The electric vehicle (EV) market in South Asia is rapidly evolving, driven primarily by environmental concerns, economic incentives, and proactive government policies. Although there are significant challenges in the region including lack of awareness about EVs, insufficient and low utilisation of charging infrastructure, high initial costs of EVs and its low uptake; the potential for growth is substantial, driven by increasing environmental awareness and technological progress which is expected to reduce the cost of EVs. The article provides an overview of the EV market in South Asian countries…

India

India stands out as the largest and most dynamic EV market in South Asia. The country has seen significant growth in the EV sector, particularly with electric two-wheelers and three-wheelers that cater to its vast urban and semi-urban populations. Major automotive companies and startups are heavily investing in EV technology, creating a robust ecosystem. Data from VAHAN indicates a significant increase in India’s electric two-wheeler market in the third quarter of FY 2023-24 (Q3 FY 24), with a 34.42 per cent rise in sales compared to the previous quarter (Q2 FY 24). This growth trend continued into the fourth quarter of FY 2023-24 (Q4 FY 24), with 76,301 units sold, according to data consolidated by India Briefings.

Over the past decade, the central government has introduced various initiatives to encourage the adoption of EVs in the country. These measures include tax incentives for EV owners and the development of public EV charging infrastructure. FAME (Faster Adoption and Manufacturing of (Hybrid and Electric vehicles) is India’s primary scheme aimed at promoting electric mobility. Launched by the Department of Heavy Industry (DHI) in 2015, FAME’ second phase (FAME-II), which began on April 1, 2019, ended on March 31, 2024. The initial budget allocation for FAME-II was Rs 100 billion. Later, another Rs 15 billion was added in the budget. The scheme has earmarked incentives for each category of EV.

The initiative aimed to support 7,000 electric buses, 500,000 electric three-wheelers, 55,000 electric passenger cars, and 1,000,000 electric two-wheelers. By March 30, 2024, a total of 1,542,452 EVs had been subsidised under the scheme. This includes 1,364,929 two-wheelers, 157,171 three-wheelers, and 20,352 four-wheelers.

In the interim budget of 2024, FAME III has been proposed and the finance minister has allocated around Rs 26 billion for this scheme. The scheme is likely to be finalised in the main budget to be announced in July 2024.

Recently, in March 2024, the central government has approved a scheme aimed at establishing India as a key manufacturing hub for EVs featuring the latest technology. This policy is intended to attract investment from renowned global EV manufacturers, enhancing the domestic EV market.

The key policy details are the following:

  • Minimum and maximum investment: Rs 41.50 billion and no limit, respectively
  • Manufacturing timeline: Companies have three years to set up manufacturing facilities and commence commercial production, aiming to achieve 50 per cent of domestic value addition (DVA) within five years.
  • DVA: Companies must reach a localisation level of 25 per cent by the third year and 50 per cent by the fifth year.
  • Customs duty: A 15 per cent customs duty applies to vehicles with a minimum CIF value of $35,000 and above for 5 years, provided the manufacturer sets up facilities in India within three years.

The other key policies that will drive the uptake of EVs directly or indirectly include the production linked incentive (PLI) scheme for automobile and auto component industry and the PLI scheme for ACC battery manufacturing. Apart from government incentives, a key driver for EV uptake in India from the consumer perspective has also been the rising fuel costs. High taxes on petrol and diesel make EVs a more appealing option for cost-conscious consumers who seek to make their cars less costly vis-à-vis ICE vehicles in the long run by factoring in low operational expenses. Furthermore, growing awareness about pollution and its health impacts is driving the consumer’s shift towards cleaner transportation alternatives. In addition, improvements in battery technology and the development of efficient electric drivetrains have enhanced the performance and range of EVs, making them more competitive with conventional vehicles and reducing range anxiety of consumers. These drivers have led to a positive future outlook based on various projections.

