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EV sales in India grew by nearly 47% to 1.5 million in 2023

India, a major player in the global automotive industry, has started focusing on transitioning to alternative fuels to curb pollution after expanding its consumer and vehicle bases and adding local manufacturing facilities over the past two decades. On this journey, 2024 will be a crucial year, as the country — the third-largest automotive market — faces challenges to offer accessible growth capital to late-stage startups while trying to lure Tesla and other foreign EV manufacturers to enter its domestic market.

In 2023, India, the world’s largest two- and three-wheeler manufacturer, sold almost 24 million vehicles, including commercial and personal four-, three- and two-wheelers, according to the latest data on the government’s Vahan portal. Of the total number of vehicles registered, more than 1.5 million were EVs, capturing 6.35% of the total base, including 813,000 electric two-wheelers. While the overall growth was nearly 10% from about 22 million vehicles sold in 2022, EV sales grew by close to 47% from 1.03 million EVs sold last year.

This brings the total number of electric vehicle sales in the country to nearly 3.5 million. Two-wheelers accounted for more than 47% of sales, four-wheelers represented about 8% and the rest came from e-rickshaws and three-wheelers.

India’s annual growth in EV sales in 2023 is significant; however, it’s not as high as in the previous two years, which were over 209% in 2022 and 166% in 2021. One of the reasons for the dip in the sales of EVs is the cut in subsidies given to two-wheeler customers through the $1.38 billion incentive scheme called Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles, commonly called FAME-II, that came into effect in June and dropped the monthly sales of electric two-wheelers in the country over 56% in that month alone. The sudden drop in electric two-wheeler sales has arguably impacted the country’s overall EV market, as India is predominantly a two-wheeler market and has limited manufacturers in the electric car segment.

Ravneet S. Phokela, chief business officer of electric two-wheeler startup Ather Energy, told TechCrunch the market took a hit for about three months due to the FAME-II update, though it has rebounded to pre-subsidy change levels as of October.

“From the bounce back, how the rapid growth is going to be remains to be seen, but we expect it to be more gradual than exponential. However, the days of 100% quarter-on-quarter growth are gone,” he said over a call, adding that the change would help in the medium-term perspective.

“In a way, while the subsidy impacted us in the short term financially, if I just take a macro view, there has actually been a good outcome because now, the market pricing is close to non-subsidy levels, which means the market has gotten used to price levels that we can explore broadly when subsidy goes over,” Phokela noted.

The subsidy update has also caused consolidation and sudden exits of many small-scale electric two-wheeler brands, including the ones selling rebranded Chinese vehicles. Phokela said that the top four players, namely Ola, TVS Motor, Ather Energy and Bajaj, which combined had around 26% to 27% share about nine months ago (before the government updated FAME-II in May), currently capture about 80% of the total electric two-wheeler market.

Ather Energy sold an average of about 80,000 to 85,000 units this year and expects a similar sales figure for 2024, Phokela said.

Apart from electric two-wheelers, the FAME-II scheme applies to three- and four-wheeler sales to boost EV consumption in the country.

New Delhi has given more than $628 million in subsidies through December 1 under FAME-II on the sale of 1.15 million vehicles, according to the government data shared in the parliament.

EV manufacturers have demanded that the government continue offering subsidies to let the market sustain its growth and expand further to meet the country’s electrification target to have 30% EV penetration by 2030.

“Given that the costs are still not optimized yet for the supply chain, it is important for the government to continue the subsidy for two to three years and taper it down,” Phokela said.

Industry sources told TechCrunch that market players have requested the government provide predictability in its policies and avoid bringing abrupt changes, such as the case of FAME-II updates, to let them make assumptions and base financial and business planning accordingly.

“A lack of predictability is the biggest killer point for the industry,” an executive at an electric two-wheeler company stated on the condition anonymity. “Even if you are saying six months, please tell us that it will be for six months and then turnaround, but don’t say two years and end in one year.”

In addition to FAME-II, the Indian government has offered a $3.11 billion production-linked incentive scheme to attract investments and push domestic manufacturing of automobile and auto components in the country. Indian car manufacturers Tata Motors and Mahindra & Mahindra have emerged as the early beneficiaries of the incentive scheme. The government reported more than $1.43 billion of investments came until the second quarter of the financial year 2023-24 as a result of the scheme.

