Amid a slowdown in electric passenger vehicle sales, private equity firms are ramping up their investments in India’s electric two- and three-wheeler sector. In the first half of 2024, total investments amounted to USD 754 million. While sales of electric two-wheelers are increasing, electric passenger vehicle sales have seen a decline. Persistent issues like range anxiety and insufficient charging infrastructure continue to pose challenges.
Private equity (PE) firms are intensifying their investments in India’s electric two- and three-wheeler sector, aiming to capitalize on this emerging market. This increased focus occurs as sales of electric passenger vehicles have slowed in the first half of 2024 compared to the previous year, affected by higher prices, range anxiety, and a lack of sufficient charging infrastructure. Experts also note that electric cars are facing stiff competition from hybrid models. Funding for this sector soared by nearly 17% in the first six months of 2024, reaching approximately USD 754 million. This funding encompasses a USD 423.5 million investment in electric two- and three-wheeler and small commercial vehicle manufacturers, along with USD 330 million directed towards the broader EV ecosystem, including financing, battery swapping, charging facilities, EV fleets, battery recycling, and EV parts, as per data from Ostara Advisors, a firm specializing in electric mobility investments.
Key investments include a USD 150 million investment from Exedy in Omega Seiki Mobility, a manufacturer of electric three-wheelers and small trucks, and GEF Capital Partners’ USD 70 million infusion into TI Clean Mobility.
Other notable investments include Mahindra Last Mile Mobility’s USD 50 million from the National Infrastructure Investment Fund (NIIF), Lohum’s USD 54 million from Singularity VC and other backers for battery recycling, and Battery Smart’s USD 65 million from Leapfrog Investments for its EV battery swapping services.
Despite uncertainties in policy, the cumulative sales of electric two-wheelers and three-wheelers from January to June surpassed sales from the same period last year. This growth is attributed to the availability of high-quality products, positive reviews about the total cost of ownership (TCO), especially in the commercial segment, and the relative ease of charging for two- and three-wheelers, as they generally do not require specialized charging infrastructure, explained Vasudha Madhavan, founder of Ostara Advisors.
However, the sales of electric passenger vehicles (PV) saw a decrease of 13.5% in June year-over-year, contributing to a 20% decline in the first half of 2024 to 46,845 vehicles, signalling a potential downturn mirroring trends in Western countries. This slowdown is prompting manufacturers to adjust their production strategies and investment plans.
Abhishek Poddar, India country head at Macquarie Group, mentioned that fleet owners and the commercial vehicle sector are contending with high initial costs for EVs and challenges in securing suitable financing. Concerns also linger about technological risks and the need for additional training for fleet staff to manage EV charging infrastructure.
Macquarie recently introduced Vertelo, an EV leasing venture, with the aim of allocating USD 1.5 billion to accelerate India’s transition to EVs. Additionally, Macquarie made a strategic investment in ChargeZone, a prominent Indian EV charging firm.
Persistent issues like range anxiety and insufficient charging options continue to hinder the quicker adoption of EVs. With recent cuts in government subsidies leading to price hikes, manufacturers are urging consistent policy support to bolster EV growth in India, with Madhavan advocating for clearer government policies to strengthen the EV market.
