Is India’s dream for electric vehicles viable in the long run?

Though the government has strongly indicated its goals for an electric vehicle-future in India, a long road lies ahead before consumers and manufacturers can fully adapt.
Is India’s dream for electric vehicles viable in the long run?
Is India’s dream for electric vehicles viable in the long run?
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The Modi government has made it abundantly clear that it wants an electric vehicle-future in India, and has set targets for it. All three-wheelers manufactured in India would have to be electric by 2023, two-wheelers with an engine capacity of up to 150cc manufactured in India should be electric by 2025, and 30% of cars sold after 2030 should be electric. The industry too responded — Ola ran a pilot with 200 electric cabs in Nagpur in 2017; Hyundai recently launched Kona, an electric car, at Rs 25.30 lakh; Ather Energy has launched multiple electric scooters and Rahul Sharma’s Revolt Intellicorp is coming up with an electric bike.

The Budget only confirmed the government’s inclination. Finance Minister Nirmala Sitharaman gave multiple sops — additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles for consumers, implementation of phase 2 of the FAME scheme, lowering of GST on electric vehicles, etc.

However, according to The Ken, electric two-wheelers made up just 0.006% of all two-wheelers sold in 2018.

The government has certainly given the market a push, but what about the targets? According to Gaurav Vangaal from IHS Markit, a data and information services provider, the target for light vehicles (including passenger vehicles, utility vans and small commercial vehicles) is much more modest than the government’s target that 30% of vehicles in 2030 should be electric vehicles. For light vehicles, Gaurav puts this figure at only approximately 4.1%.

Sri Harsha Bavirisetty, the COO of Gayam Motor Works, a Hyderabad-based company which develops electric three-wheelers that have swappable batteries, says that the government’s announcements will lead to more funding flowing into the sector, which was not necessarily the case earlier.

Lack of infrastructure, and other challenges

But funding is only a part of the numerous challenges that lie ahead for the sector. According to Gaurav, the biggest would be the adoption of charging infrastructure and policies required for charging stations.

And this is something Ola realised as well, when they piloted electric vehicles in Nagpur. Operating expenses were high and there were long wait times at charging stations.

“On the one hand, high upfront costs, lack of charging infrastructure and uncertain performance of a battery-powered vehicle may hold back rapid adoption of e-mobility for private users; on the other, fleet operators are potential early adopters due to business sensitivity to operating costs. Due to the low operating cost of an EV, commercial and public utility vehicles have more compelling economics when compared with private/passenger-owned vehicles,” a report by the Ola Mobility Institute states. It adds that the reason for this is that despite the high initial cost, this is covered by travelling more in shorter periods due to the necessary scale and ability to manage with limited infrastructure.

But India’s market for electric vehicles currently largely consists of two-wheelers. With regard to charging infrastructure, Bengaluru-based Ather Energy, which manufactures electric scooters, isn’t too worried.

“Our utilitarian mobility solution is for the everyday commute. According to data we’ve collected over 10 lakh kilometres, the average commute is 14 km on a weekday and 17 km on the weekend. On an average, our customers commute less than 19 km a day. Most electric scooters will give you a range of 60-80 km. According to our data, 94% charging is done at home and the rest in public spaces,” says Ravneet Phokela, Ather’s Chief Business Officer.

“Outliers are people who do more than 40-60 km a day. Rest of the commuters may use public infra for a top-up. Nobody uses infrastructure for a full charge,” he adds.

Battery swapping

One of the reasons that the cost of electric vehicles continues to remain high is the cost of the battery. Setting up of charging infrastructure is also an expensive affair.

Gayam Motor Works makes electric bikes, smart autos and supply vehicles for businesses such as Big Basket and Ikea. Harsha says that when they ran tests with auto drivers, they realised that long charging hours were not practical, and the solution for this was battery swapping.

For autorickshaws, Harsha says that daily requirement isn’t met with a single charge. No technology in India charges a three-wheeler within an hour, with the minimum being three hours, he adds.

“Fast charging technology is hugely expensive. It may be relevant for buses and cars to some extent, but three-wheelers is a price-sensitive market. Ride costs are low, income levels are low. Battery swapping seems to be the only workaround for the passenger segment as well. It takes only a minute. The economics also works well,” he says.

“When you compare our vehicle with a diesel vehicle, the running cost for diesel is Rs 3.5/km. An electric vehicle charged at home would cost only 50 paise/km. If a vendor has set up battery swapping, then the running cost would be Rs 1.5-Rs 1.8/km. When that significant cost is eliminated, the vehicle becomes easy on the pocket,” he adds.

At a policy dialogue organised by the Ola Mobility Institute on battery swapping, they came up with a shared resolution for the same, touching upon its potential as a model for charging small vehicles, creating favourable economics for consumers and offering several advantages in the ease of use. They also proposed that looking at the batteries as a service may catalyse adoption of electric vehicles in India.

“Manufacturing is a money making business. Till the time consumers do not adopt the product, they are not going to manufacture, and the consumer is not ready,” Harsha says.

Adoption of electric vehicles

Another major challenge is getting consumers to buy electric vehicles. Gaurav says that consumers aren’t ready because economics matters.

“This is not a mature market. Budget is an important factor for each consumer. If a vehicle cannot compete with the price range of an internal combustion engine (ICE), nobody is going to buy it. The cost of the battery is approximately 50% of the vehicle… after 4 to 5 years, when the battery drains out you have to replace it. If you buy a vehicle at Rs 10 lakh, at Rs 5 lakh — you'll get ICE vehicle if you're only looking for commuting," he says. 

With a market still hesitant to adopt electric vehicles for daily commutes along with ambitious targets for electric vehicles on the road, Harsha says that shared mobility and public transportation is where adoption will first start.

“I’m not segmenting vehicle wise but market-wise. Buses, autos, last mile connectivity — and same with two-wheelers connecting first mile and last mile scenarios will be the first to take it up. Many startups have started putting scooters on rent in places such as Delhi and Bengaluru for short-distance commutes. This is where initial adoption is going to be happening much faster. Charging infrastructure can be taken care of when things can be deployed in a more controlled way and ownership is not an issue,” he says.

Seeing this, Harsha adds, customers may warm up to the idea of owning electric vehicles.

It was similar to this that Uber, in collaboration with Bajaj, launched Bajaj Qute, a quadricycle, as part of its new Uber XS category in Bengaluru, which would ply in certain areas of the city to start with.

Government push

For the manufacture of electric vehicles and the growth of the industry, the government introduced the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) scheme. This year, the government announced phase 2 of this scheme and has now called for proposals on the setting up of electric vehicle charging infrastructure in the country.

Under Fame-II, subsidies will be available for the next three years.

“That’s not a very long time, because sometimes it takes 2.5-3 years to get a new product once you start. If there’s long predictability in policy, it allows original equipment manufacturers (OEMs) or vendors to invest because there is predictability of the market for 5-6 years. On the charging side, for two-wheelers, there is a lack of standardisation in terms of charging protocol. It doesn’t allow people to make investments. Setting standards will go a long way in getting the infrastructure up and running,” says Ravneet.

However, experts agree that the government being vocal about its push for electric vehicles has created momentum, but now it has to bring stakeholders on the same page.

“There is constant discouragement of the traditional IC engine and continuous encouragement of intelligent policies towards the electric vehicle. There is clear and firm intention toward electric vehicles, which is good for the electric market in the long term, specifically policy-wise, because most manufacturing companies are seeing where to invest and now, the government is giving a clear indication,” says Gaurav. 

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