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Investors stay bullish on Indian EV market | Mint – Mint

“India is a price-sensitive market. So, there may be an impact on sales of two-wheeler EVs due to the withdrawal of subsidies. But eventually, the industry will learn to live without incentives, and to that extent, the long-term EV story remains intact,” Arpit Agarwal, director, Blume Ventures, said. The VC firm has invested in multiple EV startups, including Yulu, ElectricPe, and BatterySmart.

Last month, following in the footsteps of Goa, Maharashtra withdrew subsidies on electric scooters and motorcycles, making them dearer by up to 10,000 per vehicle. Goa scrapped its incentive policy in July 2022.  Maharashtra comprised the highest two-wheeler registrations in India at close to 40,000 registrations in the first six months of 2022. The state was offering a subsidy of 5,000 per kilowatt-hour (kWh) of battery capacity, with an upper cap of 10,000. Initially, the subsidy was for 100,000 vehicles, but about 64,000 buyers benefitted, according to  two wheeler platform BikeDekho.

EV sales in August showed that demand has remained unaffected by the decisions. According to information on the government’s vehicle registration portal, Vahan, registrations of electric two-wheelers crossed the 50,000 mark, for the second time since March.

With 10,476 two-wheeler EVs registered in August, Hero Electric topped the charts, Okinawa and Ampere took the second and third spots  with 8,554 and 6,396 units, respectively.

Okinawa Autotech, one of the highest-selling electric two-wheeler makers in the country, isn’t seeing any slowdown in demand for its vehicles, said founder and managing director, Jeetender Sharma.

“While we would have expected the state subsidies to continue for the customers to accelerate EV adoption in India, the rollback shouldn’t impact overall sales,” Sharma added.

Besides states, the Centre also offers incentives for buying electric vehicles under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME II) policy. With an outlay of 10,000 crore, the scheme offers a subsidy of 15,000 per kWh on electric bikes and is aimed at promoting sale of EVs in the country. The scheme is valid till 31 March 2024.

India’s EV segment is pegged to receive investments worth $12.6 billion across the automotive supply chain over the next five years, according to a 2021 joint report by Indospace and Colliers. The report also pointed out that 64% of the investments will be made in automakers and the rest in battery manufacturing.

Investments in the EV space have picked up pace after a slight lull in 2020. In 2021, total private equity and venture capital investments in the EV segment grew eightfold to $1.7 billion in 2021, from $181 million in 2020, according to a joint report titled ‘Electrifying Indian Mobility’ by IVCA-EY-Induslaw.

Bullish on burgeoning demand, higher sales forecast and a supportive regulatory environment around the EV ecosystem, investors are expected to double down on their investments.

This calendar year has already witnessed a slew of deals in the first eight months. For instance, last month, electric two-wheeler maker Ultraviolette raised $10 million from Amsterdam-based Exor Capital. Another two-wheeler maker, River, raised $11 million in a Series A round led by Chris Sacca’s Lowercarbon Capital, with participation from Toyota Ventures. Meanwhile, ride-hailing start-up BluSmart Electric Mobility said in July that it is close to raising $250 million from investors including Bp Ventures.

However, things might change once the FAME II scheme ends. Investors are expected to query startups on how their business will look like once the subsidies end, said Capital A’s founder Ankit Kedia. “At that point, valuations will correct and investment lens will also change.”

While FAME II will end in 16 months, the industry might take a little more time to come of age. Okinawa’s Sharma expects the Indian EV market to mature in the next few years. “Five years from now, electric scooters will be 20% of the ICE scooter market. The overall market in 2025 will be around 26 million scooters, of which five million will be electric scooters.”

Moreover, for customers, there are several other factors to choose EVs over petrol two-wheelers, despite a higher upfront cost. Lower registration fees and goods and service tax (GST) for EV buyers, lower maintenance cost, and significantly higher price of gasoline as compared to the cost of electricity are some of the reasons, said Niraj Rajmohan, co-founder and chief technology officer, Ultraviolette, a Bengaluru-based EV maker which recently raised $10 million from Amsterdam-based Exor Capital.

Investors also expect that rising prices will eventually push companies to look for affordable technologies. “It (states ending incentives) will push manufacturers to innovate and cost optimize,” said Shailesh Vickram Singh, an investor with Climate Angels, an early-stage backer of sustainability startups. 

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