India is the fourth largest automobile market in the world, imports more than $ 100 bn worth of oil every year and has some of the most polluted cities in the world. Adoption of Electric Vehicles in India is therefore, a strategic imperative and a foregone conclusion.
An electric powertrain is fundamentally superior to an internal combustion engine. An ICE burns fuel and a large portion of the energy released is lost as heat. An EV also scores over the ICE in faster acceleration for speeds that matter, does not require a transmission system and is better aligned to future trends such as self-driving. The ICE remains ahead on two key parameters – Range and Refuelling (Charging) time, a solution to which may permanently transform the auto industry across the world. Volvo has already announced that it will stop making ICE engine by 2025
More than 80% of vehicles sold in India are 2W/3Ws, which are easier to electrify and are likely to lead EV adoption in India. This, in itself, is likely to be a $ 20 bn market opportunity for India by 2025.
EV adoption in India shall be influenced by:
- Policy – The FAME -II scheme has mandated adoption targets and has provided tax and duty concessions etc. It has also laid down a framework to set up the charging infrastructure and develop the EV ecosystem across the country.
- Storage Technology – The battery constitutes about 40% of the cost of the vehicle and lies at the core of two continuing drawbacks of EVs over ICEs: Range and Recharging. Li-ion is the most mature battery technology currently and is likely to remain the mainstay of EV batteries for the next 5-10 years. Technological innovations in Battery Management Systems can vastly increase the battery life, improve safety features and deliver superior performance. Ongoing innovations and localization in Motors, Controllers. E-Axles, inverters and chargers will further aid the EV adoption.
- Charging Infrastructure – While an ICE vehicle can be refuelled within minutes, an EV needs to be charged, which takes significantly longer. Innovative models such as Battery As A Service, battery swapping, ease of home charging need to be watched closely.
- Attractiveness to customers – China currently has more than 50% share in Global EV sales. 56% of total car sales in Norway in 2019 were EVs. In India the 2W category has seen the largest activity with more than 15 e-2W manufacturers already in operation. India is also the largest 3W vehicle market in the world. It is expected that the EV adoption in India shall be led by 3W, followed by 2W, City buses and passenger cars, in that order. Fleets and Public Transport Systems are likely to be earliest adopters to EV technology.
From a marketing perspective, a lower upfront cost of EVs is of paramount importance to the customer. It is here that the technological innovations in driving the prices downwards, policy push and the ability of the banking industry to finance the battery separately from the rest of the vehicle would need to be watched.
The Indian auto industry has been hit hard by the impact of Covid-19 and it will not be a surprise if its revival is led by Electric Vehicles.
