CAPEX FOR EV COMPONENTS TO EXCEED RS 25K CRORE IN NEXT 3-4 YEARS: ICRA

Domestic auto parts industry has outlined a capital expenditure (capex) of Rs. 25,000 crore for EV components in the next three-four years for capacity building, technology and product enhancements, said ratings agency ICRA.

The ratings agency projects the Indian electric two-wheeler component market potential to exceed Rs 1 lakh crore by 2030, while the e-passenger vehicle (e-PV) component is foreseen at another Rs 50,000 crore at least, in terms of revenue potential for ancillaries.

Shamsher Dewan, Senior Vice President and Group Head – Corporate Ratings, ICRA Limited, said: “Auto ancillaries have started investing in the EV components space to capitalise on this opportunity, and companies have entered into collaborations/joint ventures (JVs) in cases of technological impediment. The PLI scheme, recent e-vehicle policy and state incentives would also contribute to accelerating capex.”

At present, only around 30-40 percent of the EV supply chain is localised. While chassis components that require “minimal technology upgradation” are manufactured locally, ICRA reckons that there has been substantial localisation in traction motors, control units, and battery management systems over the years.

According to ICRA, for parts that are already used in internal combustion engine (ICE) vehicles, there could be “technological advancements” in certain cases, resulting in higher content per vehicle. However, advance chemistry batteries, which remain the most critical and the costliest component, accounting for almost 35-40 percent of the vehicle price, are currently imported.

The low localisation levels give rise to manufacturing opportunities for domestic auto component suppliers, as per the ratings agency.

“The larger projects (especially for battery cell localisation) are expected to be funded partly by debt initially. There is also substantial private equity interest in this space. Capex for components other than batteries is expected to be funded largely through internal accruals,” added Dewan.

In his view, battery cells are currently not manufactured in India, and thus most original equipment manufacturers (OEMs) rely on imports.

"Manufacturing operations in India are limited to the assembly of battery packs. To achieve mass-scale penetration of EVs and a competitive cost structure, India will need to create its own eco-system for developing battery cells locally,” Dewan further added.

ICRA also acknowledged that engine and drive transmission components would be impacted by the EV transition. It also believes that EV adoption could also have a bearing on aftermarket demand because of “fewer moving parts”. However, supplies to alternate applications, new products, and export opportunities are likely to mitigate the impact to an extent.

Meanwhile, ICRA expects EVs to account for around 25 percent  of domestic 2W sales and 15 percent of Passenger Vehicle (PV) sales by 2030, translating into strong “market potential” for EV components.

2024-04-23T08:27:32Z dg43tfdfdgfd