Ola, TVS and Ather propel TN in $12.6 bn EV sweepstake

The electric vehicle (EV) segment in India is likely to see investments worth ₹94,000 crore ($12.6 billion) over the next five years across the automotive value chain and Tamil Nadu is leading the race, according to a report by consultancy firm Colliers.

Tamil Nadu, which is setting up a dedicated EV park at Manalur near Chennai, has been able to corner the highest share of investments at 34%, followed by Andhra Pradesh and Haryana. The outlay is based on companies’ planned investments in manufacturing capacities across states largely in components and assembly line production, followed by investments in battery manufacturing. A chunk (64%) of the investments will be from OEMs, while the remaining capital would be for lithium-ion battery manufacturing.

Major manufacturers investing in the EV space in TN include Ola Electric (₹2,354 crore), TVS Electric (₹1,200 crore), Ather Energy (₹635 crore), Srivaru Motors (₹1,000 crore), Ampere Vehicles (₹700 crore), Simple Energy (₹350 crore), Magenta (₹250 crore) and Zeon Charging (₹250 crore).

TN’s pole position in the EV transition is not surprising as the state has always had a strong auto manufacturing ecosystem — accounting for 30% of the country’s auto industry base and 35% of the auto component sector. The state is home to domestic manufacturers, including Royal Enfield, Ashok Leyland, Tafe and TVS Motor. While Ford has shut down its India business it was instrumental in creating TN as an auto and component hotspot. Following its entry, Hyundai Motor, BMW, Daimler, Renault-Nissan, Mitsubishi Motors and Yamaha Motor followed suit. “The huge supply of engineering talent, thanks to a lot of engineering colleges in the state, has also been instrumental,” says Ramesh Nair, CEO, Colliers India.

Currently, 15 states have either approved or notified EV policies, with six more states set to join the race. Delhi, Gujarat, Maharashtra and Meghalaya are focusing on demand incentives for buyers, whereas Karnataka, Tamil Nadu, Andhra Pradesh, Telangana are focusing on manufacturer-based incentives. “We believe a balanced mix of incentives at both ends should help create a robust ecosystem for EVs,” according to the report. The investment is likely to create opportunities in the real estate sector across several segments, mentions the report.

Besides EV makers, battery manufacturing companies are also looking to set up base in states where lands are being given at concessional rates such as Andhra Pradesh and Tamil Nadu. According to the report, a battery manufacturing ecosystem of 110 GW will be built by 2030. “The government has a conservative scenario of manufacturing batteries by 2030 but this can spawn a manufacturing requirement of about 1,300 acres of land pan-India,” adds Nair. Besides, around 13.5 million square feet would be needed for setting up 26,800 public charging spots by 2025

The real estate consultancy firm expects landlords to outsource dedicated charging stations to charging service providers at busy locations or enter into a revenue-share model with charging service providers. “There is also ample scope for developers to develop retail and recreation spaces in proximity to charging stations,” mentions the report.

However, for setting up battery manufacturing units, electricity charges and capital subsidies will be critical as lack of focus on R&D for new battery technologies saw the country import ₹6,600 crore ($929 million) worth of lithium-ion batteries in FY20.

But to achieve the grand investment target, ease of business remains the stumbling block as even today multiple construction permits take about three months, leading to higher approval costs. Besides, lack of high-specification Grade A warehouses for storing lithium-ion batteries and high land cost in urban centres for public charging stations are the other challenges, points out the report.

With the government’s push for faster adoption, e-vehicles sales have tripled year-on-year to 1.18 lakh units in H1 FY22 on the back of fiscal incentives such as FAME-II, aimed at achieving the government’s 2030 target of 30% EV sales.