The global automotive industry is on the verge of disruption. Four technology-driven trends — electrification, shared mobility, connectivity, and autonomous driving—are leading the automotive industry to this disruption. These trends will shift markets and revenue pools, change mobility behaviour and build new avenues for competition and cooperation.
India -Emerging Scenario and EV ambition
The Indian automotive industry has started to experience these effects of the global disruption. Out of the four emerging trends, Electrification is of importance and might significantly impact auto OEMs and auto component manufacturers. India has big plans for the emerging Electric Vehicles and its technologies in the country. It has announced (and later modified some) ultimatums for the next decade.
India has great expectations of achieving a high level of penetration in e-mobility by 2030. The reason is not very surprising; the alarming levels of pollution indices which keep on rising and the colossal dollars the country must pay for annual crude oil imports. In December 2017, New Delhi was in a state of red alert and came close to Beijing in terms of pollution toxicity, such are the pollution indices in India. If India successfully manages to achieve this target by 2030, it could save about 1 Giga Tonne of emissions.
The story so far
E-mobility has arrived in India. In the Indian context, any discourse around Electric Vehicles cannot be disjointed from pollution and its impact, dependence on oil imports, dire need to have more renewable sources of energy. The automotive industry could benefit by viewing it not as a threat, but an opportunity. The good news is that policymakers are trying to seriously consider it and the social circle across the nation is making EV a buzzword.
However, till date, there has been very little penetration as EV today are undergoing a typical vicious cycle of high cost, low demand, low supply. This must translate into a virtuous cycle of low cost, high demand, high supply.
There is a need to create an integrated policy to nurture this technology. An eco-system approach is what will help achieve India’s progress on electric mobility. The policy on ‘Faster Adoption and Manufacturing of Hybrid and Electric vehicles’ FAME I in 2015 and FAME-II in 2019 have in some ways been instrumental in successfully creating an initial but nascent market. However, there is an apparent shift in the focus of Government towards supply-side measures that include manufacturing of critical components of EV technology.
The real challenges and barriers to going electric
Despite lack of specific pointers towards electrification, the EV Industry in India will still take another few years to evolve. This does not owe to the Indian Government’s ambitions targets and their resultant steps but simply because the automobile industry believes that India too will follow the low-carbon footsteps that are being taken by global big car markets like China, US and Japan.
Every major car-maker existing and planning to enter our market is getting into the act. So, while some domestic players already have EV in their portfolio (though in very small numbers), other MNC OEM’s are all testing and planning to launch their own EVs within the next few years. While each of these manufacturers understands the significance of the mass market prospects for EVs, they are hopeful that the policy push from the Government will translate into concrete steps that will eventually make EVs attractive even for buyers in the lower price segments.
But, there are challenges. The primary concerns have been around range anxiety (kms on a single charge) and the lack of charging infrastructure and several other factors. Some of them are:
EVs worldwide constitute a very small niche and are all loaded on the top of the premium price segment and remain dependent on incentives. This holds true in developed markets like China and the US where the number of EVs on the road are gaining critical mass. Adoption in India will also be heavily dependent on Government incentives.
However, there is an alternate view that while demand incentives can help in the short term but, in the next five-six years, with the expected reduction in battery prices and the simultaneous increase in cost of ICE (internal combustion engine) vehicles due to stringent emission regulations could help EVs offer an inherent operating cost-benefit and make them sustainable even in the absence of incentives.
• Cost of the battery
Currently, the cost of the battery and power electronics constitute almost two-thirds of the cost of an EV. The most widely used battery materials today are nickel-metal hydride (NiMH) and Lithium-Ion (LiON). Multiple factors like demand-supply gaps, uneconomically low volumes etc, lead to the high cost of manufacturing EVs. Today, an EV’s battery, power electronics and motors can together cost as much as six to seven times that of an IC engine affecting the ex-showroom price.
