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0The future of transport and mobility has arrived. EVs have made their indelible mark and investors are taking notice. Captivated by rapid growth, profitability potential, and sustainability – those with capital do not want to be left behind. The numbers tell a riveting story and for good reason. In India alone, EV startups raised over ₹12,000 crore ($1.5 billion) in private equity and venture capital in 2023, ensuring a thriving ecosystem.[1]
So what is the reason for this enthusiastic investment? Will this love affair continue to strengthen in the coming decade?
People Want EVs
Surveys show that 52% of global consumers are considering an EV for their next vehicle.[2] Users across all age groups, and especially those with a greener conscience, are eager to get their hands on the next and the best. In India, 70% of two-wheeler buyers are open to purchasing an EV, creating immense demand for startups in this segment. The demand is already an exciting variable for investors probing into the market with an intent to partner with a young startup with their eye on the ball.
The Costs are Coming Down
The cost of EV batteries has declined by over 85% since 2010, from $1,200 per kWh to under $150 per kWh, making EV startups more competitive.[3] As the components for EVs become more economical, the margins become more attractive. The cake is expanding speedily and many want a slice of the pie.
Market for Two and Three-wheelers Zoom Ahead in India
India is the largest market for two-wheelers, with startups like Ather Energy and Hero Electric capturing attention. Indians need comfort and mobility to go hand in hand, and the smooth two and three-wheeler options offer all that and more. Equipped to handle Indian roads, these are greener and more economical alternatives that consumers in metro cities are glad to embrace. That’s why electric three-wheelers dominate India’s EV market, accounting for over 52% of total EV sales in 2023, a unique growth area for startups.[4] Since electric cars are greener, urban regions with environmental awareness are also experiencing higher adoption.
Diversity is Key
When gauging investments, various components come to light. Angels and institutional investors assess every startup on a variety of aspects such as manufacturing, charging infrastructure, software, battery technology as well as branding. Not only does this offer a holistic picture, but it also offers the investor choice. One angel investor may choose to work with a startup that specializes in one or has a key MOAT. An economic moat, often attributed to investor Warren Buffett, is a term used to describe a company’s competitive advantage. Like a moat protects a castle, a company must have something that sets it apart and protects its market share. Since the category is still on the rise, young startups have a noticeable moat by way of first mover’s advantage or key technology. Angel investors recognize that if there is a great time to invest in EVs, it is as early as possible since consumer adoption is already on the rise.
Policy Advantages
India’s FAME-II scheme allocates ₹10,000 crore ($1.2 billion) to accelerate EV adoption. On the other hand, the U.S. offers up to $7,500 in tax credits per EV, creating demand for innovative startups. Since the government is encouraging the sector, one can be certain that it will receive the necessary aid needed along the journey to grow into a robust category with many products and thriving startups.
Possible Pitfalls
As with any business and product, angel investors must vet the company thoroughly before investing. Ultimately, all variables matter, particularly who the founder is and why they set off on this mission. The intent is often recognizable to the end user and today – the end user is the king. The risk in any investment is subject to change and angel investors are banding together in response to assess what startups will grow into the future.
In conclusion
Since young startups in the EV space have policy encouragement, rising infrastructure, and first-mover advantage, the sector is lucrative to many angel investors. Many are flocking to park their money with the next great EV giant. Of course, not every startup will make it. That said, EVs have proven that they are here to stay and have enormous profitability potential. Those with the right manufacturing, logistics, and tech are sure to experience unprecedented growth and benefit many angel investors that aided their journey.
[3] BloombergNEF
