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Capex for EV components likely to exceed Rs 25,000 crore in next 3-4 years: ICRA
Apr-24-2024

Credit rating agency ICRA in its latest report has said that capital expenditures (capex) for electric vehicle (EV) components are likely to exceed Rs 25,000 crore in the next 3-4 years, for capacity building, technology and product enhancements. About 45-50% of this, would be towards battery cells. The PLI scheme, recent e-vehicle policy and state incentives would also contribute to accelerating capex.  

It said spurred by government support in the form of subsidies, enhanced awareness, and increasing product launches, the EV segment in India has seen a significant upturn in prospects over the past two years. A confluence of factors such as improving product portfolio, charging infrastructure, and financing availability and a gradual decline in battery prices are likely to aid in the acceleration of EV penetration across segments over the medium term. EV penetration reached 4.7% in FY2024, with much of it driven by the electric two-wheeler (2W) segment, although e-three-wheelers (e-3Ws) and electric buses have also contributed to the same.

According to the report, at present, only around 30-40% of the EV supply chain is localised. Chassis components that require minimal technology upgradation are manufactured locally. There has been substantial localisation in traction motors, control units, and battery management systems over the years. However, advance chemistry batteries, which remain the most critical and the costliest component, accounting for almost 35-40% of the vehicle price, are imported. The low localisation levels give rise to manufacturing opportunities for domestic auto component suppliers. For parts that are already used in internal combustion engine (ICE) vehicles, there could be technological advancements in certain cases, resulting in higher content per vehicle.

ICRA expects EVs to account for around 25% of domestic 2W sales and 15% of passenger vehicle sales by 2030, translating into strong market potential for EV components. Accordingly, the rating agency projects the Indian e-2W component market potential to exceed Rs 1,00,000 crore by 2030, while the e-passenger vehicle (e-PV) component is foreseen at another Rs 50,000 crore at least, in terms of revenue potential for ancillaries. The actual growth for domestic auto component suppliers would depend on localisation levels and value addition.


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