Human Resource Development Cell, SRCC
Electric Vehicles- The Future of Mobility
Over the past few years, the level of interest and innovation in electric vehicles has accelerated significantly. In fact, EVs have fared better than their internal combustion engine (ICE) counterparts due to various factors such as energy security, reduced reliance on crude oil, better air quality, and lower greenhouse gas emission. The global EV market grew by 43% annually on an average in the last five years. Therefore, EVs are transforming the future of mobility.
India is the fifth largest car market in the world and has the potential to be among the top three in the near future. However, considering the current scenario of congested roads in metropolitan cities, drastic deterioration of air quality, and the increased bill of crude oil import, adding even more cars onto the roads would be unfeasible. India paid $82.4 billion for the crude oil it imported in the nine months through December 2021, a 108% jump over $39.6 billion paid over the same period in 2020, according to the Oil Ministry data. At least 30.7% of deaths in India can be attributed to air pollution from fossil fuels--that means about 2.5 million people die every year after breathing toxic air. Therefore, India requires a revolution in the transport sector to promise a future of clean technology. EVs are henceforth emerging as a game-changer in the automotive sector of India.
Despite Original Equipment Manufacturers (OEM) launching products, the EV penetration is extremely low at 0.8%. The limited adoption of EVs among Indian customers can be attributed to various reasons. Consumers are worried about the capability of the vehicles to reach the final destination. There are only 2000 charging stations for the six lakh electric vehicles on road today. Lack of charging infrastructure proves to be a major turn-off. The two and three-wheeler EVs are sold at a premium of 20% and 30% respectively. This high upfront cost causes the value-conscious Indian customers to prefer ICE vehicles over electric ones. Adding to this is the poor clarity in terms of the resale values of EVs.
Despite all the obstacles, some major developments are boosting the growth of EVs. Lithium-ion, a material used in the manufacture of batteries, saw a decrease of 98% in price over the last three decades, of which a 90% reduction took place in the last decade alone. This has brought down the overall manufacturing cost of EVs. Since 25% to 30% of the vehicle cost is attributed to batteries, this has created a significant drop in the prices of EVs. The new age techs are building products that are attractive not only in terms of design but also the features. For example, the Ola Electric scooter offers a maximum speed of 115kmph, a range of 115 km, voice control, various safety features, and much more. Based on the sales report of Ola Electric, we can safely say that customers are willing to pay for these vehicles. Earlier, the OEMs that manufactured and marketed the products did not get into retailing or servicing. However, the new age OEMs are not only manufacturing the vehicles, but they’re also selling them directly to the customers. Apart from that, they’re also setting up charging stations and providing financing options. This has helped in accelerating the initial adoption of EVs by customers. Since the upfront costs of electric vehicles are high, consumers tend to believe they’re going to incur high costs. However, what we need to look into is the total cost of ownership (TCO). TCO is the lifetime cost of running a vehicle that includes the upfront cost and the running cost after adjusting the resale value. Although the upfront costs of EVs are on the higher side, the maintenance and running costs are lower compared to the ICE counterparts. For example, the cost of charging a two-wheeled electric vehicle is at about 15% to 20% of the cost of an ICE vehicle.
Several initiatives introduced by the government are driving the growth of EVs in India. The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) policy introduced by the central government offers monetary incentives to customers which help reduce the purchase price. On the other hand, state governments have introduced supply-side incentives to attract investment in the EV sector to generate employment opportunities. GoI has also extended the Production Linked Incentive (PLI) scheme for the Advanced Chemistry Cell (ACC) battery. The scheme can promote the establishment of battery factories in India and research and development in battery technologies. Battery occupies a significant portion of the cost of EVs, and a reduction in its costs will enhance the affordability of EVs. Through the Phased Manufacturing Programme (PMP), where there is an increase in customs duty, the government is aiming to support the local industry.
According to the reports of NITI Aayog and RMI, EV sales penetration is expected to reach 80% for two and three-wheelers, and 50% for four-wheelers by 2030. There is a massive opportunity for emerging startups and traditional OEMs in the coming future. The EVs, therefore, boons a high prospect of shaping the future of the transportation sector.
By Dana Zain Shafeeq