New Delhi, Jul 1 (KNN) In a significant shift within India's burgeoning electric vehicle (EV) sector, smaller component manufacturers are now catching the eye of venture capitalists. 

These agile startups, many of which pivoted from unrelated industries, are filling crucial gaps in the EV supply chain and offering innovative solutions to both established and emerging automakers.

Gurgaon-based Indigrid and Matel exemplify this trend. Indigrid, originally a TV set-top box manufacturer, transitioned to producing EV components like motor control units (MCUs) and instrument clusters over the past six to seven years. 

Matel, which began as a solar water pump manufacturer in 2016, entered the EV parts market in fiscal year 2021. Both companies secured their first institutional funding rounds in May-June 2024, marking a watershed moment for the sector.

These newcomers are challenging the dominance of traditional auto component giants like Sona Comstar and Sterling Gtake by offering full-stack solutions and rapid product iterations. "A lot of the large players are very specialised... Design changes with the likes of Sterling Gtake and Bosch can be very expensive and take a long time," noted Matel co-founder Netaji C Patro.

The rise of these startups is timely, given the increasing complexity of EVs compared to internal combustion engine vehicles. Rishab Puri, co-founder of Indigrid, highlighted that EVs require many more electronic components, creating opportunities for innovation by smaller firms.

Venture capitalists are taking notice. Amit Sharma, general partner at Cactus Partners, which invested in Indigrid, explained, "Well-capitalised OEMs like Ather and Ola usually design most equipment in-house, but with sales increasing their reliance on supply chain partners will likely grow." 

He added that traditional automakers like Bajaj and Mahindra are also increasing their EV exposure, preferring to rely more heavily on agile supply chain partners.

However, these startups face challenges. The sector demands heavy investment in research and development, with long product development cycles. Mohammed Shoeb Ali, co-founder of Transition VC, which backed Matel, noted that investors often expect quicker returns, making it difficult for hardware-focused startups to secure funding compared to their software counterparts.

Despite these hurdles, the growth in EV sales is providing a tailwind for these component makers. According to the Federation of Automobile Dealers Associations (FADA), electric passenger vehicle sales in India surged 91 per cent year-on-year to 90,996 units in FY24, while electric commercial vehicle sales tripled during the same period.

(KNN Bureau)