for Climate




Sector Voices

Capital flows into the Indian EV ecosystem:

reading the tea leaves

- Vasudha,Founder of Ostara Advisors

We are currently on the cusp of once-in-a-century disruption of not just the automotive and the energy industries but also, the handshake between these two, as vehicles go electric and energy generation starts to transition to more renewable sources. This transformation requires a deeper understanding of emerging business models to catalyse global capital flows into these sectors.

While most electric cars look similar on the outside to their fossil fuel-powered counterparts, underneath the hood things are very different. The electric powertrain is fundamentally superior to an internal combustion engine (ICE). Did you know that, unlike your petrol or diesel car that gives you fewer km to the litre in city driving vs on the highway, the electric vehicle can actually deliver better “fuel economy” in the city due to regenerative braking? As EVs can harvest energy from braking, most of the kinetic energy spent to accelerate when the light turns green is recaptured at the next red light.

India is the world’s 4th largest vehicle market and the world’s largest manufacturer of two-wheelers and three-wheelers, which also make up 75-80% of all vehicles sold in the country each year. At a market size of ~$188 billion, India’s automotive industry contributes ~7.1%* to the annual GDP.

In 2019, NITI Aayog set the goalpost - 70% of all commercial cars, 30% of private cars, 40% of buses, and 80% of two-wheeler (2W) and three-wheeler (3W) sales to be electric by 2030.

If we take the 2030 target as the Base Case, this would represent an EV market opportunity of $206 billion between 2021 and 2030. This ambition translates into total sales of 102 million vehicles between 2021 and 2030, an annual battery demand of 158 GWh and a support infrastructure of 2.9 million public charge points by FY30. (Source: CEEW-CEF)

2021 was a transformational year for the Indian EV ecosystem as pandemic-driven rise in ecommerce and rising fuel prices gave a huge boost to EV adoption, accompanied by a huge jump in deal sizes from sub-$5m family office/angel network rounds at the start of the year to a $1bn fund-raise towards the end of the year. EV OEMs witnessed a 4x jump in funds raised in 2021 over 2019. Start-ups led the way across the entire EV value chain from two- & three-wheeler OEMs to Charging networks to Advanced Battery technologies to Last-mile logistics.

2022 has built on these very same themes with OEMs taking the largest share of the private equity pie.

We believe, from a funding perspective, 2023 will be the year of the EV components industry (including motors, controllers, battery cells, packs, BMSs etc.) as capital flows into EV OEMs cascade into growth of the EV supply chain. We also see a definite trend towards fleet electrification, both in passenger cars and buses as well as trucks for logistics, driven by the compelling economics of these business models. We will also see increased investments into charging infrastructure from financial as well as strategic investors.

Today, Ostara Advisors is India’s first and only investment bank focused entirely on electric mobility, new energy and sustainability. We have advised leading startups and companies in the Indian Electric Mobility ecosystem on their fund-raise and M&A strategies, including India's first EV two-wheeler acquisition in 2018 and India's largest private equity raise for an EV three-wheeler startup in 2022. We strongly believe that the Indian electric mobility and new energy ecosystem presents one of the most attractive destinations in the world for global capital and will deliver superior returns over the next 5-10 years.

Vasudha is the founder of Ostara Advisors, India's first Electric Mobility & Sustainability-focused investment bank. She has over 19 years of experience in Corporate & Investment Banking across Citibank, ICICI Bank and boutique investment banking and made her debut in the top 20 on the All-India M&A League Tables in late-2018. She advised on India's first electric vehicle two-wheeler M&A, where she represented Greaves Cotton Limited on the acquisition of pioneering EV two-wheeler maker Ampere Vehicles. She has also recently helped raise the largest private equity round of $40m for Altigreen Propulsion Labs in the electric three-wheeler space. Vasudha is also responsible for setting up Citi's India's 'Private Equity and Hedge Fund' coverage vertical, which she established and expanded.