Top stocks in India's EV charging megatrend

However, the other players in the EV ecosystem can often be the game changers.

Servotech Power Systems is one of the few listed companies in India focused on building EV charging infrastructure.

The company, which was a penny stock until 2022, has garnered interest of late. This is evident in the 10x rise in the stock price in two years.

But Servotech is not alone. Several larger companies have also begun venturing into the EV charging space.

Yet, there is little on the ground to suggest that India's charging infrastructure can be adequate to support growing demand for EVs over the next decade.

The international media has been particularly critical of the challenges that India's EV infrastructure presents.

India's electric vehicle boom stalls over charging challenges, wrote Nikkei Asia.

India's electric vehicle owners turned off by country's lack of charging stations, wrote South China Morning Post.

Recognising the bottleneck, the government recently notified the PM E-DRIVE scheme. The scheme will have an outlay of ₹10.9 trillion and shall be implemented until March 2026.

It aims for faster adoption of EVs, setting up of charging infrastructure and development of EV manufacturing eco-system in the country.

As per the plan, EVs should ideally comprise 30% of new private vehicle registrations in India, amounting to 80 m EVs, by 2030.

To support this dramatic rise in EV adoption, India will need a total of 3.9 million public and semi-public charging stations, for a ratio of one station per 20 vehicles.

The current ratio is approximately one charging station per 135 EVs. And this is significantly lower than the global ratio of 1 charging station per 6 to 20 EVs.

As per estimates, this shortage in charging stations could push India to be 40% behind government's EV 30@30 vision.

What is the scenario globally?

In a 2021 survey of EV drivers in the UK, over 90% of the respondents reported having access to home EV chargers.

On the other hand, a 2023 study showed that only 55% of Indian consumers had such access.

Among major EV markets, China has one of the most widely rolled out public charging infrastructure.

To put things in perspective, China accounted for 70% of global public EV charging network in 2023. Although EV infrastructure will grow globally, China is expected to retain a majority share even by 2035.

The UK plans to install at least 300,000 public chargers by 2030.

In the US, the government has announced nearly $50 million to subsidise projects that aim to expand access to convenient charging. The objective is to build a national network of 500,000 public EV charging ports by 2030.

Japan's Green Growth Strategy aims to deploy 150,000 charging points by 2030, including 30,000 fast chargers. The objective is to reach a comparable level of comfort for refuelling conventional vehicles.

So, in India, having charging stations at workplaces and publicly accessible areas will be key for increasing adoption among groups without access to home charging.

Charging speed will also be an important consideration for consumers. Those looking to switch to electric vehicles, especially for long journeys, will need a reasonably quick charging infrastructure.

Charging services should also be easy to use, reliable and transparently priced. Further, ensuring interoperability is important when making investments in charging infrastructure and services, so that a wide customer base is able to benefit.

In India, FAME II has offered financial support and set targets for charging infrastructure, such as the requirement for chargers to be installed every 25 km along major highways.

Additionally, in March 2023, the ministry of heavy industries announced financial aid for the development of charging infrastructure.

However, the corporate investments in EV charging network have, so far, been dismal.

More recently, Maruti Suzuki announced plans to set up around 25,000 EV charging stations.

The automaker aims to leverage its network of over 5,100 service centres across 2,300 cities. It's in discussions with oil marketing firms and energy companies to build a robust charging infrastructure.

EV charging startup Log 9 Materials, in which Amara Raja Energy and Mobility has around 12% stake, has partnered with Trinity Cleantech to set up charging stations across India. Trinity will deploy about 2,000 charging units across the country.

Also, the country's largest EV producer, Tata Motors has partnered with Delta Electronics India and Thunderplus Solutions to set up 250 new fast charging stations across the country.

Tata Power has deployed over 850 charging points for electric vehicles across the country.

In addition, Hero Motors, BPCL, and Jio are also among the new entrants in the EV charging business.

Nevertheless, the number of charging stations certainly seem small compared to the quantum of expansion desired in the pan India network.

Further, there are several challenges to overcome before corporates find the EV charging network investments profitable and viable.

High costs, low returns

Setting up charging stations, especially fast-charging ones, requires significant investments. Land acquisition, equipment installation, and grid upgrades add to the costs. This can become a roadblock for private players to scale.

Grid capacity and efficiency

While India's power generation capacity is increasing, integrating surging EV demand into the existing grid poses a challenge.

Upgrading grid infrastructure to handle peak charging hours without sacrificing stability requires proactive planning and significant financial resources.

Patchy distribution, range anxiety

Most charging stations are clustered in urban centres, leaving rural areas and highways bereft of charging options. This creates "range anxiety" for potential EV buyers, limiting their travel choices.

Lack of interoperability in chargers

The lack of consistent charging standards across manufacturers and regions adds to the confusion. Incompatible plugs and communication protocols can leave drivers stranded with depleted batteries.

Clear, unified standards are essential to ensure seamless charging experiences.

Lack of awareness about charging options

Public awareness about EV charging options and their benefits remains limited.

Addressing knowledge gaps through awareness campaigns and accessible information can encourage wider adoption, leading to a greater demand for charging infrastructure.

Therefore, it may be a while before reasonably larger companies in the EV ecosystem make substantial investments into charging infrastructure.

Eventually, stocks in the power sector could have a direct presence in EV charging. Even power storage makers may find this stream of business viable over time.

Meanwhile, small, niche and nimble players like Servotech Power Systems may continue to make hay while the sun shines.

Mind you, this is not a recommendation on Servotech. Please assess the fundamentals, valuations and management quality of every stock carefully before investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com