Continued from part I…
Investment scope in the industry
If you take a look at major brands in India, there are companies like Tata, Bajaj, Heromotocorp, Maruti, Mahendra and Mahendra that are trying to participate in the EV industry and launching their own set of vehicles.
Now, there is no point in taking a look at the current portfolio because as we see these companies are coming up with newer and newer products.
But most importantly we need to be aware of which companies are in the two-wheeler and four-wheeler manufacturing space when it comes to EV, so, these could be literally any company.
The above listed are the traditional players who used to manufacture traditional cars and bikes are now getting into the EDI (electronic data interchange) space.
Now many international players, for example, Tesla recently entered the Indian market Tesla is already selling high-end EV cars, so, it might enter the space.
Similarly, other international big manufacturers and big brands might come into the Indian market and would try to dominate this space because this is a super lucrative space.
Now the second component which is called OEM original equipment manufacturers is where the major game lies for the EDI players.
Firstly, if you need to get an EV done, like a bike or a car you need a bunch of components.
So the first component that you generally need is called a battery pack.
Now the battery is one of the most critical components for any EV.
And it costs approximately 40% of the entire amount.
This is a big cost indeed!
This also means that the selling price of this particular component would be very high.
And if you are actually making investments in battery companies in India, it might be a good practice.
Before that, it is important to note down the battery manufacturing companies in India.
There are a lot of problems when it comes to Indian battery manufacturers, for example, they are not doing high-end efficient manufacturing, a bunch of regulatory-related issues, a bunch of issues around procuring raw material.
These issues might not diminish but with this growing industry, I’m hopeful that the government in conjunction with the private sector will be able to sort out these issues.
Other parts forming the EV cost are electronic motors, power electronics, vehicle integration, which contribute in the range of 10 to 20%.
And these are very important components that need to be kept in mind.
Now the key takeaway is that OEM component manufacturing would play a major role in the EV industry to become big.
Let’s consider buying a traditional vehicle, let’s assume that we are trying to buy a Ferrari in India.
Why do you think is Ferrari not sold in India?
The reason is very simple that the OEM for Ferrari, the engine is designed in Italy, some other components are designed in Germany.
These components, keep on getting designed in Europe and bringing those components to India and manufacture it, there will be a lot of import duty, there will be a lot of skilled manpower required, there will be a bunch of other issues.
Therefore, the bottom line is that since EDI is such a big opportunity for the government, the governments are pouring an insane amount of money in terms of building up this industry.
When I say that the government is looking to build up this industry, where do you think that they would start fishing?
They would start by supporting the OEMs.
There are multiple challenges in terms of manufacturing batteries, and this is a national mission.
On this front, it is called as National Mission on transformative mobility and battery storage.
So even the government realizes its importance, and why we need to build up our OEM system in India in order to create and structure the AV industry.
Now in order to support OEMs, what do we need?
We need to get really efficient in terms of the building of batteries.
This is definitely a step in the right direction, and it shows there will be a lot of investments that will be made by the government going forward.
Government in action
The government is running a production link incentive scheme for ACC battery storage manufacturing, which will incentivize domestic production units.
It’s putting in a lot of effort in terms of building up the OEMs and a lot of support and investment will go to them now very quickly touching upon how the government is building infrastructure.
infrastructure is a very key issue when it comes to ease and the government at the backend needs to develop the infrastructure, pass on the regulation pass on the benefits give a lot of incentives to people to come and invest in the space.
The government of Karnataka has introduced a comprehensive EV policy, Tamil Nadu has come up with another supply ecosystem where they are trying to build OEMs there is a lot of administrative and investor-related support that has been given by the Tamil Nadu government as well.
Government is also proactive in terms of building the backend infrastructure supporting OEMs.
This industry is already growing.
The situation looks conducive to accelerating the next leg of the growth.
I hope that this blog article was insightful and gave your perspective.