German Carmaker Volkswagen Eyes India: To Invest in Expansion And EV Manufacturing

The German car maker Volkswagen Group is formulating plans to firm up fresh investments to manufacture electric vehicles (EVs) in India and looking at other segments such as capacity expansion besides others.

After the launch of its new models under the India 2.0 strategy and upping sales volumes in the local market is also gearing up for its much anticipated first EV, ID.4, in 2024.

Although Volkswagen’s EV ID.4 will be rolled out from its manufacturing facility in Maharashtra’s Aurangabad and assembled with imported parts and components, the company aims to deeply localise the Evs it introduces in India’s mainstream market after 2025.

Volkswagen’s Major EV Investment Plans In India

Although not much has come forth from the German automaker regarding how much investment the group is likely to make to manufacture EVs in India however, Ashish Gupta, brand director of Volkswagen Passenger Cars, said the emphasis is to localise to the extent possible to operate sustainably in the segment.

As per industry estimates, localising an EV platform spawning two vehicles requires a massive minimum investment of about ₹9,000 crores (₹1 billion).

Gupta further states the planning for the same needs to be done now in order to bring a mass electric car, in the timelines that the industry is looking at somewhere in between 2026-27, and that Volkswagen too is looking at similar timelines.”

While the EV segment is growing faster than anticipated, and nearly 46 electric vehicles are scheduled for launch in the Indian market over the next three-four years, at the same time, electrification will “happen in steps” in the automotive sector as the ecosystem is not ready.

Pointing to the fact that almost 50% of the cost of an electric car is the battery, the supply base is not ready, and unless mass localisation of battery manufacturing happens in India, none of the OEMs (original equipment manufacturers), not only us will be able to do mass electrification.

India’s EV Market Potential
With its massive population and growing middle class, India has immense potential for the electric vehicle (EV) market. The government’s push for electric mobility as a means to reduce pollution and dependence on fossil fuels has further fueled the growth of the EV market in India.

According to a report by BloombergNEF, EV sales in India are expected to grow from about 3% of total new vehicle sales in 2020 to around 28% by 2030. This projection assumes that the government will continue to offer incentives for EV adoption and improve the charging infrastructure across the country.

Additionally, the Indian government has offered several incentives to EV manufacturers, including tax exemptions and subsidies, which have made EVs more attractive to consumers.

Another factor driving the growth of the EV market in India is the increasing demand for clean mobility solutions. With rising pollution levels in major cities, consumers are increasingly becoming more conscious of the environmental impact of their vehicles. EVs offer a cleaner and more sustainable alternative, which is becoming increasingly attractive to environmentally conscious consumers.

Challenges EV Market Needs Overcome In India
However, there are many challenges that need to be addressed to realise the full potential of the EV market in India.

One of the biggest challenges is the lack of charging infrastructure in the country. While the government has announced plans to install thousands of charging stations across the country, the pace of installation has been slow. This is a significant impediment to the growth of the EV market, as consumers are hesitant to purchase EVs without a reliable and accessible charging infrastructure.

Another major hurdle is that unless mass localisation of battery manufacturing happens in India, as nearly 50% of the cost of an electric car is the battery, the supply base needs to be ready in this regard.

Another challenge is the high cost of EVs compared to traditional petrol/diesel vehicles. While the cost of batteries is declining, EVs are still more expensive than conventional vehicles. This cost difference is a significant barrier for many consumers, particularly in a price-sensitive market like India.

Major Auto Companies Now Moving Toward EVs

Major auto companies around the world are increasingly investing in electric vehicle (EV) technology and expanding their production capabilities to meet the growing demand for cleaner and more sustainable mobility solutions. This shift towards EVs are driven by a combination of factors, including stricter emissions regulations, rising consumer demand for electric vehicles, and advancements in battery technology.

Several major auto companies have already announced plans to significantly increase their EV production over the coming years.
For example, General Motors (GM) plans to invest $27 billion in EV and autonomous vehicle development through 2025, with the goal of selling only EVs by 2035. Ford also plans to invest $22 billion in EVs through 2025, with the aim of having EVs make up 40% of its global sales by 2030.

Volkswagen (VW) has set a goal of producing 1.5 million EVs annually by 2025, while Tesla plans to ramp up production to 20 million EVs per year by 2030.

Thus the potential for this market is significant. According to a report by BloombergNEF, global EV sales are expected to grow from 3.1 million in 2020 to 14 million in 2025 and 62 million by 2040. This growth is driven by several factors, including declining battery costs, increasing consumer awareness and demand for electric vehicles, and government policies aimed at reducing carbon emissions.

In addition to traditional automakers, new players in the market, such as Tesla and Chinese automakers like NIO, are also driving the growth of the EV market. These companies are leveraging new technology and innovative business models to disrupt the traditional automotive industry and accelerate the transition to electric mobility.

The potential benefits of a widespread transition to EVs are significant. EVs produce zero emissions and can help reduce air pollution and improve public health. They also have the potential to reduce dependence on fossil fuels and help mitigate climate change. In addition, EVs offer a quieter and smoother ride, lower maintenance costs, and can help drive innovation and job creation in the automotive industry.

However, several challenges still need to be addressed to realise the full potential of the EV market. These challenges include the high cost of EVs compared to traditional vehicles, limited charging infrastructure in many regions, and concerns about battery production and disposal sustainability.

In conclusion, major auto companies are increasingly investing in EV technology and expanding their production capabilities to meet the growing demand for cleaner and more sustainable mobility solutions.

The potential for this market is significant, driven by declining battery costs, increasing consumer awareness and demand, and government policies aimed at reducing carbon emissions.

Similarly, the electric vehicle market in India has immense potential, driven by government incentives, decreasing battery costs, and increasing demand for clean mobility solutions.
However, several challenges need to be addressed, particularly in the areas of charging infrastructure and cost, to realise the market’s full potential.