A slow turn in EV sales as investor funding, state subsidies continue

Fewer than six out of every 100 vehicles sold in India are electric

Electric vehicle (EV) sales in the country have declined for two months in a row as the government increases subsidies.

EV’s share in total vehicles sold slipped from 6.3 per cent in December 2022 to 5.5 per cent in January 2023. The slowdown comes after rapid growth compared to the period before Covid-19. EV’s share in total vehicles sold was 0.62 per cent in January 2019. Monthly sales are just over 100,000 now, as seen in chart 1 (click image for interactive chart).

The slowdown has a mix of reasons: one being new battery norms announced after a number of electric vehicles caught fire in the country. The absence of a wide range of models in passenger vehicles is also a factor; according to a February 6 report by global financial major BNP Paribas. The report, authored by analyst Kumar Rakesh, noted that EV’s share in various segments has been affected.

The share of electric vehicles in the two-wheeler segment is down to 5.1 per cent in January, compared to 5.7 per cent in December. Electric three-wheelers and passenger vehicle share has also declined. Of all three-wheelers sold in this period, nearly half were electric. The share is in single-digits for two-wheelers and less than one per cent for passenger vehicles (chart 2).

But investors have faith in Indian EV start-ups. They last year allocated more than $1.6 billion to fledgling businesses in the segment; shows data from tracker Tracxn (chart 3).



Many EV companies are in later rounds of funding, suggesting a more mature profile. Early-stage companies attracted over half-a-billion dollars worth of funding.

The government has increased subsidies through the FAME India scheme. The Rs 5,172 crore allotted for Financial Year 2023-24 (FY24) is nearly double that given in FY23 (Rs 2,897.8 crore). Subsidies are available at the state government level too, such as in Punjab, Rajasthan, Chhattisgarh and Chandigarh.

Elsewhere in the world, EV sales were affected when the state pulled back subsidies and support. The Indian government’s support may well determine if the lacklustre January growth has set the tone for 2023; or whether good times will continue for the 978 companies operating in the space in India, the third largest number globally after the US and China. Around 246 of them have raised money from investors.