As the world’s third-largest auto market, India is a ripe target for electric vehicle companies, but due to slow domestic development, Indian companies are unlikely to capture a significant global share in the electric vehicle segment in the foreseeable future, according to a report by S&P Global Ratings.
Asia will continue to maintain its position as the world’s largest producer and market of electric vehicles (EVs), EV batteries and EV battery materials, and the continent will become the center of the EV era, the report said.
The report said: “As the world’s third-largest auto market, India is a ripe target for electric vehicle companies. Electric vehicle sales in the country more than doubled last year. However, this number is from a low base. In the past 12 months, electric vehicle sales accounted for less than 2% of total light vehicle sales.”
Furthermore, 90% of electric vehicles in India belong to the two- and three-wheeler segment.
“While growth potential is strong, development of adequate charging infrastructure will be key for EV adoption. Given the slow adoption of EVs in the country, no Indian company is likely to capture a meaningful share of the global market for EVs in the foreseeable future,” it added.
S&P Global Ratings pointed out that Tata Motors is the leader in India’s electric vehicle field, with a market share of more than 80%.
“We expect the company to maintain its strong position despite increasing competition from other players such as SAIC Motor Corporation Ltd and Hyundai Motor, as well as domestic players such as Mahindra & Mahindra & Mahindra,” the company said.
However, Tata Motors’ British unit Jaguar Land Rover Automobiles “lags behind many of its peers in the shift to electric vehicles. This could harm its competitiveness,” the report said.
“With EVs accounting for only around 10% of Tata Motors’ projected passenger vehicle sales in FY23, we expect the margin and earnings impact to be manageable. There is also no significant funding requirement given shared manufacturing infrastructure with the ICE unit,” the ratings agency said.
Tata Motors has also raised about $1 billion (approximately Rs. 82.28 Cr) through the sale of convertible instruments.
The securities are compulsorily convertible into an 11% to 15% stake in its Indian electric vehicle business.
“This funding significantly reduces Tata’s debt in India. We believe Tata’s India EV business has further monetization potential,” S&P Global Ratings said.
The report states that Asia will become the center of the electric vehicle era.
“The region has the vast resources needed for the industry (nickel in Indonesia), highly supportive policies (China), and industry-leading technology (South Korea, China, Japan). A group of Asian companies are surpassing the established players, especially in China, which has a larger electric vehicle market than the rest of the world combined,” the report said.