New battery manufacturing capacities are coming up in India and the localisation push will help lower costs of EVs just like it does in the case of IC engine cars. Experts in cell manufacturing feel that the economic size of a battery manufacturing plant is upwards of 8 GWh. So, clearly, localisation benefits can be accrued only in the long term and with meaningful penetration and volumes for EVs.
• Price multiple
The biggest hurdle for buyers looking to go electric is the current high price of EVs. For a buyer who is hesitant to choose a hybrid in favour of the equivalent ICE-only car, the nearly 3x price tag of an EV is too much of an entry barrier. The industry view is that the price multiple between ICE cars and similarly positioned EV can’t be more than 1.2x to 1.3x.
But lower-end cars will tend to be more expensive because of the higher cost of technology spread over a lower price level. Unfortunately, price sensitivity is also higher amongst buyers in the lower price segment. And the cost-of-ownership issue will further affect long term viability of EVs.
• Challenges from the Grid side
Most often, the EV discussion only veers around the non-existent charging infrastructure and about who will be responsible and when will this come up in India. Another point that gets raised is how much of the power generated comes from old, coal-fired thermal power plants and about how EVs may well be only displacing the pollution from the cities to the suburbs where these plants are located. But what about the other challenges that the grid may be faced with when EVs start becoming mainstream? And what about the price of charging EVs at private charging stations?
Even assuming that renewables and newer, cleaner sources of thermal or nuclear power come on stream within the next few years, there are other factors like the skyrocketing demand for electricity that will affect EVs. According to Brookings India, projections for 2030 show that even with a fair penetration of EVs (two, three and four-wheelers, and intra-city buses), the increase in demand for electricity is likely to be only about 100 TWh (Tera watt-hours) or about 4 per cent of the total power generation capacity. So, ramping up power generation should be possible to meet that growth in demand.
The EV space will also turn out to be like the proverbial ‘chicken and egg’ situation. But that was the case even with ICE vehicles, where the cars came first, and the roads came later. So, the charging infrastructure will take its time coming, as will the production capacities for batteries. But, in the meantime, the Government needs to also promote hybrids and plug-ins to create an enabling ecosystem for buyers of EVs and those who need to invest and profit from setting up the charging infrastructure.
As quite ostensible from the mentioned facts and figures, E-mobility is a distant dream for the Indian government. If India really wants the mission to be accomplished, it’s going to be a collective effort of every individual/ organization significant to the country.
The way forward for e-mobility in India
Besides the end-users or customers, three key stakeholders could play an integral role in India’s transition towards EVs.
• The Government: By defining the regulations on emissions and fuel efficiency, clarifying aspirations, strategic intent and direction, exploring incentives and subsidies, it can support EV adoption and focus on developing a supportive ecosystem.
• The power, fuel, and charging infrastructure companies: By laying down a foundation of support, innovating on business models (e.g., leasing of batteries, swapping infrastructure, deploying fast chargers), making the economics of (fast) charging infrastructure work, providing stable power supply and grid stability, they can enable easy and rapid charging and drive EV adoption.
• The automotive industry: By changing the product and component mix bringing EV components and vehicles to life, building the right talent pool and skill set, improving the performance of batteries and electric vehicles and building scale, the industry can drive the EV disruption in India.
In the new future, e-mobility in India would not be something of luxury but it would be something necessary for the survival because the pollution level is alarming, and the only solution is the green sources and transmission of energy. Hence, EVs are inevitable when it comes down to it, so it is better to plan and organize about how the developments are going to occur rather than dodging the change.
Undoubtedly, an integrated policy on future of mobility with a focus on zero-emission mobility is the call of the hour. However, such a policy should also consider financial health of the industry, revenue to the government and employment opportunities to millions and millions. The future of electric mobility is here and is here to stay, evolve and widen its reach.
Author: Suresh Rangarajan is an analytical and performance-driven professional with extensive experience in public relations and corporate communication. He actively follows the automotive sector.
Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or any employees.