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The Indian government continues to push for higher EV production in the country and for greater localisation of supply chains, which will be key to help the country reach the target of 30 per cent EV penetration by 2030, according to a report on Wednesday. 

“We estimate that the Tata and JSW groups alone will be investing over $30 billion into making EVs and EV materials over the coming decade, of which about $10 billion will be in South and Southeast Asia (SSEA),” said the report by S&P Global Ratings.

As the world's most populous country, India's vast market potential is attracting substantial EV-related investment. EV adoption in India will progress with model launches that bring prices more in line with ICE models, and with improving charging infrastructure.

“We also believe hybrids and vehicles powered by compressed natural gas will command meaningful market share alongside EVs in the light-vehicle and passenger commercial vehicle segments,” the report mentioned.

The government recently launched the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme that has a financial outlay of Rs 10,900 crore over a period of two years. The PM E-DRIVE scheme will play a pivotal role in accelerating EV adoption and building critical charging infrastructure nationwide, contributing to a cleaner and more sustainable future.

According to the report, the transition from ICE in India will initially be more about a shift to alternate fuels rather than pure electrification.

“Government policies on imports and foreign investment will continue to play a critical role in India's vehicle electrification,” it mentioned.

India is increasingly important to the Korean entities Hyundai Motor Co. (HMC) and Kia, which combined rank as the second-largest carmaker in the country. The market accounted for about 12% of the group's global sales volume in 2023.

Hyundai plans to continue investing in India, including in local EV production. It will start with its first fully electric model made in the country, launching in January 2025.

The company recently completed an initial public offering in India, and part of proceeds will be used to further their growth and improve its product offerings in that market, said the report.

“We believe Tata Motors has sufficient financial headroom in its credit metrics to undertake its EV investments. In September 2024, the firm announced plans to invest about $1 billion in a new EV plant in the south Indian state of Tamil Nadu,” the report noted.

Its parent entity, Tata Sons Pte. Ltd., has also announced an investment in a lithium-ion battery plant in the northwestern state of Gujarat, with an initial capacity of 20 gigawatt hours. The plant will support more development of the EV supply chain in that region.

The report estimates that rated carmakers will be spending more than $20 billion building electric vehicle (EV) production in South and Southeast Asia for the next few years.