Avendus Capital, which is an investment banking arm of financial services provider Avendus Group, said that the total cost of ownership (TCO) in case of low- and medium-speed electric two-wheelers is already lower than internal combustion engine vehicles.
The report said, "With the present and projected level of EV penetration in the country, EVs in India could represent a Rs 500 billion (US$ 7.09 billion) opportunity by 2025. Two- and three-wheelers will lead the electrification movement in India in the medium term."
It added that the penetration in two-wheeler segment is expected to be at 9 per cent by 2024-25 and with the right macroeconomic environment, it can increase up to 16 per cent while the segment could grow to Rs 12,000 crore (US$ 1.70 billion) by 2024-25.
It is seen that E-rickshaw emerged as a large market in India in a short time frame even though a large part of this market is still unorganised and based on lead-acid batteries, the report stated.
The market is expected to see a shift to lithium-ion battery and by 2024-25, as much as 40 per cent of the e-rickshaw market is expected to be li-ion based.
"Over the past decade, the economics of the technology used in this sector has improved significantly, and today, EVs make economic sense across multiple use cases," said Mr Koushik Bhattacharyya, director and head (industrials) at Avendus Capital, at the launch of the report.
He said that the predictability of transition to EVs is accepted by the world, however, the timeline for mass adoption is still a topic for debate. "But we believe that we are moving quickly towards a mobility regime where EVs become mainstream."
It is expected that the adoption of EVs is accelerated by the current COVID-19, as customers are looking for environment-friendly and cost-effective personal mobility solutions, and also because online commerce is fast becoming the norm, the report said.
"India represents the fourth-largest automobile market in the world and the second-largest two-wheeler market with around 20 million units. It is also a country with massive dependency on oil imports, with a US$ 112 billion oil import bill in FY19," added Mr Bhattacharyya. He added that pollution in many Indian cities has reached alarming levels. "All these factors combined make a strong case for EV adoption in India."
He added that the TCO will become favourable as the battery prices decreases further.
"E-auto makes economic sense on a TCO basis. We expect to see intensive action in this space going forward. We expect around 20 per cent EV penetration in e-auto category by FY25. We expect this segment to be Rs 40 billion (US$ 567.46 million) by FY25," said Mr Ankit Singhal, vice-president (industrials) at Avendus Capital.
It is estimated that the EV adoption in the four-wheeler category will stay limited to commercial or fleet applications. The overall penetration in the electric four-wheeler segment is expected to be about 2 per cent and increase to 5 per cent with the help of right macroeconomic environment, he said.
He added, "We expect this segment to be Rs 100 billion (US$ 1.42 billion) by FY25."
Avendus Capital said it expects factors mainly policy, battery cost, charging infrastructure and supply chain localisation driving the adoption of EVs in various segments in the country over the next decade.
The commercial vehicle side will be led by e-buses with regulatory push expected to drive this category, rather than TCO.
"We expect EV adoption in the bus category to be about 13 per cent by 2024-25 and segment to be Rs 60 billion (US$ 851.18 million) by that time.
"Light commercial vehicles (less than 3.5 tonnes) in the EV category also make TCO sense and we forecast about 4 per cent EV adoption in this segment by FY25, translating into a Rs 15 billion (US$212.80 million) market opportunity," Mr Singhal said.
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