Electric 3-wheelers, 2-wheelers sales to see a sharp rise in India by 2024: Crisil

Unlike countries that manufacture lithium ion batteries and, hence, enjoy a cost advantage, battery prices in India continue to be at a premium.

By:Published: February 12, 2020 7:50:26 AM

A report says nearly half of new three-wheelers sold and a sixth of two-wheelers sold in the country will be electric by 2024. Crisil Research had conducted a report on the lines of India’s commitment to make 30% of all new vehicles sales as electric vehicles (EVs) by 2030, in line with the global trend. By 2024, as much as 43-48% of new three-wheelers (excluding e-rickshaws), and 12-17% of new two-wheelers sold in India will be EVs. But, traction may be low for four-wheelers, with only 5% of new sales likely to be EVs, the report said.

While the sales of e-autos are expected to grow from 700 units to 370,000 units by 2024, e-rickshaws expected to grow from 450,000 units to 875,000 units. Similarly, the electric two-wheelers will touch 35 lakh units by 2024 from the current 1.26 lakh units, the Crisil Research report said. The report focused on demand, supply and policy growth drivers for EVs such as battery costs, government subsidy and charging infrastructure, besides conducting a segment-wise analysis of the cost of acquisition and operation of EVs as compared with existing internal combustion engine (ICE) vehicles.

Faster adoption of two- and three-wheelers is a function of cost. Typically, electric scooters are cheaper to run compared with ICE scooters. And, e-autos are cheaper to both own and run as compared with their ICE counterparts. Crisil Research director Hetal Gandhi said: “In the context, supply will also be a critical factor for adoption. The top five electric two-wheeler manufacturers are expected to increase their capacity for electric variants from 4 lakh units in fiscal 2020 to over 3 million units by fiscal 2024. And in three-wheelers, even incumbent original equipment manufacturers are launching e-autos at a rapid pace. But low-speed, four-seater e-rickshaws are fast emerging as an alternative to e-autos because of being 30% cheaper.”

An analysis by Crisil also shows while the government’s policy — Faster Adoption and Manufacturing of Electric Vehicles in India – II (FAME II) — and other emission regulations have created the push for EVs, these will hit the roads slower than envisaged over the next five years. What’s more, adoption will vary across segments, with e-two- and three-wheelers continuing to hold the pole position, it said. That’s because the enabling ecosystem, so critical for the successful adoption of EVs in India, is not quite in place yet, while vehicle manufacturers have been slow to provide the supply-side push, too. India is lagging on the global growth drivers for EV sales — battery prices and manufacturing, demand incentives and the charging infrastructure.

Unlike countries that manufacture lithium ion batteries and, hence, enjoy a cost advantage, battery prices in India continue to be at a premium. Hence, despite demand incentives, the cost of acquisition and operations of EVs will remain unfavourable for various vehicle categories, thereby constraining demand for the next five years. Constraints on the supply side are that original equipment manufacturers are still grappling with a chicken-and-egg conundrum: Will battery capacity come up at scale first and help reduce EV costs or will EV volumes have to grow first? As a result, consumers do not have enough models to choose from as yet, and the public charging infrastructure is still to fall in place, the research note said.

Therefore, the execution of government’s EV policy roadmap — which encompasses everything from demand incentives to battery manufacturing capacity to charging infrastructure — holds the key to faster adoption of EVs in India. In the immediate term, the government could do well to action the phased manufacturing plan to drive down battery prices and accelerate the development of the charging infrastructure. Crisil Research estimates electric two- and three-wheelers, which already enjoy better cost economics compared with their ICE counterparts, will continue to zoom ahead. By fiscal 2024, EV penetration is expected to improve to 12-17% of new vehicle sales for e-two-wheelers and a whopping 43-48% for e-autos.

However, offtake of passenger cars for personal mobility will be subdued given poor cost economics and the lack of demand incentives under FAME II, though cab fleets will move up a gear. Crisil Research expects landed lithium ion battery costs in India to drop from the current $230 per kWh to $143/kWh by fiscal 2024. Till then, volume offtake will remain slow as lower battery prices will be the key factor that will spur EV adoption in the country.

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