Electric vehicles (EVs) will account for 50% and 70% of new two-wheeler and three-wheeler sales in India by 2030, global consulting firm McKinsey & Company.
The report states that India will electrify rapidly, but the transition paths to it will vary across vehicle types, with electrification expected to happen fastest in the two-wheeler and three-wheeler space due to shorter payback periods.
On the other hand, the electrification of passenger vehicles and heavy commercial vehicles is expected to be more gradual. Electric passenger vehicles could account for 10-15% of new vehicle sales by 2030, according to a report released at the annual conference of the Automotive Component Manufacturers Association (ACMA) in New Delhi.
McKinsey also noted that the shift toward electrification would bring headwinds for component categories that are oriented toward traditional internal combustion engines (ICEs).
Shivanshu Gupta, Senior Partner at McKinsey & Company, said, “Disruption, especially due to the electrification of mobility, is inevitable. While they bring some headwinds, they also present new opportunities for Indian suppliers to expand into domestic and global markets, in traditional categories as well as newer EV segments.”
He added, “Indian auto component manufacturers could benefit from dedicating management bandwidth and resources to exploit these opportunities.”
The news comes at a time when India is setting aggressive targets for vehicle electrification. The Center and several state governments have introduced new policies and subsidies for various stakeholders in the EV ecosystem to increase EV adoption.
Amitabh Kant, Former CEO of Niti Aayog, said, “India must aim for 100% electrification in the two-wheeler and three-wheeler segments in the next four years. I am convinced that India’s electrification journey should be about two-wheelers and three-wheelers… because 80% of the total vehicle sales in India are two-wheelers and three-wheelers.”
He further added, “My view is that the green mobility revolution is indeed knocking at our door and India needs to focus on shared connected and electric transport and also pointed out that battery technology in India is also undergoing tremendous development. The shift to electric mobility is now growing simply because the cost of batteries, which account for about 40 to 45% of total vehicle costs, is falling rapidly.”
According to Kant, costs will continue to fall below $100 per kWh, and when that happens, the initial cost of ownership for EVs will be cheaper than for internal combustion vehicles, even without any FAME subsidy.
Nitin Gadkari, Union Transport Minister, said, “I feel that the cost of lithium-ion batteries will come down over time and within two years there may come a day when the cost of petrol two-wheelers and EVs (two-wheelers) will be the same.”
A few months ago, he declared that the price of electric cars will be at the level of gasoline cars within a year.
In a bid to boost the EV segment in India, Gadkari had earlier said that the total number of EVs in the country would rise to 30 million in the next two years.
As of mid-July this year, 13.34 Lakh EV units were plying on Indian roads, according to government data.
McKinsey also noted in the report that significant disruption in the Indian automotive space presents an opportunity for automotive suppliers to capture more than $95 billion by 2030 in India and globally.
As per the report, “With faster EV penetration, the US and EU markets are likely to lose economies of scale for local manufacturing of traditional component categories (forgings, castings, etc.) due to low demand volumes and high variety, adding that Indian players could serve these markets by taking advantage of lower labour costs.”