Foreign Investors (FDI) to look for investments in India
There are many questions about how the coronavirus will affect the global electric vehicle market and what will be the impact on foreign investors. So far, electric cars have been a niche product and many OEMs have focused their go-to-market strategy on the small, technology-savvy segment of automotive customers.
The potential increase in demand for the electric vehicle rental and subscription models, which is top of the pandemic, which has caused major difficulties in providing electric vehicles and closing assembly facilities due to its dependency on imports from China, has made the situation a challenge for Indian electric vehicle manufacturers but are the opportunities for foreign investors.
By comparison, India’s retail vehicle finance business is now valued at INR 4.5 trillion ($60 billion). Around 50 percent of the two-wheeler, 80 percent of private four-wheelers, and 95 percent of light, medium, and heavy commercial vehicles in the country are funded by loans or through foreign investors. Although Chinese investors are one of the main players, this scenario could change. Dusija said that Chinese investors should not be the only investors in the VC space.
The two-wheeler segment dominates the market in terms of volume due to the growing middle class and young population. The wide range of products attracts many consumers, leading to a growing market for electric vehicles. Developed countries such as the UK, Germany, and the US have encouraged the use of electric vehicles to reduce emissions, which has led to increasing in sales of electric vehicles.
User-friendly government policies and support in the form of subsidies, grants, tax breaks, and other non-financial benefits in the form of car-pooling, lanes, new registrations (in China, ICE engines are banned for new registrations in urban areas), increased vehicle range, improved availability of charging infrastructure, and proactive participation by automakers have driven global electric vehicle sales. More than 5 million electric cars were on the roads in 2018, an increase of 40% compared to 2017. Due to the ongoing developments in the automotive sector, the market for electric vehicles has developed rapidly.
The growing sensitivity of various governments to the clean environment has reportedly increased the demand for zero-emission vehicles is a welcome move for foreign investors. Automakers and many suppliers are investing heavily in future technologies such as electric vehicles and autonomous driving systems. The electric vehicle industry in India is gaining momentum as 100% foreign direct investment is possible, new manufacturing centers are being built, and charging infrastructure is being improved.
The global automotive industry is currently undergoing a paradigm shift, trying to shift to alternatives and less energy-intensive options. The burden of oil imports, the increasing pollution, and international commitments to combat global climate change are the key factors that have driven India’s recent policies to accelerate this change.
As India prepares to launch electric vehicles, the government, industry, and finance leaders must face the growing need to mobilize low-cost capital for electric vehicles and infrastructure. According to our recent report Mobilizing and Financing Electric Vehicles in India, co-authored with Niti Aayog, India’s transition to electric vehicles will require a cumulative investment of 19,7 trillion Indian rupees (266 billion rupees) in-vehicle charging infrastructure and batteries over the next decade. Analysis shows that the country’s market size for electric vehicle financing has a potential of $50 billion by 2030.
Researches included the use of a proprietary H2 cost model to evaluate hundreds of options, shows that the most promising applications for low-carbon hydrogen in industrial processes like ammonia, steel, chemical manufacturing, and heavy transport will be in the next decade.
As a result, hydrogen is likely to remain a niche technology for passenger car use but has great opportunities in commercial vehicles for maritime and air transport that seem lucrative to foreign investors. Companies with high-growth electric vehicles are exciting for investors. Thanks to their high energy efficiency and ability to use established infrastructure, electric vehicles have developed a cost advantage over individual mobility that fuel cell vehicles are likely to achieve soon.
It is important to remember that the process of developing and manufacturing electric vehicles is not significantly different from that used by manufacturers of traditional combustion vehicles. Nor should we forget that the major traditional car manufacturers will increase competition in this market segment with the introduction of their own electric vehicles.
This means that electric vehicle manufacturers may face higher costs than traditional car manufacturers and it is a great opportunity for foreign investors to invest in India. The Indian automotive industry is expected to experience strong growth in 2021-22 after recovering from the effects of the COVID 19 pandemic and will be an attractive proposition for foreign investors.
For the first time in 2019 sales of electric battery-electric and plug-in hybrid cars are expected to exceed two million vehicles. In January 2019, Deloitte issued a forecast for electric vehicle sales and the electric vehicle market has made great progress, not just sales. Together with annual sales of battery-powered electric vehicles and plug-in hybrid electric vehicles, which are expected to top two million vehicles by 2019. However, this milestone has been overshadowed by economic uncertainty and changing consumer priorities and values, so it is worth taking stock of the market.
In the foreseeable future, electric vehicles will remain a profitable segment due to higher sales revenues, continued evolution on the re-use and re-marketing of batteries, and significant investment opportunities in charging infrastructure. Additional revenues streams from on-demand services and feature sources such as data charges will offset the cost pressure as the current GTM model continues to evolve. The market will be able to support the transition to electric vehicles in the same way that other nations will in the next decade.
The combination of these elements will create a compelling offer that improves the customer experience and allays concerns that stand in the way of the adoption of electric vehicles. The Indian government’s Ministry of Heavy Industry has shortlisted eleven cities across the country for the introduction of electric vehicles into their public transportation systems, known for the fastest deployment and production of hybrid and electric vehicles under the Country’s program. The government has also set up incubation centers for start-ups working in the electric vehicle sector.
The American electric car and clean energy company Tesla Inc. marked its entry into the country by establishing its subsidiary Tesla India Motor Energy Pvt Ltd in Bengaluru. In February 2021, Energy India, India’s first smart electric vehicle manufacturer, will move its multi-million-pound factory to Bengaluru in Karnataka and Hosur in Tamil Nadu.
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