India is "optimistic" that its new EV policy measures will facilitate the entry of more foreign players into the market.

• The secretary of the Department of Promotion of Industry and Internal Trade stated that India is optimistic that its new electric vehicle policy measures will facilitate entry into the market for more international players.
• Rajesh Kumar Singh stated to CNBC's Sri Jegarajah that it entails concessional tariffs for restricted quantities of imports by international EV manufacturers, contingent upon their unwavering commitment to invest a minimum of $500 million in India.
• The initiatives will also attract other foreign automakers, as VinFast, Vietnam's leading EV maker, has already announced its intent.

The secretary of the Department of Promotion of Industry and Internal Trade stated that India is optimistic that its new electric vehicle policy measures will facilitate entry into the market for more international players.

The government recently introduced crucial measures to strengthen the country's standing in electric vehicle manufacturing.

Rajesh Kumar Singh informed CNBC's Sri Jegarajah that the agreement includes concessional tariffs for a specific amount of imports by global EV manufacturers, in exchange for a firm commitment by them to invest at least $500 million in India.

"He stated that the goal was to achieve 25% localization targets by the third year and 50% by the fifth year, which was applicable to both global and domestic electric vehicle manufacturers."

While Tesla has garnered a lot of attention, Singh emphasized that other foreign automakers will also be attracted to the initiatives, as VinFast, Vietnam's leading EV manufacturer, has already expressed its interest.

"Although I won't disclose the names of other companies, we are highly confident that several companies will utilize this policy."

In February, VinFast commenced construction on its integrated EV manufacturing facility in Tamil Nadu, India. The company intends to initially invest $500 million over five years, with a projected capacity of 150,000 vehicles annually, as stated.

Elon Musk, CEO of Tesla, expressed excitement about India's future but postponed a trip to meet Prime Minister Narendra Modi due to heavy Tesla obligations.

Tesla's entry into India's EV sector will level the playing field, as competition remains limited, MG Motor India's CEO Emeritus Rajeev Chaba told CNBC.

Robust trajectory

Nearly double in 2023, India's EV sales were driven by rising consumer interest and government initiatives, and are expected to increase by 66% in 2024 to constitute 4% of total passenger vehicle sales, according to Counterpoint Research.

According to Counterpoint, by 2030, electric vehicles (EVs) are predicted to account for approximately one-third of India's photovoltaic (PV) market, indicating a strong long-term growth trend in the country's automotive industry.

Singh deemed Modi's goal of achieving 30% EV usage by the end of the decade to be realistic.

"For commercial vehicles, including three-wheelers and two-wheelers, we will be hitting above 30%," he said. "For passenger cars, it will be more realistic to expect 15% to 20% by then."

The secretary stated that the penetration of electric vehicles, specifically two-wheelers and three-wheelers, in India is rapidly increasing.

Our three-wheeler ownership rate is close to 50%, while our two-wheeler ownership rate is around 10%-12%.

"We have a lag in passenger vehicles where penetration is only about 2%, so we created a policy to encourage manufacturers to enter India and bring their latest models and technology."

In 2023, India surpassed China as the largest market for electric three-wheelers, with over 580,000 sales, according to the International Energy Agency's "Global EV Outlook" report.

The report stated that the country is the second-largest electric two-wheeler market worldwide, with sales expected to increase by 40% in 2023 compared to 2022.

According to IEA, the five largest domestic manufacturers in India, including Ola Electric, TVS Motor, Ather, Bajaj, and Ampere, dominate the electric 2W market and account for more than 75% of sales.

Structural problems

Bain & Company highlighted several structural challenges that must be addressed to encourage increased adoption of EVs.

India has a significantly lower charging infrastructure compared to other countries, with approximately 200+ electric vehicles (EVs) per commercial charging point, in contrast to around 20 EVs per charging point in the US and less than 10 EVs per charging point in China, according to a report by Bain.

"Singh acknowledged that it is a challenge, but progress is being made in establishing battery charging infrastructure in many of our larger cities and highways."

"In the next two to three years, we anticipate that battery charging infrastructure will become widespread."

Another obstacle that must be addressed is "range anxiety," which is the fear that EVs won't have enough range to reach their destination.

The expansion of the EV space and the demand among consumers for fully electric vehicles will not be hindered by range anxiety, he stated.