Bigger is better in India’s nascent electric car market

NEW DELHI – In India, where an increasing number of consumers aspire to own bigger cars to cope with the country’s notoriously potholed roads and bad traffic, automakers are betting on low-cost, battery-powered SUVs to capture the budding electric vehicle market.

At India’s major auto show in New Delhi earlier in January,

there was a new breed of EVs taking centrestage, with predominantly foreign companies looking to muscle in on the nascent electric scene. In a marked shift in rhetoric, local auto bosses were also excitedly talking up the sector’s prospects.

Homegrown manufacturers Tata Motors and Mahindra & Mahindra are now jostling with Chinese giants BYD and SAIC Motor and South Korea’s Hyundai Motor. Even India’s biggest automaker Maruti Suzuki India, which previously largely pooh-poohed EVs, showed a compact electric SUV it says will hit the market in 2025.

Demand for smaller SUVs has been surging in India. They’re suited for the country’s driving conditions, which can vary vastly from smooth multi-lane freeways to rutted streets crowded with rickshaws, dogs and cows.

They also offer aspirational buyers an important, yet affordable, status symbol, perching drivers above the masses. And while larger electric SUVs tend to be inefficient (and expensive) because they require bigger and costlier battery packs, their compact equivalents are built on small-car platforms, making them more cost effective.

“The conundrum for electric vehicles is lighter is better, but customers want SUVs,” says Mr Andy Palmer, the former CEO of Aston Martin who also helped spearhead Nissan Motor’s creation of the Leaf, one of the first mass market EVs.

“Using a small-car platform to build an electric SUV meets the sweet spot for both manufacturers and consumers,” he said, citing the example of Volkswagen using the ID.3 hatchback platform to also build the ID.4 SUV.

After lacklustre sales of a battery-powered sedan called the Tigor EV, Tata Motors in 2020 introduced an electric version of the Nexon compact SUV. Priced at 1.4 million rupees (S$22,655) and with a range of around 300km, the Nexon quickly became India’s best-selling electric model.

Still, public adoption of anything electric in India when it comes to passenger transport has been slow. Most local manufacturers have been reluctant to switch to electric cars because of their high upfront production costs, while a lack of public charging points has deterred buyers.

Just 1.2 per cent of passenger vehicles sold in the six months through September were electric, according to the Society of Indian Automobile Manufacturers. Even EV market leader Tata Motors, whose electric sales in the quarter through December were up almost 120 per cent from a year earlier, only sold 12,596 units.

But India, which may have already surpassed China as the world’s most-populous nation, is also a market carmakers cannot afford to ignore.

At the same time, some foreign players are rethinking their strategies around China, the world’s other massive car market. Stellantis, for example, has shuttered its only Jeep factory in China due to interference from local politicians, while Volkswagen and General Motors are struggling to preserve their positions as local Chinese manufacturers give them a run for their money.

India not only offers cheap labour but also a talent pool of largely English-speaking workers.

China’s SAIC, which owns the British marque MG, started selling SUVs in India in 2019 after taking over GM’s plant in the western state of Gujarat. It plans to launch three EVs in India by the end of 2024 and expects as much as 30 per cent of local India sales to eventually come from the segment.

BYD, backed by Mr Warren Buffett’s Berkshire Hathaway, has, meanwhile, outlined a bold plan to capture 40 per cent of India’s EV market by 2030.

Stellantis brand Citroen on Monday started taking bookings for its eC3 electric compact SUV in India.

“The EV transition in India is coming through very strong and very fast, much faster than what people are expecting,” Tata’s chief financial Officer PB Balaji said at the auto show. “We see this morphing into an EV-led industry pretty soon.” BLOOMBERG