Electric vehicles: EVs offer Rs 3 lakh cr business opportunities by FY26, says CRISIL

Electric vehicles (EVs) offer an almost Rs 3-lakh crore business for various stakeholders in India in the five years through fiscal 2026, a CRISIL analysis indicated on Tuesday. The segment is expected to be driven by shared mobility, battery swapping and shift from ICE vehicles besides government support, it said.

The opportunity includes potential revenue of about Rs 1.5-lakh crore across vehicle segments for original equipment manufacturers (OEMs) and around Rs 90,000 crore in the form of disbursements for vehicle financiers, with shared mobility and insurance accounting for the balance, as per the analysis.

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CRISIL also does not rule out EV penetration reaching 15 per cent in two-wheelers, 25-30 per cent in three-wheelers, and 5 per cent in cars and buses by fiscal 2026 in terms of vehicle sales. According to CRISIL, EV adoption continues to surge as more people shift from internal combustion engine (ICE) vehicles.

Data on the Vahan portal shows the share of electric three-wheelers (3Ws) increased to almost 5 per cent of 3Ws registered last fiscal year from less than 1 per cent in fiscal 2018.
For electric two-wheelers (2Ws) and buses, the percentages rose to almost 2 per cent and 4 per cent, respectively, as per the analysis, which also suggested that the shift is not limited to large cities either.

Smaller towns are also entering the fray, driven by the government's fiscal and non-fiscal measures, according to the analysis by CRISIL.

As per Vahan statistics, in fiscal 2021, the contribution of the top 10 districts in nationwide sales of electric cars and 3Ws dropped from 55-60 per cent in fiscal 2021 to 25-30 per cent in the previous fiscal.

For 2Ws, the percentage declined from 40-45 per cent to 15-20 per cent, it said. Rising fuel prices and government support have played a huge role here. Central schemes such as Faster Adoption and Manufacturing of

Hybrid and Electric Vehicles in India (FAME-India), phased manufacturing plan, and Production Linked Incentive have jump-started the country's EV journey, according to CRISIL.

The emergence of EVs is an opportunity for both existing and new industry participants to innovate and capitalise on the quickly evolving passenger and cargo mobility. To address ecosystem challenges of the EV industry, the government is considering rolling out a structured battery swapping policy.

"Such facilitations will go a long way in realising the EV potential. In addition, improvement in availability of finance will push EV adoption," said Jagannarayan Padmanabhan, Director, CRISIL.

Startups with new-age business models as well as OEMs with an established business have evinced interest in manufacturing EVs. Many state governments have also provided demand incentives, and capital assistance for setting up greenfield manufacturing plants, CRISIL said.

In addition, its total cost of ownership analysis suggests electric two and three-wheelers attained parity with ICE vehicles last fiscal even when running a mere 6,000 km and 20,000 km, respectively, annually.

By 2026, the analysis indicates that adoption of two and three-wheelers will rise even without subsidy, due to parity of ownership cost with ICE vehicles.

Considering the improving cost parity and the government's focus on electrification of vehicles, we should not be surprised if EV penetration reaches 15 per cent in two-wheeler, 25-30 per cent in three-wheeler, and 5 per cent in cars and buses by fiscal 2026 in terms of vehicle sales," Hemal Thakkar, Director, CRISIL said.

According to CRISIL, several new trends and business models are expected to emerge as all that growth materialises. Battery-as-a-service and public charging stations, for one, typically has a pay-per-use model and aims to reduce the initial outgo of the customer, improve viability, address range anxiety and, in turn, increase asset utilization, it said.

Mobility-as-a-service is yet another model, which focuses on shared mobility by linking operations with charging infrastructure, as per the analysis, which added that here, too, the vehicle and charging infrastructure are deployed on a pay-per-use model.

Then there is micro-mobility, which provides last-mile distribution of cargo by way of micro-rental of electric 2Ws and 3Ws, operating on a self-drive rental model. The model is typically asset-light and based on open-source operations, where the user can hire and deploy vehicles, it stated.