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CRISIL Research Sees Electric Vehicles As Having A Rs 3 Lakh Crore Potential For India

TNI || New Delhi || 13th April 2022

According to a CRISIL estimate, electric vehicles (EVs) present a nearly Rs 3 lakh crore opportunity for different stakeholders in India over the next five years, through fiscal 2026.

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The opportunity includes revenue of around Rs 1.5 lakh crore for original equipment manufacturers (OEMs) and component manufacturers across vehicle segments, as well as Rs 90,000 crore in disbursement for vehicle lenders, plus shared mobility and insurance accounting for the rest.

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Meanwhile, as more people switch away from internal combustion engines (ICE), EV usage continues to rise.

According to the Vahan portal, the percentage of electric three-wheelers (3Ws) registered climbed to about 5% in fiscal 2022 from less than 1% in fiscal 2018.

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The percentages for electric two-wheelers (2Ws) and buses increased to about 2% and 4%, respectively.

The transformation isn’t just happening in big cities. Smaller communities are also getting involved, thanks to the government’s budgetary and non-fiscal policies. According to Vahan figures, the top ten districts’ share of nationwide sales of electric cars and 3Ws declined from 55–60% in fiscal 2021 to 25–30% in fiscal 2022. The proportion of 2Ws fell from 40–45 percent to 15-20 percent.

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The reasons for EV adoption are all too obvious. The affordability of ICE vehicles is being impacted by rising fuel prices and ICE vehicle costs, while government assistance for EVs is also playing a significant role.

FAME-India (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India), the Phased Manufacturing Plan, and the Production Linked Incentive are few of the government’s EV initiatives.

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EV production has piqued the interest of both start-ups with cutting-edge business models and established OEMs. Many state governments have also offered demand incentives as well as capital aid to greenfield manufacturing companies.

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Furthermore, according to CRISIL’s estimate of total cost of ownership, electric 2Ws and 3Ws were able to compete with ICE vehicles last fiscal year, although they only cover 6,000 and 20,000 kilometres yearly, respectively.

Due to parity in ownership costs with ICE vehicles, uptake of 2Ws and 3Ws is expected to climb even without subsidies by 2026, according to the report.

Considering the improved cost parity and the government’s emphasis on electrifying vehicles, we should not be shocked if EV penetration hits 15% in 2Ws, 25-30% in 3Ws, and 5% in automobiles and buses by fiscal 2026 in terms of transportation sales, says CRISIL Limited, Director, Hemal Thakkar. 

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