Tata Motors saw a growth of 63% in EVs and increased EV penetration in its portfolio to 12% this year, a company spokesperson said in a statement to TechCrunch.

Automobile manufacturers, including Ather Energy and Tata Motors, introduced their new EV models in the country to expand their presence and attract new customers.

Phokela underlined that “premiumization” emerged as a notable consumer trend this year, particularly in the Indian electric two-wheeler market. The trend of premium models coming to the market will continue in 2024, he predicted.

All four top electric two-wheeler brands have vehicles between the price range of $1,400 to $1,800, while the traditional internal combustion engine two-wheelers are available at an average price of $1,000.

In the last 12 to 18 months, the electric two-wheeler market also saw growing sales from the tier two and tier three towns. For Ather Energy, Phokela said only 43% of its sales came from tier one cities, while 57% was from tier two and tier three towns — despite its limited distribution in those regions. The startup is now expanding its distribution to get even higher sales.

Some market observers believe that the growth of electric two-wheeler sales in the developing parts of India is due to hefty electricity subsidies. However, Phokela argued that if that were the reason, there would be a significant growth in the demand for low-end vehicles, not the premium models. People in non-metro cities consider EVs as status validation and a way to show off, he said.

Commercial use cases as a major investor attraction

Although top electric two-wheeler manufacturers have so far targeted the personal mobility segment in the Indian market, investors are bullish on the growth of commercial use cases.

“In the next two to three years, the majority of the traction will come from B2B use cases — whether it is three-wheeler cargo, three-wheeler passenger, eco-mobility, food delivery, hyperlocal delivery, fast/quick commerce, the use of EVs there is the one that’s accelerating much faster,” Kunal Khattar, founder and general partner at Indian VC fund AdvantEdge Founders, told TechCrunch.

He said while the share of commercial vehicles is about 30 million, or 10% of the total number of vehicles on the road in India, they consume almost 70% of the energy of all the vehicles.

“If you’re in the business of energy, whether it is battery manufacturing or swapping, energy storage or building charging infrastructure, your entire focus should be on B2B,” he noted.

Sandiip Bhammer, founder and co-managing partner at New York-based climate tech VC fund Green Frontier Capital, told TechCrunch the opportunity to gain faster and more rapid growth in the commercial segment is significantly higher than in the consumer segment.

“The economic viability of two-wheeler and three-wheeler segments on the commercial side is much clearer than on the passenger car segment,” he said.

Investors believe that compared to the consumer segment, the commercial segment is less prone to be impacted by subsidy changes. This is because businesses consider the total cost of ownership rather than the face value of the vehicle they purchase.

Khattar said the B2B segment will be 100% electric in India in the next two to three years, irrespective of whether subsidies and other incentives would be available.

The country plans to add thousands of battery-operated auto-rickshaws and e-buses to electrify public transportation across states in the coming months. Likewise, it looks to offer EV charging stations at various local gas stations.

Equity investments in India’s electric vehicle (EV) market decreased by 52%, from $2.1 billion in 2022 to $1 billion in 2023, according to the data shared with TechCrunch by VC analyst firm Tracxn earlier this month. The number of funding rounds also dropped 62%, from 135 in the previous year to 51. However, EV funding was not as dire as in some top-performing sectors, such as tech, SaaS, agritech and health tech, where equity investments dropped by over 80%.

Bhammer of Green Frontier Capital said the drop in EV funding this year was mainly due to valuations that were too high in many of the existing startups.

“If you look at new companies that are raising capital, they are actually raising capital at a much more reasonable valuation than the older companies doing extension rounds,” he said.

India EV funding

Investors are optimistic about the capital flow growth in 2024 but cautious about muted numbers, particularly in the consumer segment, due to FAME-II changes and lack of clarity on subsidy extension.

“We need the support of the government, in terms of subsidies and taxes and all of that, because of the fact that we are not mainstream yet,” Khattar of AdvantEdge Founders said.

One key reason for being hopeful is India’s growing global presence and becoming a part of the China+1 strategy for most global companies.

“China has now started de-growing. So, India is the beacon of hope in an otherwise pretty dull emerging markets scenario,” Bhammer said.

