansion into the EV three-wheeler segment, and Napino, to help grow its electronics and EV component manufacturing capacity. We are also investing in funds that support Indian companies to grow the two-wheeler EV market domestically, as well as create local jobs and strengthen India’s role in global EV supply chains.

On the supply side, consider batteries. India has historically relied on importing EV battery cells from other countries, but this is set to change. According to some estimates, in just the next five years, 13 per cent of India’s EV battery cell demand could be sourced domestically, up from close to 0 per cent today. In the government’s most recent Budget, import duties were eliminated on a range of materials that make the lithium-ion batteries which power EVs – effectively a push to boost domestic battery makers. Relatedly, concerted investments in charging infrastructure across both urban and rural areas will also be needed in order to boost uptake. The government’s Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles, or FAME scheme, could support the buildout of this charging infrastructure, including both slow and fast charging solutions, to meet the needs of a growing market.

Beyond its borders, India’s EV transformation offers an exciting inflexion point for the industry more widely. The right moves now could send a major signal to the market. For instance, joint ventures between domestic industry or battery manufacturers and international firms are an obvious next step to meet growing national and international demand. IFC, with its global footprint, could help structure such partnerships and foster strategic skills and technology transfers. Closer to home, the Indian EV revolution could mean higher earnings for micro-entrepreneurs and drivers, reduced noise and air pollution, and better connectivity and logistics – all of which are key to strong economic growth.

The writer is the International Finance Corporation’s Regional Vice-President for Asia and the Pacific and oversees all investment and advisory operations across the region.