By Mohit Sharma, CEO & Co-Founder, Oye! Rickshaw
We don’t have to look back too far in time to see a clearly established pattern on how geopolitical conflicts have a direct impact on crude oil prices. The impact of international and civil wars, as well as violent nongovernment organisations on global supplies, have been bookmarked in the annals of recent history for us to learn from. The Suez Crisis, the Six-Day War, The Iraq-Iran War, Iraq’s invasion of Kuwait and US intervention in Iraq are just a few of the many examples of how wars directly impacted the production and supply of oil. But, history is often forgotten and repeated.
The latest entry into this list is the ongoing war against Ukraine by the Russian Federation. An unfortunate yet avoidable incident, the war has displaced an estimated 160,000 citizens and this number is expected to reach up to 7 million according to the EU. At the time of writing this article, it’s been reported that at least 364 Ukrainians have died and at least 759 have been injured based on UN findings. Besides the humanitarian crisis, the 2022 Russian invasion of Ukraine has also made a dent in the global crude oil market and its ripple effects are being felt in India too.
Crude oil dynamics:
It is interesting to note that India doesn’t rely heavily on Russia for its import of crude oil (only 6% of refined petroleum and 2.3% of crude oil). But Russia is the third-largest producer of crude oil after the U.S. and Saudi Arabia. They account for one in every 10 barrels of oil consumed worldwide. India, on the other hand, imports nearly 85% of its oil needs, which puts the country at the mercy of the global crude oil market and its volatility. With Russia being a key player in this market, disruptions at its end are going to be felt at a domestic level too.
An upward tick in renewable energy markets:
Conversely, one key development that can be noted is how the renewable energy sector seemed to be on an upward trend since February 24, 2022 (the day of the Russian invasion of Ukraine). Notably, the European Renewable Energy Index saw a 9.3% bump on that day. Other European players in this market, Orsted A/S, Siemens Gamesa Renewable Energy SA and Vestas Wind Systems A/S saw a massive jump of 10% in stock value. A similar upward trajectory was seen in the shares of U.S. renewable energy companies like Sunrun Inc., peaking at 13%, Enphase Energy Inc. and SolarEdge Technologies Inc., both touching 9% increase and TPI Composites Inc., producers of blades for wind turbines, managed to see an impressive 26% bump.
India’s EV reality:
But what’s our story back home? India is the largest market globally for 2W and 3W and is also amongst the top five in the commercial vehicles and passenger cars segment. But adoption of EVs has been insignificant so far. According to a recent study by Accelerated e-Mobility Revolution for India’s Transportation (e-AMRIT), only 7,96,000 EVs have been registered till Dec 2021. While there is a growth of 133% in sales in the EV space from FY 2015 to FY 2020, this still pales in comparison to the sales of ICE vehicles. With an EV market that still has a lot of ground to cover, coupled with India’s overreliance on imported crude oil to run its existing base of ICE vehicles, we are caught between a rock and a hard place.
There is also a problem of “EVersion” or averse to the idea of adopting EV vehicles within the country. This fear comes with any path-breaking new tech and EVs are no exception. Many question their range capabilities and the lack of supporting infrastructure peppered throughout the nation. As a result, any plans of out-of-city trips are a source of consternation for many potential buyers. The cost factor is another worry since EVs don’t really come cheap. India lacks major lithium reserves and depends on countries like China and Taiwan to meet this need. With very few OEMs manufacturing lithium batteries domestically, it adds to the cost of producing EVs.
On the other side of the EV story, its adoption can tick off many of the checkboxes that a country should be checking off. According to the 2017 FICCI and Rocky Mountain Institute Report, a shift to shared, electric and connected mobility in the passenger vehicles segment can help reduce 1 gigatonne of carbon dioxide emissions by 2030. EV adoption is said to help cut the oil import bill by half by 2030, according to industry experts. The EV sector is also likely to see investments worth $12.6 billion across the automotive value chain in the next five years according to a joint report by Colliers and IndoSpace.
A state-backed push for EV adoption:
The government is also ramping up its efforts to make EV adoption easier and faster. The subsidy under the Faster Adoption and Manufacturing of Hybrid & Electric Vehicles (FAME) for FY 2023 is projected at INR 2,908 crore, which is a three and a half times hike from the current fiscal year. The government also made a new provision allowing any individual or an entity to set up Public Charging Stations (PCS) without the need for a license. Additionally, the new regulation also sweetens the deal by offering up government land to any government or public agencies and private entities who wish to set up their own PCS on a revenue-sharing basis.
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The recent battery swapping model in the EV space makes adoption a lot easier with individuals not having to worry about long hours of downtime. The Union Government’s recently announced Battery Swapping policy (which gives EV buyers an option to not own the battery, thereby bringing down upfront costs) takes it a step further by introducing interoperability standards. This move can potentially change up the entire EV market by making swapping accessible to anyone and everyone who has EVs from different vendors. This can also bring up interesting business models around vehicle ownership — EVs can be sold without battery packs to cut costs and with interoperability standards, new vendors can offer up batteries on a per-swap-basis and further make EV attractive and accessible to the larger market.
The EV sector is constantly evolving and innovating to make itself more accessible and affordable. While the sector is not fully developed yet, moving away from non-renewable energy sources that require us to dip our feet in foreign soil to EV that is domestically produced will be the path to self-sufficiency and environmental safeguard for India.
