The government is said to be releasing an order to commercial fleet owners who operate cab services and delivery services to transition to electric vehicles in a phased manner. A Reuters report said that the government will task Uber, Ola and other ride-hailing services in India to convert 40% of their fleet to EVs by 2026. While companies that use two and three-wheelers for delivery and other commercial purposes will also have to transition to EVs by April 2023, which will directly impact companies like Swiggy, Zomato and other similar kinds of service providers.
But what this means in a country with a huge population that commutes daily on two-wheels is that a significant amount of riders will have to switch to electric bikes or scooters. Good thing is that there is no shortage of options for electric scooters in India. Hero Electric and Okinawa, two major electric scooter manufacturers already have a range of products in the market. While start-ups Twenty-Two Motors, Ather Energy and the upcoming Revolt Intellicorp electric scooter and bike brands are also newly entering the market.
However, when it comes to electric cars, there are not many options available. The only three fully electric cars that are plying on Indian roads include the Tata Tigor EV and the Mahindra e2o Plus and eVerito. While Hyundai is scheduled to launch the Hyundai Kona EV in India on July 9 and Maruti Suzuki is also expected to launch their EV (Electric WagonR) by 2020. That said, the problem is that these vehicles, despite the subsidies, are expensive compared to their traditional counterparts and will cost upwards of the price-point that can be acceptable to the masses. Nissan has also been evaluating the Indian market for their electric car the Nissan Leaf but it would cost more than the Kona also.
The benefits of ordering these service providers to transition to EVs and offering them incentives will create a demand for these vehicles in India and allow more manufacturers to begin investing and manufacturing them in India. Uber and Ola will play a vital role in creating this demand. Millennials find Uber, Ola and other smartphone-app-based ride-hailing services more convenient than the traditional form of buying a personal car. Globally, this has impacted the passenger vehicle segment and more and more vehicles are sold for commercial purposes. Some analysts and even manufacturer see that personal or private vehicles will soon be a thing of the past and the future lies in shared mobility. Brands like Polestar, the performance arm of Volvo, or the Chinese sister company Lynk & Co follow a subscription basis business model rather than conventional dealerships and direct sales formula.
Looking at a slightly micro level, Ola as a company itself had launched a pilot project in Nagpur designed to provide first-hand experience to inform a viable business model for electric vehicles at scale. However, it turned out that with the current infrastructure, within a year, drivers were unhappy with long wait times at charging stations and high operating expenses and wanted to return to traditional fossil fuel powered cars. However, the company states that despite these issues the company has not lost hope. Ola launched a new business unit – Ola Electric Mobility Pvt Limited. This venture recently has found support from investors like Ratan Tata and Arun Sarin while reporting new investments and funding worth Rs 400 crore. The company aims to bring 1 million electric vehicles on India roads by 2022 and has initiated new pilot programmes to deploy electric vehicles and charging solutions, including battery swapping stations, electric 2-wheeler and 3-wheeler services.
With the infrastructure available in India currently, the task to transition such a large volume in the time frame seems Herculean. First, the infrastructure needs to grow at a rapid pace and so does battery technology used by Indian manufacturers. Some elements that are used to create the batteries are not available abundantly in India and require to be imported. Materials such as Lithium and Nickel, which are usually mined in South America, South East Asia, Australia and some parts of Africa and mining them safely is not an easy task making them expensive.
Additionally, another hurdle is the business model used by Ola and also Uber specifically is that both follow a similar business model where essentially most drivers of Uber cabs are contractors are not full-time employees of the company. When you look at India, the models have been tweaked to some extent where the company offers drivers with vehicles on a contract. Despite that, a majority of the Uber and Ola vehicles are owned by the drivers themselves, who due to their financial backgrounds in India may not be able to shell out that premium cost for an EV at this point. The same goes for companies like Swiggy and Zomato that also use independent contractors who use their own motorcycles for deliveries. The question remains how far are these companies willing to invest to transition to EVs will be something to keep a close watch on.
