BY Ayush Raj
India is the fifth largest car market in the world and has the potential to become one of the top three in the near future — with about 40 crore customers in need of mobility solutions by the year 2030. That is one side of the coin. The other side is that the country needs a transportation revolution. The current trajectory of adding ever more cars running on expensive imported fuel and cluttering up already overcrowded cities suffering from infrastructure bottlenecks and intense air pollution is unfeasible. A transportation revolution will have many components — better “walkability”, public transportation, railways, roads — and better cars. Many of these “better cars” will likely be electric.
Every time there’s an increase in oil prices or there’s a discussion on climate change, Electric Vehicles are inevitably mentioned as a part of the solution. Yet, despite several new Indian companies entering various parts of the EV value chain, significant capital infused in the space and large-scale execution efforts, EVs are not mainstream yet.
It’s been 20 years since Reva became the country’s most affordable electric car and soon became one of the world’s bestselling electric cars, having sold in 24 countries and one would have expected electric vehicles to become a norm and a lifestyle in the country. However, the reality seems to be far from this.
However with the development in technology in recent years,EVs are finally ready to take off.In September 2021, Ola Electric sold e-scooters worth 1,100 crores in just two days in India. Gurugram got India’s largest EV station that can charge upto 100EVs.Under Phase-II of the Faster Adoption and Manufacture of (Hybrid and) Electric Vehicles (FAME) Scheme, India allocated Rs 10,000 crore for advancing electric mobility in public transportation fleets, four-wheelers, three-wheelers, private two-wheelers as well as electric vehicle charging infrastructure.
Vehicle range has drastically improved owing to significant improvements in battery chemistry. Moreover, Lithium ion prices saw a 98% dip over the last three decades, of which 90% reduction took place over the last decade alone. This resulted in a massive drop in the cost of manufacturing batteries. And since the battery forms 25% to 40% of a vehicle’s cost, the price of EVs has also seen a decline.
Companies are branching beyond manufacturing and distribution, and selling directly to consumers, setting up charging infrastructure and providing financing options. This is key to accelerating initial adoption as customers are assured of charging infrastructure support and financing. The full-stack approach is going to play an important role in helping EVs reach critical mass on Indian roads.
Another important benefit of EVs that will foster it’s popularity is that in a two-wheeler Electric Vehicle, the cost of charging is at about 15 to 20% of the cost of fuel for an IC vehicle. With the fuel prices increasing rapidly, this delta is only getting larger. Since EVs also have fewer moving parts, the maintenance cost for an electric vehicle is actually about 30 to 40% cheaper than that of its internal combustion counterpart.A total cost of ownership comparison tells us that two-wheeler EVS turn out to be 50% cheaper (over the life of the vehicle) than an IC vehicle, signaling that the mass adoption for EVS will be driven by two wheelers.
According to NITI Aayog and RMI, EV sales penetration is slated to reach as high as 80% for two and three-wheelers, and 50% for four wheelers by 2030, elucidating the massive opportunity for not just emerging startups but also traditional original equipment manufacturers.
One of the major limitations of EVs is the lack of robust charging system among users, however charging batteries would be a more interesting play than swapping in the short-term. In the long-term, swapping works best because it has multiple benefits for a consumer. One doesn’t have to wait for three or four hours to charge their vehicle, instead, can swap the battery in less than five minutes. Though seamless, swapping infrastructure is much more CapEx heavy than charging infrastructure and hence not a preferable short-term play due to the current limited EV adoption.
India has a lot to gain from the widespread adoption of e-mobility. Under the Make In India programme, the manufacturing of e-vehicles and their associated components is expected to increase the share of manufacturing in India’s GDP to 25% by 2022. On the economic front, large-scale adoption of electric vehicles is projected to help save $60 billion on oil imports by 2030 – currently, 82% of India’s oil demand is fulfilled by imports. Price of electricity as fuel could fall as low as Rs 1.1/km, helping an electric vehicle owner save up to Rs. 20,000 for every 5,000km traversed. Finally, electrification will help reduce vehicular emissions, a key contributor to air pollution which causes an average 3% GDP loss every year, reports suggests.The Go Electric Campaign is an initiative aimed at reducing the import dependence of our country in the coming years and has also been projected as an important step towards a cleaner and greener future. The campaign is aimed at creating awareness at the PAN-India level and is expected to boost the confidence of Electric Vehicle manufacturers.
The transport minister pointed out some key benefits of using electricity as an alternative fuel. The minister stated that fossil fuels have an import bill of ₹8 lakh crore.
Thus considering all these factors the future for EVs looks promising in India, and hopefully with the entry of Tesla in India we can expect a major change in people’s perspective over EVs.
ABOUT THE AUTHOR
Ayush Raj is a first year student, pursuing B.com (hons) at Kirori Mal College, Delhi University . His hobbies include reading books that revolve around economy, investment and psychology , and playing cricket.He also takes keen interest in understanding stock market and various types of investments and aims to build a career around the same.
Disclaimer: The views expressed in this article are the author’s own and do not necessarily reflect the views of the organization.
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