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Overview of the Industry
The global automotive industry is emerging after one of the challenging periods which was dealing with global disruptions and supply chain constraints. India’s automotive industry has witnessed a remarkable transformation with influx of technology playing a critical role. The sector has been more resistant owing to rising domestic demand with passenger vehicles reaching highest-ever level in FY 2022-23 and export increasing by 35.9%. India’s automotive industry is estimated to become the world’s third-largest market by 2023.
The emergence of new technologies such as electric vehicle (EV) and connected cars has opened new avenues for growth and innovation. Indian startups have led the recent automotive transformation. Startups in the sector range from new players in electric vehicles manufacturing to brands that provide software solutions to simplify transportation requirements.
While India’s innovation is focused on EV, Hydrogen Internal Combustion Engines (ICE), and cheaper technology alternatives such as adoption of Ethanol are also on the cards for India’s automotive industry.
India vs Global Scenario
The Indian automobile sector is the fifth largest in the world and is the world’s top producer of buses and two- and three-wheelers, respectively. This paves the way for the market’s size and associated opportunities to support the growth momentum in the following ten years to be disclosed. The market for electric vehicles (EVs) is thus expanding rapidly on a global scale. The Indian EV sector is likewise developing quickly and is predicted to record a growth of USD 113.99 billion in 2029. The growth in the sector is primarily attributed to growing investment, and as per Ernst & Young’s report, India’s electric vehicle industry attracted massive investments of about $6 billion in 2021 and is projected to attract $20 billion by 2030.
Government support for the growth of the EV startup ecosystem
The Indian government’s push for electric vehicles creates a wide range of business prospects for EV startups in the infrastructure, energy, and mobility sectors. These include growth opportunities in the EV OEM market, battery infrastructure, solar car charging, and battery swapping technology.
India’s flagship EV programme (FAME) has been essential in stimulating EV demand in the nation. The government also announced the PLI-ACC (Production Linked Incentive for Advanced Chemistry Cell Battery Storage) scheme with an outlay of US$ 2.45 billion (Rs 18,100 crore), for strengthening the battery infrastructure and the EV ecosystem.
NITI Aayog’s battery-swapping policy that will be in effect till March 31, 2025. Additionally, the government has given tax exemption and other incentives to promote EV adoption.
Challenges faced by the Startups
Perhaps the most challenging aspect of vehicle production is the fact that most of the vehicle concept, processes and requirements cannot be established successively.
Instead, once the vehicle idea has been established and validated, tasks such as the production environment, supply base, tools, necessary workforce and finances, organizational and production processes, potential vendors as well as marketing, sales and branding strategies all need to be established and set in motion at the same time. Some keys challenges that startups face today are:
- Capital and labour-intensive nature: Developing, manufacturing, and bringing a new car or automotive technology to market can be extremely expensive. Startups in this sector need to secure significant investment capital to cover research and development, manufacturing, and marketing costs.
- Competition: The automotive industry is highly competitive, with established companies dominating the market. Startups must offer something unique and compelling to convince consumers to choose their product over those of established competitors.
- Regulations: The automotive industry is subject to numerous regulations, including safety and emissions standards, which can be difficult and costly for startups to comply with.
- Supply chain complexity: The automotive supply chain is complex, with many different parts and suppliers involved in the manufacturing process. Startups may struggle to navigate this complexity and secure reliable sources of high-quality components.
- Manufacturing and distribution challenges: Startups may struggle to set up efficient manufacturing and distribution processes, which can be crucial to success in the automotive industry. Original Equipment Manufacturers (OEMs) in India today are bound to rely on external markets for electronics and semiconductor components, causing visible obstructions in what otherwise would have been a more seamless process of production.
What’s Ahead
India's automobile sector showing a palpable shift towards EVs in the coming years. EVs have a current market of 0.7% in India and by 2027, this figure is expected to increase to 3.8%. Additionally, with energy prices likely to remain high as predicted for the future, the demand for CNG-powered cars and hybrid cars is expected to grow. Startups focused on battery swapping, load balancing, technologies for reverse feeding into the grid, battery storage and waste disposal-related R&D and charging infrastructure will play a crucial role in transforming the face of the industry.
Greater indigenization of automobile manufacturing, especially storage batteries, and biofuel (BioCNG, Bioethanol, Biodiesel, Fuel cell & Hydrogen based fuel) based vehicle technologies will play a key role in reducing import dependency. There is a huge potential for India to emerge as a global leader in the automobile industry.
If you are a startup making a difference in the Auto and EV sector apply for the National Startup Awards 2023 under the following categories and more.
- Sustainability Champion
- Indigenous Ingenuity Champion
- Rising Star Award
To apply for the National Startup Awards 2023, you have to be a DPIIT recognised startup. Click here to get recognised.