While India is still a nascent market for EVs, global EV companies including Tesla and VinFast are also looking to enter the Indian market in the coming months to leverage the size of the world’s most populous nation. The Indian government is developing a new EV policy to attract foreign carmakers to foray into the market alongside supporting domestic players to expand the country’s electric car base. Incumbents including India’s top carmaker Maruti Suzuki are also closely observing the ongoing moves by international players to look for the right time to enter the market.

“Legacy carmakers are in no hurry. When they launch, they will distribute, and through their distribution, they will be able to start selling numbers as much as, if not more than, existing players,” an EV investor told TechCrunch.

Companies including Tata Motors, which are already in the EV market with their vehicles, are working to address the current adoption challenges.

“Charging infrastructure growth remains the residual barrier for mass adoption of EVs. Tata Motors has initiated open collaboration with key charging players to accelerate the growth of chargers, which will deliver a better experience to the EV buyers,” the Tata Motors spokesperson said.

Ravi Pandit, co-founder and group chairman of automobile tech company KPIT Technologies, told TechCrunch that software and hardware have become the vehicle’s core and that trend will continue to grow over time.

“Now, the model is changing where instead of there being a lot of computers in a car, there will be a computer and around which there will be a car. That’s a fundamental shift,” he said.

Similarly, electric two-wheeler manufacturers and infrastructure providers are working on standardized charging solutions. Ather Energy has already collaborated with Hero to offer interoperability on charging.

“We have about 1,400 fast chargers, and Hero Vida has about 500, and we are growing on a monthly basis,” said Phokela. “We are in conversations with many other OEMs, and these discussions are at different levels of maturity.”

In addition to standardization and interoperability on the charging side, some companies are exploring alternatives to lithium, including sodium-ion-driven technologies and silicon anode.

“What is clear is that you cannot drive revolution in any sector unless you have access to the raw materials that power the industry. So, if China controls the refining capacity of lithium, how would India drive the EV revolution if it has to keep going to China for its batteries,” Bhammer said.

He mentioned that other incoming updates in the market include vehicle-to-grid and clip-on devices that will be available on a subscription-based model to help users convert an existing two-wheeler from a non-EV to an EV without charging the motor or battery permanently.

In an industry known for braggadocio, Toyota has a decadeslong reputation for tight-lipped reserve, divulging little publicly about what it’s working on before a snazzy new feature or car appears in its showrooms. But it’s made a notable exception. Since 2012, Toyota has routinely touted “breakthrough” progress in an industrywide race to develop solid-state batteries, and predicted that it will be first to deploy the holy grail technology in electric vehicles. Its boasts have captured attention because success would mean the most energy-dense EV battery currently thought possible—lightweight yet able to power an EV for 500 or 600 miles. But if Toyota has been sticking its neck out, it has outsize reasons for doing so: Such an advance could quiet critics who have mercilessly needled the company for its sluggish development of EVs despite being the world’s largest carmaker for most of the last 15 years.

After so many claims, there are broad industry doubts whether Toyota is truly on the verge of a solid-state breakthrough, or whether its battery will be essentially for show. The skepticism reflects the general state of play at the very high end of EV batteries, in which investors from venture capitalists to automakers General Motors and Volkswagen have invested billions of dollars. In this world, solid state is the apex. If it were a brand, solid state would be the Rolls-Royce of batteries.

In 2020 and 2021, QuantumScape and Solid Power went public in mergers with special purpose acquisition companies on the promise of making solid-state batteries. Many investors saw them as the industry’s ultimate winners, as long as they could make what they promised, since their batteries would provide the greatest driving range.

But here’s the thing: These companies’ batteries wouldn’t deliver more range because they are solid state; they would do so because they use lithium-metal anodes. Lithium metal is superior to other anode materials because it’s by far the most energy-dense battery metal currently known. A lithium-metal battery could easily power a standard-size EV 500 miles on a charge, compared with 300 or so miles using a similarly sized conventional battery. But it’s highly volatile, especially when it’s around conventional liquid electrolytes. Solid-state designs are primarily intended to make lithium metal safer.

