Economic Survey 2022-23 predicts 10 million annual electric vehicle sales by 2030

The Economic Survey 2022-2023, presented in Parliament yesterday by Finance Minister Nirmala Sitharaman, contains a number of conclusions, including the thesis that India remains the world's fastest growing economy despite multiple global growth challenges.

GDP growth for fiscal year 2024 is projected between 6% and 6.8%. The survey states that this "optimistic growth outlook is driven in part by the resilience of the Indian economy, as evidenced by a recovery in private consumption, smoothly replacing export stimulus as the leading growth driver."

The Economic Survey assumes India Auto Inc as a key driver of India's economic growth. In December 2022, India became the third largest automotive market in the world with sales of 4.4 million units. These data suggest that India surpassed Japan and Germany in terms of automobile sales . Earlier in 2021, India was the largest manufacturer of two-wheeler and three-wheelers and the fourth largest manufacturer of passenger cars in the world. The importance of the automobile sector is measured by the fact that it has a contribution of 7.1% to total GDP and 49% to manufacturing GDP. While, on the other hand, this sector alone provides direct and indirect employment to 3.7 billion people in India.(end 2021).

Tenfold growth of India EV Inc by 2030

India, which has set a zero emissions goal by 2070 and aims at maximising the use of electric vehicles, aims to have electric vehicles supply 30% of mobility needs by 2030. Domestic consumption is expected to rise sharply over the next seven years. There is also a high demand for this type of environment friendly mobility.

Economic Survey 2022-2023 report states that: “The automobile industry, expected to play a critical role in the green energy transition. The domestic electric vehicle (EV) market, expected to grow at a CAGR i.e., compound annual growth rate of 49% between 2022 and 2030, with annual sales expected to reach 1 crore units (10 million) by 2030. The EV industry will create 5 crores of direct and indirect jobs by 2030.”

According to the forecast of the economic survey, by 2030, the annual sales of electric vehicles will be 10 million, which means a 10-fold growth of the Indian electric vehicle industry. In 2022, electric vehicle sales surpassed one million units. It happened for the first time as a result of growing environmental awareness among buyers. The support from central and state government in form of incentives for electric vehicle buyers, and a wider choice of products resulted in such a high growth. High prices for Petrol and diesel, and to some extent CNG, are also pushing buyers towards electric vehicles. Plus, the wallet-friendly cost of owning an electric car in the long run is a big catalyst.

Much of the growth is in the two- and three-wheeler segments, commonly referred to as the "low-hanging fruits" of the electric vehicle industry. Provided that they are most affordable compared to electric cars or commercial vehicles. It is clear that they are the biggest contributor to EV sales. With over 600,000 units sold in 2022, electric two-wheelers accounted for 62% of India's total electric vehicle sales, followed by electric three-wheelers at 34% and electric passenger cars at 4%.

Another positive point for India EV Inc is the government's PLI scheme, which enables higher localization of components for electric vehicles. This will reduce dependency on imports, as well as allow electric vehicle manufacturers to optimise costs and price of electric vehicles. 

The economic review also points to some headwinds for future growth. “Despite the optimistic outlook, the automotive industry faces certain challenges. Higher borrowing costs and moderate global demand are expected to be obstacles in the short term. Among the structural problems, increases in premiums for long-term third-party vehicle insurance resulted in an increase in the total initial cost of insurance by about 10-11 percent, especially for two-wheelers. Thus, the two-wheeler segment is the most affected and shows the lowest sales in the last ten years. Solving these problems will contribute to the development of the automotive industry.”

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