According to Mordor Intelligence, the electric commercial vehicle segment, though in its nascent stage, is poised for significant growth. This surge is fuelled by an increasing focus on sustainability and cost-effectiveness within the logistics and transportation industries. Electric buses, trucks, and vans are gradually being integrated into urban fleets, bolstered by government initiatives aimed at reducing pollution and promoting electric mobility in public transportation and goods delivery. The growth of this segment is crucial for achieving India’s ambitious environmental targets and improving urban air quality.

The Indian EV market is moderately consolidated, with the top five companies holding 43.74 per cent of the market share. The leading companies in this market, include Ampere Vehicle, Ather Energy, Okinawa Autotech, Ola Electric Mobility, and TVS Motor Company. Other key players include BYD India, Hero Electric Vehicles, Hyundai Motor India, JBM Auto, Mahindra & Mahindra, MG Motor India, Olectra Greentech, Switch Mobility (Ashok Leyland), Tata Motors, and Toyota Kirloskar Motor. Going forward, Mordor Intelligence estimates that the size of the Indian EV market is projected to be $34.8 billion in 2024 and is expected to reach $120 billion by 2030, growing at a CAGR of 22.92 per cent during the forecast period (2024-2030).

According to a report by Bain & Co., electric two-wheelers could constitute around 40 to 45 per cent of all EVs sold in India by 2030, while electric passenger vehicles might account for about 15 to 20 per cent. In contrast, a Niti Aayog report outlines more ambitious government targets for EV adoption by 2030: 40 per cent for buses, 30 per cent for private cars, 70 per cent for commercial vehicles, and 80 per cent for two-wheelers.

Meanwhile, the Economic Survey of India 2023 has projected a robust 49 per cent CAGR for the domestic EV market from 2022 to 2030, anticipating annual sales of 10 million EVs by 2030. The EV industry is expected to create approximately 50 million direct and indirect employment opportunities over the next seven years.

Despite several drivers, and policy interventions, several challenges hamper the uptake of EVs in India. These include limited availability of charging stations, especially in rural areas, which limits long-distance travel and overall adoption. Also, despite subsidies, the upfront cost of EVs remains high compared to traditional vehicles, deterring many consumers.

Sri Lanka

The government has drafted a Framework on Electric Mobility in 2019 to guide its EV efforts. This was done in partnership with the Swiss Agency for Development and Cooperation. The framework outlines important aspects including charging infrastructure, policy and regulations, manufacturing and import, technology, incentives and subsidies, institutional capacity, etc. Further, the Sri Lanka Sustainable Energy Authority (SLSEA) embarked on an initiative to drive the adoption of e-mobility in the country. The main components of this initiative included a target that mandated a minimum of 20 per cent of all new light vehicle registrations in 2022 to be EVs. As per the sustainable energy development action plan for EVs, there is a target to transition 10 per cent of the vehicle fleet to EVs by 2030. It also involved collaborating with key players like the Ceylon Electricity Board (CEB) and Lanka Electricity Company (LECO) to set up new public electric charging stations equipped with direct current rapid charging capabilities. According to the data collated by EV Club of Sri Lanka, the country has 56 DC fast chargers and two normal chargers, with chargers concentrated mostly around Colombo and Kandy and the road connecting these two key cities. Additionally, the CEB has undertaken several initiatives to promote EVs within Sri Lanka, including the establishment of EV charging stations.

The substantial initial expenses associated with the EVs and the required charging infrastructure pose a significant barrier to the widespread adoption of EVs. Sri Lanka’s frequent adjustments to its motor tax system disrupts car manufacturer’s ability to strategically invest in the EV ecosystem. Moreover, the country’s dependence on imports for a majority of its automotive requirements hinders the timely development of domestic EV innovations, consequently maintaining elevated costs for EVs.

According to Research and Markets, electric three-wheeler segment in Sri Lanka is mostly unregulated, and this has led to the entry of large numbers of individual operators in the market. The fares are usually negotiated for each trip. Previous attempts of implementing meters have failed.