To use lithium metal, you need some form of solid separator. That sounds easier than it is—solid battery materials like oxide ceramics can be tricky to manufacture at large scale and with fast production. They can impede a battery’s performance, because it’s harder for lithium ions to move through a solid than a liquid, making an EV sluggish. And the material inside—the solid electrolyte along with the lithium metal—is superexpensive compared with the insides of a conventional EV battery. Either way, the thing to keep in mind is that it’s the lithium metal, not the solid package it comes in, that matters most in a solid-state battery. Investors who see it the other way are committing an error analogous to calling a hamburger a “bun,” when those couple of pieces of bread are really just a way to package the beef, or admiring a person for their skull when it’s the brains inside that matter. The more appropriate label is a lithium-metal battery.

The questions about Toyota aren’t only about one company’s attempts to regain its technological street cred, but reflect a wave of uncertainty about solid state itself. As far as I can tell, no prominent company is positioned to deploy a pure solid-state lithium-metal battery any time soon. That includes Toyota, which declined to divulge whether its solid state battery uses lithium metal. A number of lithium-metal battery companies say they have tried but failed to make pure solid-state lithium metal work. Qichao Hu, CEO of lithium battery developer SES AI, told me he couldn’t get such batteries to produce enough cycles before they failed, nor to generate enough power, meaning an EV equipped with such a battery would not accelerate fast enough. SES turned to what Hu calls a “hybrid” system that uses a liquid electrolyte called “solvent in salt” and a solid coating over the lithium metal. After also failing to make solid-state technology work, QuantumScape turned to a semisolid battery that uses a gel in the cathode to get enough power out of the battery.

“A lot of companies are just trying to plant a flag in the ground and say, ‘We did it first,’” said Pedro Pacheco, an auto industry analyst with consulting firm Gartner. “Therefore, you have a lot of companies coming forward and saying, ‘We’re working on solid state’ or ‘We’re about to launch solid state.’” But they aren’t—at least not authentic solid state.

A Decade of Promises

This is a big point of hype in batteries: A slew of solid-state developers—among them U.K.-based Ilika, China’s WeLion New Energy Technology, Taiwan’s ProLogium Technology and Colorado-based Solid Power—are using silicon as the anode, not lithium metal. This is because silicon is much easier to handle in a battery than lithium metal is; silicon is less volatile and doesn’t require the same care. It delivers less specific energy density than lithium metal does—around 330 watt-hours per kilogram versus 400 Wh/kg or more, respectively. But it can store 10 times as much energy as conventional graphite anodes, making silicon anodes extremely attractive for use in an EV.

The thing is, solid state isn’t necessary in a battery using a silicon anode, because silicon isn’t an inordinate fire hazard. Silicon anode developers like Sila Nanotechnologies and Group14 Technologies get roughly the same energy density using a liquid electrolyte as one would with a solid, with more power and at lower cost. That is, the solid state-silicon battery makers are employing an expensive structure for no good reason. They’re adorning themselves with the cachet of solid state, but using an inferior anode material that defeats the purpose of going through the trouble. It’s a kind of Potemkin solid state.

A small number of companies, including SES and QuantumScape, are attempting to go the lithium-metal route while shelving the hope of pure solid state. SES, a Massachusetts startup we have profiled, appears to be ahead of the pack. Last month, the company announced that it had reached the B-sample stage of validation with South Korea’s Hyundai Motor, and was on track to be in a commercial EV in 2025 or 2026. San Jose, Calif.-based QuantumScape says it has entered the earlier A-sample qualifications with a major automaker but hasn’t revealed which one.

A Practical View

Rory McNulty, a next-gen battery analyst at Benchmark Mineral Intelligence, a battery metals research firm, said it’s crucial to remember that lithium is hard to work with. Few companies produce lithium-metal foil at the size and quality required for EV batteries. So, he said, a lot of companies have gone to silicon as a way to start developing a solid-state battery, with the aim of moving on to lithium metal later, once they know what they are doing.

Arguably, one of these is WeLion. In April, China’s Nio plans to release an EV using WeLion’s solid state-silicon battery. WeLion claims the battery will deliver specific energy density of 360 Wh/kg, much better than the 240 Wh/kg achieved by conventional lithium ion, and will power the Nio around 390 miles on a charge, calculated using the U.S. mileage standard.

