Auto Industry to Invest Rs.25,000 Crore to Scale EV Manufacturing: ICRA

The auto component industry is poised to invest over Rs 25,000 crore in the next 3-4 years to scale up the production of electric vehicle (EV) parts, as highlighted by rating agency ICRA on Tuesday. EV penetration in FY2024 has reached 4.7%, primarily fueled by the electric two-wheeler segment, with contributions also coming from e-three-wheelers and electric buses, according to ICRA's statement. Notably, traction motors, control units, and battery management systems have witnessed significant localization over the years.

However, advanced chemistry batteries, constituting around 35-40% of the vehicle price and remaining the most crucial and costly component, are predominantly imported, ICRA added. The relatively low levels of localization present manufacturing opportunities for domestic auto component suppliers.

"ICRA anticipates a minimum of Rs 25,000 crore investment in EV components over the next three to four years, focusing on capacity expansion, technological advancements, and product enhancements," remarked ICRA Senior Vice President Shamsher Dewan. Approximately 45-50% of this investment is expected to be directed towards battery cells. Dewan further highlighted the contribution of the Production-Linked Incentive (PLI) scheme, recent e-vehicle policies, and state incentives in accelerating this investment.

Looking ahead, the rating agency forecasts EVs to represent approximately 25% of domestic two-wheeler and 15% of passenger vehicle sales by 2030. Consequently, ICRA projects the electric two-wheeler component market potential to surpass Rs 1 lakh crore by 2030, with the e-passenger vehicle component segment estimated to reach at least Rs 50,000 crore in terms of revenue potential for ancillaries.

It's worth noting that battery cells are presently not manufactured in India, leading most original equipment manufacturers (OEMs) to rely on imports.