Automakers to pump $10 billion in building EV capacity by 2030

Automakers in India will be pumping in close to $10 billion (₹80,000 crore) to build infrastructure for manufacturing electric vehicles by the end of this decade, the data compiled by ETIG shows. The move comes amid the electrification trend sweeping the automotive industry globally. It is also being prompted by the government’s nudge to ditch pure internal combustion engines in favour of battery-operated vehicles.

The capital expenditure would entail building a couple of green field plants for EVs, investment in battery plants to make batteries from cell level and supporting grid charging infrastructure.

While the tentative plans of carmakers show that they are planning to create capacity of around 2 million EVs taking the cumulative installed capacity to around 7.2-7.5 million units by 2030, two-wheeler makers are bracing to create 15.5 million of the EV capacity that would be equivalent of nearly two-third of the cumulative installed capacity of internal combustion engine (ICE) powered two-wheelers.

“This is the first time in a decade that one will be seeing this kind of capex in the creation of fresh capacity,” said Puneet Gupta, director S&P Global Mobility. However, owing to the volatility in the battery technology manufacturers are unlikely to commit large capex in one go, he added.

The capex is likely to be revised upwards if more automakers plan to put their battery plant to increase backward integration. “This investment will be the first critical milestone if India has to become a $5 trillion economy. As of now, the government and the industry are in sync with each other,” said Vinod Aggarwal, president, Society of Indian Automobile Manufacturers Association.

With incumbents ramping up the capacity and multiple carmakers set to enter the fray in 2025, EV penetration for passenger cars in India is expected to reach 25-30% by 2030. Better battery density is set to ease range anxiety and lead to wider adoption to battery driven cars.

Brokerage CLSA expects e-car sales to be around 1.54 million units in 2030, compared with 47,241 units in FY23. It estimates e-two-wheeler retail sales to increase at a 9% CAGR over FY22-31 and an 8% CAGR over FY22-36.Among carmakers, Maruti, which is leading the capex charge, plans to increase its installed capacity to around four million units compared with 2.25 million presently as it would be launching six EV vehicles by 2031, the company said at the annual earnings conference earlier this month. It’s likely to make an investment of ₹45,000 crore in doubling the capacity, ET reported earlier this month.

The company’s first EV model will go on sale in 2025 and thereafter remaining models will be launched within a certain interval.

Mahindra and Tata Motors have announced EV capex of ₹10,000 crore and ₹15,000 crore respectively that would be incurred in the next 5-7 years. Korean car maker Hyundai has recently committed to spend $2.45 billion (₹20,000 crore) over the next 10 years in the southern Indian state of Tamil Nadu to bolster its plans for electric vehicles in the country. The carmaker currently has a capacity of 775,000 vehicles per year at its Chennai factory that it plans to increase to 850,000. The company has yet to disclose the exact timeline for the expansion.