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The Road Ahead: Exploring the Booming Indian E-LCV & E-M&HCV Market
29 Aug 2024

The Indian electric vehicle (EV) opportunity is experiencing a remarkable surge, reaching approximately US$ 34B in FY24 with 30% YoY growth. It is projected to reach around US$ 238B by FY30, growing annually at about 38% from FY24-30, reflecting a paradigm shift towards sustainable mobility.

In line with this transformative trend, the following section will focus on E-LCVs (Electric Light Commercial Vehicles) - cargo capacity of less than 7.5 tons and E-M&HCVs (Electric Medium & Heavy Commercial Vehicles) - cargo capacity between 3.5 and 7.5 tons.

By FY30, E-LCVs and E-M&HCVs are projected to capture a significant 14% share by volume of the total LCV and M&HCV market. This momentum is primarily fuelled by government subsidies provided to consumers at the time of purchase and the cost-effectiveness of E-LCVs, which boast a 10-20% lower Total Cost of Ownership (TCO) compared to traditional Internal Combustion Engine (ICE) counterparts. Additionally, there is a diverse range of new models hitting the market, catering to multiple use cases. Moreover, we will also discuss the challenges that lie ahead on this road to growth and how they can be addressed.

E-LCV and E-M&HCV overview

In FY24, E-LCV and E-M&HCV sales soared to 2.1K units, nearly two times the units sold in FY23. The sales volume is expected to reach 250K units by FY30, growing annually at a rate of 121% from FY24-30. The E-LCV and E-M&HCV market is projected to reach ~US$ 6B in FY30 from ~US$ 0.1B in FY24 growing at a CAGR of 98% as shown in Exhibit 1.
Despite the remarkable sales volume growth, the penetration is currently in a nascent stage, standing at 0.2%. However, the trajectory is expected to accelerate, with penetration forecasted to reach 14% by FY30, driven by the escalating adoption of E-LCVs with ~236K units sold annually in FY30 growing at 123% CAGR.

The E-LCV market is still at a nascent stage and evolving, with only 10 models present in this segment. Tata Motors and Eicher Motors are the key incumbents while OSM and Switch are the pure-play EV companies in this segment. The E-M&HCV segment has players like Propel, Olectra, and Tresa entering the market.
TCO analysis

While E4W has high initial investments, overall ownership costs throughout the lifecycle of the vehicle are more economical than ICE vehicles. These vehicles offer lower energy consumption and reduced maintenance expenses, accompanied by decreased insurance costs.

For E-LCVs, TCO declined by 20% with subsidies, resulting in a savings of US$ 6K over vehicle lifetime. Even without subsidies, there's a 9% reduction in ownership cost, bringing the cost down to US$ 25K and resulting in savings worth US$ 3K.
Even though EVs incur costs related to battery replacement, these expenses are spread over time and are offset by competitive or even superior salvage values. Ultimately, this cost-effective approach positions EVs as financially advantageous in commercial applications such as E-LCVs.

EVs have a battery pack, charger, inverter, electric motors, and cooling units as unique components compared to ICE vehicles, requiring significant component transformation, with only 30%-35% cost overlap between an EV and an ICE vehicle, and the rest of the cost is associated to the unique components used in EVs. The following exhibit describes cost breakdown across segments for EV vs. ICE as shown in Exhibit 4.
Expansion plans

In the E-LCV segment, although there are relatively few players, the recently introduced vehicles have generated significant pre-bookings, indicating a strong demand in the market. Post this incumbents are making significant investments in expanding the existing manufacturing capabilities. TATA Motors plans to invest US$ 245M annually, with a special focus on E-LCV vehicles. In addition to established incumbents, pure-play EV companies are making significant investments to ground their presence in the commercial vehicle market. For instance, Jupiter Mobility plans to invest US$ 25M, and Omega Seiki Mobility is aiming to raise US$ 200M by CY25.
Opportunities and challenges for E-LCV and E-M&HCV adoption

Government incentives, the increasing trend in adopting E-LCVs and E-M&HCVs for last-mile delivery, and the growing electrification initiatives by both state and central governments serve as key drivers for E-LCV and E-M&HCV adoption. Nevertheless, challenges such as the high upfront costs, limited availability of public charging infrastructure, a constrained range of financing options, a shortage of diverse EV models, and a lack of awareness among fleet operators about the favorable TCO present significant hurdles to widespread E-LCV and E-M&HCV adoption.

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