The Indian Electric Vehicle Industry to be Negatively Affected by the COVID Crisis

The Indian EV industry which was growing sharply given the strong government support is now getting negatively affected due to the COVID crisis. The EV industry is still in a very nascent stage in India and the issues facing the overall automobile industry are seeing a multiplier effect on the EV segment. Many companies are start-ups and do not have the balance sheet strength to survive tough times when both the revenues as well as profit have declined. Even the larger companies such as Tatas and Mahindras are facing an environment of a sharp decline in overall automobile sales in several segments. Sales in the trucking segment have fallen by as much as 80% year on year; even the market leader in cars Maruti has seen its sales decline by 50%.

Most companies will be now be focusing on their existing businesses to survive the tough times and will have lower investments to make in the new EV segment. While the government is still strongly supportive of the EV industry and wants to make India a global hub of EV manufacturing, the government’s resources are now more directed towards immediate needs such as feeding India’s poor as well as stimulating demand in the different sectors as both the resources as well as the attention span of the policymakers is quite limited. Even globally EV sales are set to decline by over 15 to 20%.  Besides the sector-specific impact, the overall automobile industry is also facing huge challenges with millions of layoffs and pay cuts making discretionary purchases a big no-no for a large section of the consumers. With the decline in the price of oil, the overall economics of the EV segment as compared to the ICE segment has also been negatively affected. This will make the business case of EVs difficult in the given scenario and it could also lead to a push back of the EV segment gaining significant market share by a couple of years. Despite the current issues, the secular trend of increasing EV adoption remains intact as governments have become even more cognizant about the problems of climate change and pollution.