Indian automakers have an EV opportunity

Soaring global temperatures and melting ice caps are a grim reminder that the way the world uses energy needs an immediate overhaul. Electric vehicles provide a viable opportunity and they can easily reduce the dependence on dirty fuels. However, what the developed world offers today in terms of EV technology is in premium car segments that cost a bomb, like Tesla for instance.

Indian automakers have an opportunity to build cheap, electric two and three-wheelers, and small cars, and prepare to meet the burgeoning domestic demand, and perhaps that in other developing countries as well.

Poorer nations in south Asia and south-east Asia and those of Africa which are still dependent on two-wheelers and small cars could be the next playing ground for Indian automakers, if they manage to build electric mobility solutions for the home market.

“India’s potential volumes for these vehicles as the nation grows, lays the foundation for transformational manufacturing and industrial policy, which focuses on the development of technological expertise and industrial capabilities in the production of small electric vehicles,” says a report by NITI Aayog -- Zero Emission Vehicles (ZEVs): Towards a policy framework.”

These developments, adds the report, can place India in a position of global leadership as more and more countries begin to look at smaller vehicles with appropriate specifications.

For India, there are compelling reasons to call for the development, manufacture and adoption of electric vehicles. As a signatory to the Paris Accord, India is committed to bringing down greenhouse gas emission (GHG) intensity by 33% to 35% below 2005 levels by 2050.

Additionally, EVs can reduce vehicular pollution, and keep the ballooning crude import bill in check.

Sample this - if the country is able to bring down its petrol use by 50%, it can easily save the exchequer about Rs 1.2 lakh crore every year. It could also bring down the logistic cost of transporting fossil fuels which are prone to disruption from inclement weather and geopolitical factors resulting in volatility in prices.

Also, the fall in the price of lithium-ion batteries and the use of data analytics which helps in bringing down the cost of owning a car, are added incentives.

The country is also well positioned to use clean energy to power batteries, with an abundant availability of renewables like solar and wind. In fact, experts point out that India can produce enough renewable energy to power batteries for all domestic use.

India, the report says, has certain unique mobility patterns, in terms of the kind of vehicles used, which may not be available in other countries.

Based on sales figure of the past six years, 79% of the total vehicles on the Indian roads are two-wheelers, 4% are three-wheelers, which carry both goods and passengers; 3% are buses and trucks that carry more passengers and more load.

Even in the case of car ownership, it is the smaller ones— costing below Rs 10 lakhs—that constitute 12% of the total vehicle population, while the more expensive ones make up a mere 2% of the car population.

Then there is the impressive growth in shared mobility–from 130 million in 2015 to 500 million in 2016. This kind growth implies that taxi aggregators like Uber and Ola would have a ready and growing market that could absorb a lot of EVs.

“The high percentage of shared mobility in India increases both the vehicle utilization which plays to the economic advantage of EVs and also creates a natural and large-scale purchases of EV,’’ adds the report.

But to ensure greater adoption of EV vehicles by Indian consumers, the country should foster early adoption of electric vehicles by premium customers. Building premium electrics will pave the way for customers comfort with electrification, raise aspirations for indigenous products and make advanced technological available in the market.

So what should the Indian players and the government do to capture the EV revolution? First, the power industry must prepare for greater EV penetration and greater demand- side management.

Power companies should be ready to face the challenges emanating from electricity produced from renewable, dynamic electricity pricing (depending on peak demand) and the vehicle-to-grid technology for use by the EVs.

Whereas, for the government it is all about providing adequate charging infrastructure either through fast-charging or swapping of batteries, helping companies building smaller batteries, which can be used by two, three-wheelers and small cars. The government should also provide some kind of fiscal support, or subsidies for those wanting to buy electric cars.

The government also needs to fund research and development laboratories for EV subsystems—like electric power brakes, management and communication protocols, and batteries that can withstand higher temperatures.

Most importantly, India needs a comprehensive EV policy to render some clarity to auto and ancillary companies, and help them plan for an electric future.

“An EV policy should encourage a path with India- specific characteristics (tailor-made for the country’s particular needs) and initiatives for the auto sector, building towards global relevance and applications,’’ says the NITI Aayog.

The possibility of becoming an EV powerhouse in the next five to seven years in several categories exists. But it will require the government and the industry to work closely together; the government providing a long-term EV policy that encourages and facilitates companies to access latest technologies to manufacture EVs and companies to achieve global scale and competitiveness.

Source- Fortune India