According to Research and Markets, the electric three-wheeler market in Sri Lanka was assessed at Rs 2,60,420,000 in 2019. Projections indicate that it is poised to escalate to Rs 862,470,000 by 2027, with an anticipated compound annual growth rate of 33.4 per cent from 2020 through 2027. Euromonitor’s Mobility forecasts predict that EVs will account for 25 per cent of all new passenger car registrations in 2024, surpassing 17 million units in global sales. In Sri Lanka, the EV market is expected to generate a revenue of $13.4 million in 2024.

According to Statista, in 2024, Sri Lanka’s EV market is expected to generate a revenue of $13.4 million. This segment is forecasted to experience a CAGR of 7.05 per cent from 2024 to 2028, leading to an estimated market volume of $17.6 million by 2028.

Going forward, the future growth prospects of the EV segment in Sri Lanka hinges on the country’s economic recovery. Still the policy impetus and industry developments indicate that the EV market in the country can grow despite the ongoing herculean challenges in its economy country.

Pakistan

Pakistan’s EV market is in its early stages but shows significant promise. The focus has been primarily on electric two-wheelers and three-wheelers, which suit the country’s urban transport needs. In Pakistan, the National Electric Vehicle Policy (NEVP) was introduced in November 2019, marking a significant step towards the electrification of the country’s transportation sector.

According to the International Council on Clean Transportation, the NEVP aims for EVs to account for 30 per cent of all passenger vehicle and heavy-duty truck sales by 2030, and 90 per cent by 2040. The policy sets even higher targets for two- and three-wheelers and buses, aiming for 50 per cent of new sales by 2030 and 90 per cent by 2040.

To stimulate investment in EVs, the NEVP includes new foreign direct investment incentives. Manufacturers, assemblers, and suppliers in the EV and related infrastructure sectors will benefit from significantly lower taxes, with a GST of 1 per cent for EVs compared to 17 per cent for conventional vehicles. The import duty for charging equipment will also be reduced to 1 per cent. Additionally, the government plans to lower the electricity rates for charging station operators to encourage private investment in charging infrastructure. The government will ensure the installation of at least one DC fast-charging station every 10 square km in all major cities, utilising more than 3,000 defunct CNG stations as potential locations. Furthermore, charging stations will be placed every 15-30 km along all motorways. According to Electromaps, there are eight charging stations in Pakistan: Islamabad (3), Lahore (2), Karachi (1), Hafizabad (1), Sargodha (1).

Other countries

Nepal is gradually embracing electric mobility, particularly focusing on electric two-wheelers and public transportation. The Nepalese government is actively promoting EVs through various policies and incentives. Subsidies on EV imports, tax exemptions, and investment in charging infrastructure are key components of the government’s strategy. With these initiatives, the country is experiencing a significant increase in the adoption of EVs, with EV imports now comprising one-third of the market share by value, according to The Kathmandu Post. According to the Department of Customs, the import of EVs in Nepal surged by 158.31 per cent in the first six months, from mid-August 2023 to mid-January 2024. During this period, Nepal imported 5,107 EVs valued at Rs 12.73 billion. In comparison, the same period in the previous fiscal year saw the import of 1,749 EVs worth Rs 4.92 billion. Most of these imports are sourced from China and India.

While Bangladesh’s EV market is at a very nascent stage, the country’s EV market is characterised by the growing popularity of electric three-wheelers (rickshaws) and two-wheelers, which are crucial for urban mobility. The country’s congested cities and high pollution levels make a strong case for electric transportation. The Bangladeshi government has expressed interest in promoting EVs, particularly for urban transport, to combat air pollution. Efforts are underway to develop policies that support the import of EVs and the establishment of charging infrastructure.

Conclusion

The EV market in South Asia is poised for substantial growth, driven by environmental imperatives, economic factors, and proactive government policies. Each country in the region presents unique opportunities and challenges, reflecting their specific economic conditions, infrastructure development, and market dynamics. Despite the challenges of infrastructure development, high initial costs, and the need for consumer education, the potential for growth in the EV market across South Asia is immense. With continued investment, supportive policies, and technological advancements, the region is well on its way to a sustainable and electric future.