E4W market potential and projections

The Indian electric vehicle (EV) opportunity is experiencing a remarkable surge, reaching approximately US$ 35B in FY24 with 35% year-on-year growth. It is projected to reach around US$ 235B by FY30, growing annually at about 37% from FY24 to FY30, reflecting a paradigm shift towards sustainable mobility. In line with this transformative trend, this newsletter will focus on electric four-wheeler passenger vehicles, which are anticipated to command a substantial 16% share of four-wheeler sales by FY30. This momentum is primarily fueled by government subsidies provided to consumers at the time of purchase and the cost-effectiveness of electric four-wheelers (e4Ws), which boast a 6-14% lower Total Cost of Ownership (TCO) compared to traditional Internal Combustion Engine (ICE) counterparts. Additionally, there is a diverse range of new e4W models hitting the market, catering to budget-conscious consumers. Moreover, we will also discuss the challenges that lie ahead on this road to growth and how they can be addressed.

In FY24, the e-4W passenger vehicle opportunity stood at ~US$ 2B, growing at ~46% year-on-year. It is expected to reach ~US$ 18B in FY30, growing annually at about 47% from FY24 to FY30, as shown in Exhibit 1. Despite the remarkable growth in sales volume, the penetration of e4Ws is still in its early stages, currently at 2.2%. However, this trajectory is expected to accelerate, with penetration forecasted to reach 16% and ~880K units sold annually by FY30.

The e4W category, with a sales volume of ~80K in FY24, has a presence of multiple vehicle variants. The variants are mainly classified into three categories based on their use cases: hatchbacks for daily commuting, sedans for long-distance travel, and utility vehicles for carrying more luggage.

The utility vehicle segment is the most well-served, with OEMs such as Tata Motors, BMW, Audi, Jaguar, Land Rover, Mercedes, and Hyundai Mahindra offering around 18 different models to customers. Sedans are the next best-represented 4W segment with 15 models in the market. However, the hatchback category is notably underserved. This indicates that while certain segments have made headway into the EV market, providing consumers with diverse choices, there are still some vehicle segments catering to specific sets of customers that have not attracted the attention of EV OEMs.

These variants combined offer ~30+ different vehicles at multiple price points, providing consumers with a wide array of options as shown in Exhibit 2.

Total Cost of Ownership analysis

While electric cars require high initial investments, the overall ownership costs throughout the vehicle's lifecycle are more economical than those of traditional vehicles. The higher upfront capital costs associated with e4Ws are effectively balanced by substantial fuel savings compared to their ICE counterparts. For electric cars, total ownership costs decline by 14% with subsidies, and even without subsidies, there is a 6% reduction in ownership costs over the vehicle's life, as shown in Exhibit 3.