The streets of Delhi are growing quieter, but not because of any newfound civility. The internal combustion engine is slowly losing its grip, replaced by the hum of electric motors. India’s electric vehicle (EV) market is accelerating at a pace that would make a Tesla Roadster blush. Sales of electric cars surged 75% last year, albeit from a low base. The driving force? Petrol prices that would make a Saudi prince wince.
India’s fuel tax regime is a masterpiece of fiscal chicanery. Base prices are low, but add in excise duties, state taxes, and dealer margins, and you end up paying nearly double the global average. At the pump, a litre of petrol now costs around ₹100 (£0.96). That stings when the median annual income is barely £2,000. Cheap to run EVs suddenly look like a rational choice, even if the upfront cost remains eye-wateringly high.
British firms, ever alert to a margin opportunity, are circling. Jaguar Land Rover, Tata-owned but proudly British, already has a foothold with the I-Pace. Smaller players like Arrival and M&G Investments are sniffing around. The UK India Business Council reports a 40% increase in inquiries from British EV-related companies over the past six months. They see a market where the government offers production-linked incentives and where consumers are desperate for alternatives to liquid gold.
But let’s not get carried away. The Indian EV market is still a speck on the global dashboard. It accounts for less than 2% of total car sales. The infrastructure is laughable. There are barely 1,000 public charging stations for a country of 1.4 billion people. That’s like offering a straw to a thirsty elephant. And the electricity grid? It’s as reliable as a City trader’s promise. Blackouts are common, and coal still generates 70% of power. So much for green credentials.
The government’s Faster Adoption and Manufacturing of Electric Vehicles scheme offers subsidies, but they are modest. The real driver is the punitive fuel taxation. This is a case of the state using its fiscal levers to nudge behaviour. Classic central planning dressed in market-friendly clothes. But it works. The cost differential between running a petrol car and an electric car in India is now a chasm. Over five years, an EV owner saves roughly £4,000 in fuel costs. That’s not chicken feed in a country where a decent salary is £6,000 a year.
British firms should be wary, however. The Indian market is a minefield of bureaucracy, local preferences, and price sensitivity. The Tata Nano, once touted as the world’s cheapest car, was a commercial disaster. Indians want value, not just cheap. They want a car that can handle potholes, monsoons, and the occasional cow. And they want it to look good. The Maruti Suzuki Swift remains the king of the roads for a reason.
Gilt yields in London are currently offering a risk premium, but the yields in Delhi are far higher. Capital is mobile, and it flows where returns are best. India’s EV story is compelling, but it is not without risk. The rupee is volatile, and inflation is a persistent headache. The central bank has been hiking rates, making capital more expensive. For British firms, the calculus is simple: the potential returns justify the risk, but only if they can navigate the chaos.
Fiscal responsibility? The Indian government is spending heavily on EV subsidies and infrastructure. This is a bet on the future, but it is a bet with borrowed money. The fiscal deficit is already above 6% of GDP. If the EV transition fails to deliver, the taxpayer will be left holding the bill. That is a story we in Britain know all too well.
In the end, the electric car surge in India is a rational response to a distorted market. Petrol is taxed to the hilt, and EVs benefit from the arbitrage. British firms, with their capital and expertise, can profit from this. But they should remember: in emerging markets, the road is bumpy, and the GPS often lies. Invest wisely, hedge your bets, and always keep an eye on the bottom line.