You could get similar performance from a silicon anode using conventional liquid electrolyte. But McNulty said WeLion’s advance is “important because they’re getting their first solid electrolytes out, and they can test and optimize their electrolyte system.”

What he says makes sense if these companies are teeing themselves up to tackle lithium metal next. But Toyota and others aren’t talking about solid state, or lithium metal, this way. They are suggesting that they are already poised to reach the pinnacle of battery technology. They aren’t.

Aspen Skiing Company — which has been in business for roughly 75 years, according to the suit — owns four local resorts. It also vends its own ski apparel and hosts exclusive events, such as an on-mountain DJ party dubbed the AspenX Beach Club experience, where admission ranges from $50 to $450.

The federal suit, filed last week, alleges “trademark infringement, false association and/or false endorsement, and unfair competition” against London-based Perfect Moment, which was founded in 1984 and vends ski apparel and other items for women, men, and kids.

The conflict kicked off in March 2021, according to the suit, when Perfect Moment first posted photos on its social channels “liberally using and displaying certain distinguishing characteristics of the ASC resorts,” including its ski areas and lifts. ASC sent a cease-and-desist letter that same month, according to the suit, whereupon Perfect Moment removed “some but not all” of the posts.

But things kicked up again this October, when ASC alleged Perfect Moment began to not only post photos on social media set on ASC property, but also to sell clothing — including jackets, zip-ups, and leggings — that were emblazoned with images of the AspenX Beach Club experience, which is distinguished by its red and white striped cabanas, beach chairs, DJ station, and bar.

“Rather than building that reputation and goodwill through its own product line, Perfect Moment attempts to appropriate ASC’s world-renowned reputation and goodwill by intentionally and falsely associating itself with ASC’s resorts, ASC’s trademarks, and ASC’s iconic ApenX Beach Club experience,” the suit stated.

On October 21, ASC said it sent another cease-and-desist letter demanding the removal of the photos of the Beach Club and the cease of the sale of the aforementioned clothes.

Without resolution, it filed suit on December 20, demanding a jury trial. ASC is requesting that Perfect Moment stop any further infringement and deliver all infringing materials. It is also asking for compensation for profits incurred by Perfect Moment as well as unspecified damages and attorneys’ fees. When reached, Jeff Hanle, ASC’s VP of communications, told Business Insider, “We do not comment on active litigation.”

Perfect Moment did not immediately respond to BI’s request for comment.

Barclays believes the normalization of the luxury market should “fully materialize” in 2024, as brands brace themselves for a challenging 12 months.

Grin and bear it.

That’s what luxury brands and retailers are preparing to do over the next six to 12 months as aspirational consumers worldwide continue to pull back on spending in what remains an uncertain macro-economic climate.

With wars grinding ahead in Ukraine and the Middle East, and with the U.S. and the U.K. headed to the polls later this year, consumers are — understandably — anxious, and ever more cautious about spending.

With interest rates still high and questions swirling about the Chinese consumer’s appetite for luxury, it’s no wonder that analysts, brand leaders, and industry figures are all conservative in their outlook for 2024.

They believe the short term will be tough and that better times lie ahead, but no one can pinpoint when.

Barclays said it’s keeping a “cautious view,” and believes the normalization of the luxury market should “fully materialize” in 2024. It has also warned that some brands could experience “negative growth” due to the slowdown in consumption and tough comparisons with the first half of 2023.

HSBC gave its 2024 outlook the cheery title of “Goodbye Stellar Growth” and said the normalization in the sector could stretch into 2025.

“Following three years (2021 to 2023) of exceptional growth linked to revenge buying in almost all regions after the reopening post COVID-19, we are now expecting a return to normalized growth in 2024 and 2025,” the bank wrote.

HSBC said it is expecting 8 percent average growth for the companies it covers for 2024 and 2025, compared with 35 percent in 2021; 15 percent in 2022, and 11 percent in 2023.

Altagamma and Bain & Co. said in a joint report they are anticipating “softening personal luxury goods performance in 2024,” with low-to-midsingle-digit growth over 2023, based on “fragile consumer confidence, macroeconomic tensions in China, and sparse signs of recovery in the U.S.”

The report also argued that 2024 will be “a defining moment for brands, and the winners will separate themselves through resilience, relevance, and renewal — the basics of the new value-centered” luxury equation.

