India’s startup ecosystem has experienced phenomenal growth in the past few years. Much of this growth is focused on sustainable technologies, and particularly the electric vehicle (EV) sector. EVs are fast becoming a hit with consumers due to their eco-friendliness and cost effectiveness. The tremendous growth of the EV sector is reflected in the remarkable sales that surpassed the million mark in India in 2022, with an average of 83,585 electric vehicles registered every month. The EV industry is expected to develop further given how critical it is for a sustainable future. The growth of the EV segment has also sparked healthy competition in the industry. The existing auto manufacturers who earlier relied only on the sales of diesel and petrol vehicles are now bringing out electric models of their popular cars, seeing the growing consumer interest. The increased competition has also boosted investor interest in the industry, as reflected by the investment flow in 2021 that reached an all-time high, growing by nearly 255 per cent.
Startups like Ather Energy, Ola Electric, Euler and Yulu are leading this dynamic shift in the auto industry. They’re focusing on efficient and affordable EVs that can address the needs of a large and complex population like India’s. They have not only accelerated EV adoption across India but also boosted the growth of India’s automobile industry. The government has also proactively supported EV startups with subsidies and grants.
Understanding the Indian automobile industry
The Indian automobile industry is one of the largest and fastest-growing sectors and contributes substantially to the country’s GDP. Globally, it is the third-largest1 producer of cars and the fourth-largest2 producer of commercial vehicles. The sector is highly competitive with big players like Maruti Suzuki, Hyundai, Tata Motors and Mahindra & Mahindra. Moreover, with a focus on ‘Make in India,’ the Indian automobile industry is setting higher goals for world-class indigenously manufactured automobiles.
The technological advancement of the last decade has furthered this industry’s growth and helped it expand its horizons to climate-friendly options like hybrid and electric engines. It is through such technological breakthroughs that the EV sector has sprung as a sustainable alternative to traditional automobiles. For a country like India, the demand for automobiles is only going to increase.
Recognising EV startups’ impact on the automobile industry
The emergence of EV startups is proving to be transformational. A large-scale switch to EVs can help to reduce emissions, ease energy costs and stimulate employment opportunities. The auto industry is an important employment generator in India, and the rise of the EV segment has strengthened this role by creating new opportunities for engineers, technicians and other skilled workers, thus building a new generation of skilled workers in the country. It is also pushing forth some ancillary segments like EV battery and charger manufacturing industries.
Besides their economic benefits, EV startups are also driving technological growth and innovation in the automobile industry. By working on new technologies such as battery swapping, wireless charging and electric vehicle charging stations, EV startups are helping to make EVs more accessible and convenient for people countrywide. They’re also working on ways to reduce EV maintenance costs to make them more affordable for everyday consumers.
Looking at the progress of major EV startups in India
India’s EV segment has seen some remarkable startups emerge in the last couple of years. With their promise of reducing dependence on fossil fuels, these startups are helping India reduce its carbon footprint and promote sustainability. The segment is led by startups such as Ather Energy, Ola Electric and Yulu, with a growing number of new players joining the industry each year.
Ather Energy: One of the most popular EV manufacturers is Ather, a Bengaluru-based EV startup founded in 2013 that manufactures electric scooters. The company has also established the EV charging infrastructure, Ather Grid, and is one of the most prominent players in its segment. With a total funding of USD 341.7 million (INR 28306.26 million)3, the startup is backed by nine big investors, including HeroMotoCorp, Herald Ventures, Caladium Investments and others. The startup now plans to make a million more electric two-wheelers.
Ola Electric: Ola Electric is another Bengaluru-based EV startup specialising in electric scooters. The startup is backed by about 20 investors, including Edelweiss Financial Services, Jaw Ventures and even celebrity investors like Farhan Akhtar. Until now, it has been able to secure USD 861.2 million (INR 71341.38 million)4 in funding. The company is currently developing its first four-wheeler.
Yulu: Yulu, also based in Bengaluru, is a micro-mobility platform. It offers human and battery-powered micro-light two wheelers for rentals. Its pay-per-use model allows users to rent an EV easily via an app. Yulu’s network of shared dockless vehicles was built using IoT, Cloud and AI. The startup has a total funding of USD 118.2 million (INR 9791.63 million)5 with backing by nine investors, including U.S. International Development Finance Corp, Bajaj Auto Finance, Blume Ventures and others.
EV startups such as these have attracted significant investments from venture capital firms, angel investors and large private corporations, thus helping them improve their technological prowess, scale up operations and boost productivity. With encouraging policies like FAME India6 (Faster Adoption and Manufacturing of Electric Vehicles in India) and investment opportunities, EV startups in India have ample support to strengthen the segment.
Addressing the challenges in the EV sector
While the Indian EV sector has experienced remarkable growth, the challenges persist. EV startups in the country still have to deal with the high cost of production. Moreover, the lack of charging infrastructure only adds to the problem as fewer charging stations means long-distance usage will be restricted. Low consumer awareness is another issue directly affecting the demand for EVs in the market. With all these challenges, it is indeed tricky for new EV startups to succeed in the current market. Despite this, the Indian EV market looks promising, given the government’s commitment to sustainability and investments pouring in from the private sector.
Harnessing the potential of EV startups
In the long run, the Indian automobile industry is expected to benefit from the growth of EV startups. EV as innovative transportation solutions are cost-effective, efficient and climate friendly. However, industry startups will have to make EVs more practical for consumers so that demand can increase. Given the sheer size of the market, India could be a leading market for EV adoption. With supportive government policies, technological advancements and the right kind of awareness among consumers, the EV sector in India can not only transform the automobile industry but also become an important contributor to the overall economy.
6. Under the National Electric Mobility Mission, the FAME scheme was launched in April 2015 to encourage the purchase of electric and hybrid vehicles. The scheme is currently in its second phase. https://fame2.heavyindustries.gov.in/