Over the last couple of years, the talk around EVs has really grown big. You must have read articles about what the government is doing for this sector or what the corporates plan to do in this sector or how people perceive the idea of driving an EV and the people who deal in the stock markets have probably already placed their bets on the company they think will thrive when this sector really starts to flourish.
Well, the purpose of this article is to put things in perspective, to talk about this upcoming industry for three key lenses i.e. policy, corporates and the people.So, to begin with, the talk about EVs in India really began with the National Electric Mobility Mission Plan 2020 (NEMMP) launched by the government of India in 2013 reiterating its commitment to the Paris Agreement. Its aim, rather ambitious, to achieve 6-7 million sales of hybrid and electric vehicles YoY from 2020 onwards and the means to achieve this goal were fiscal and monetary incentives for the consumer and in-house technology development and domestic production for corporates.
The wheel started to spin, the government focused on preparing a cohesive policy, the corporates started working on models which could be sold off the counter and the people, well they didn’t really have a choice but to wait. However, there is an important question to ask here, “Are EVs of any good to us?” and given the current circumstances of our infrastructure, are we ready to adopt this technology.
Are EVs any good to us?
The main argument presented by the people who are in favor of EVs is that it will reduce our dependence on oil therefore reducing our import bills, it will help curb the CO2 emissions, EVs in general have a low total ownership cost and all these arguments make sense because India’s oil import dependence is about 85% and with the surge in the global crude oil rates coupled with a depreciating rupee against dollar and increased dependence on import, it is likely that the oil import bill will swell.
The chart above depicts the fact that even though the crude oil prices are well below the FY 13 levels however increased dependence and a similar Rs/$ exchange rate our YoY growth of the crude oil import bill stands at a 3.72% which is likely to move up given the circumstances. According to the Ministry of Petroleum and Natural Gas, 70% of Diesel and 99.6 % of Petrol is consumed by transport sector, therefore the benefits of shifting to EVs for both commercial and passenger vehicle is likely to outweigh the cost in the long run.
Challenges
Now although theoretically the move towards EVs looks good but the ground reality is slightly different.
The first challenge to deal with is the infrastructure in terms of electricity production and the fuel availability for the consumer (in this case charging stations). Unlike petrol and diesel, an EV would take longer to charge and the sheer lack of charging stations is likely to create a range anxiety.
Next is the purchasing cost of an EV. Currently the maximum sales of passenger vehicles come from the budget car segment (less than 10-12 lakh rupees). Since the technology is in a nascent stage, the cost of production is definitely very high and therefore it will take time before production of EVs achieve economies of scale to be able to produced at a competitive cost.
Another important factor to look over here is the dealer reluctance. Given the business model followed by car manufacturers in India a dealer of the car is likely to make money not by selling the car itself but the ancillary parts and services such as the accessories, insurance, service expenses and others. Now since the EVs are cost competitive in the long run it takes a hit on the revenue of the dealer and therefore he/she is not incentivized to sell it.
Now although a government policy should be able to take on these challenges, but sadly the very policy as become a challenge for the automakers [FAME II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles)].
What lies in the Future?
If we look at our current sales figure, there were about 7.59 lakh of EVs sold in India in FY 19 as compared to 56,000 in FY 18 with the majority of sales coming from the two and three wheelers. This may seem an impressive YoY growth, however it shows the lack of infrastructure and policy, since the goal of NEMMP was to reach 6-7 million units by 2020.
The role of government in this becomes very crucial, the kind of policy it forms, the incentives it would give to the people adopting to this technology (like the incentive provided in this year’s budget), the incentive it would give private sector to come and invest and also how it plans to shift the public transportation system to EVs.
The sky is the limit and the challenges are no less, the industry is nascent and therefore everyone is trying to figure out what would work best for them. The shift will not happen overnight and therefore it would require work from the government, the corporates and the people to move towards an environment of zero emission cars.