“There are significant challenges for all participants in this market,” said Mytheresa chief executive officer Michael Kliger, adding the current slowdown in luxury consumption seems far worse because of the sector’s long boom years and the post-pandemic shopping craze.

Kliger believes a return to growth will depend on several dynamics.

“We have one customer segment that is not actively buying at the moment — the aspirational customer. To bring them back we’ll need a more positive economic outlook which could be in the coming year — or not,” said Kliger.

“But we’ll also need to bring them back with more accessible price points — not by lowering price points, but by bringing in new entry price points,” he added.

Analysts agree, believing brands can no longer rely on price increases to boost their top and bottom lines and will need to figure out how to bolster sales by selling more entry-price products.

Overall, analysts believe it will be a lackluster year for the big brands, with organic growth projections ranging between 4 percent and 8 percent, and sales weighted toward the second half of 2024.

A large chunk of that growth will come from Asian markets, while demand in the U.S. and Europe is expected to be flat. The outlook for Chinese demand is uncertain.

Citing Global Blue data, Bernstein pointed out that Chinese international tourist spend has slowly been returning to 2019 levels. “However, is the money being spent on luxury products? Or luxury hotels and experiences? If it’s on the latter two, the luxury recovery will be delayed,” the bank said.

In its outlook, Jefferies said Chinese economic stimulus measures have had limited impact so far on consumption.

“Feedback from the ground suggests … a reluctance to spend, and perhaps an overall softening in demand so far in [the fourth quarter],” the bank said.

Jefferies added that consumers are also taking more time to consider their purchases and placing an ever greater importance on value. There is a certain Chinese consumer, it said, “who seems to be approaching luxury purchases with a greater need for deliberation and consideration.”

The bank added that growth in spend among Chinese travelers is “unlikely to provide much of a lift in 2024. Long haul spend by Chinese travelers into Europe and North America is unlikely to grow considerably, in many executives’ minds, given the much higher cost of travel, a clearly reduced price saving, and markedly upgraded assortments in China.”

In November, Barclays warned that a weak macro environment in mainland China “could affect willingness to travel, and offshore spending.”

In December, Moody’s cut its outlook on the Chinese government’s credit rating to negative from stable, citing lower medium-term economic growth prospects and property sector challenges, which should further dampen consumers’ appetite.

Jonathan Siboni, founder and CEO of Luxurynsight, which provides luxury, fashion and beauty brands with data-driven insights, is taking a brighter view of the future in China, and worldwide. He said the luxury market showdown is normal and should not be cause for panic.

“This normalization has to be put in context of a very high growth period which was exceptional. Right now, the world is in trouble. We’re in the middle of a war in Ukraine, a war in the Middle East, upcoming elections in America, and China economic tension.

“And still, luxury is resilient. It’s not resilient at 20 percent growth rates — that doesn’t make sense. Instead, it’s resilient at 6 to 8 percent growth rates. Let’s not cry” about that, Siboni said.

He also pointed out that China lifted lockdown restrictions less than a year ago, and it will take time for people to get used to traveling — and spending — once again.

Kliger is also taking a longer view, and believes the industry is quickly adjusting to the new normal. In the last Mytheresa earnings call, the CEO said he expects promotional intensity in the market to decrease with the spring/summer 2024 season because stock levels will be lower.

“It will be the first season bought by retailers and produced by brands under the clear understanding that there is a slowdown,” said Kliger. “There will be more of a balance between supply and demand. It will mean a better top line and a better margin, and that has been baked into our guidance” for Mytheresa’s second half, which runs from January to June.

As reported, Mytheresa confirmed its guidance for the full fiscal year, which ends June 30. Gross merchandise value and net sales growth will be in the range of 8 to 13 percent, while adjusted earnings before interest, taxes, depreciation and amortization margin will fall between 3 to 5 percent.

As the luxury market continues to readjust, there will also be less competition in the luxury retail arena, with Farfetch and Matches under new ownership, and the futures of Browns and Net-a-porter uncertain.

“We are in a phase and we need to get through it together, as an industry. This is a period of normalization, but I think the fundamental trends that drive luxury and online luxury are fully in place,” Kliger said.