Are we EV Ready? Will India ride EVs to realise her $5 Trillion dream?

Is the Indian Consumer Market ready for EVs?

Mar 5, 2020 8:17:24 PM / by HT Accelerate

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According to recent statistics, the sale of electric cars in India amounted to 0.7 percent of the total car sales within the country from April to November 2019. This figure roughly estimates to 1309 units of electric car sold in 2019. Initially, such decreased sale numbers indicated a decline in the market for such conveyances. However, things have started to look up with evidence confirming the readiness of the Indian consumer market to adopt electric vehicles. 

3 key parameters discussed that attempts to answer the question that  sits atop every EV player's mind.

 

1. Pricing

The biggest hurdle to the faster adoption of electric vehicles is the price tag. This is due to the sensitivity of Indian markets towards expensive commodities. According to an industry expert, the mass adoption of the electric car will not happen in India, unless the gap in the upfront price of EV and ICE vehicle is brought down. The only way to achieve that is to localize manufacturing. To make it a reality, the Indian government initiated a five-year Phased Manufacturing Plan (PMP) to accommodate the large-scale, export-competitive integrated battery, and cell manufacturing Giga plant. The Government of India, in July 2019, reduced the GST on electric vehicles from 12 percent to 5 percent. An additional income tax reduction of Rs 1.5 Lakhs on interest paid on loans taken to buy electric cars was also announced in the same month. States within India like Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh, Tamil Nadu, and Kerala have already formulated a detail EV policy to support the initiative. 

It is due initiatives like these that will nudge the consumers towards faster adoption, which will subsequently boost the demand. 

 

According to a report by Crisil Research, by 2024 up to 17 

percent of the new two-wheelers, and roughly 43-48 percent of the new three-wheelers sold in India could be electric.

 

2. Demand

Despite the much-needed hype and government initiative, the demand for electric vehicles remains below the expected numbers. This is mainly due to the higher than usual price and stagnant infrastructure. Rajiv Bajaj of Bajaj Auto believes that nobody is going to put up a foundation for anything until an increase in demand for electric vehicles within the Indian consumer market is seen. As a result, the duty of an increase in demand befalls on vehicle manufacturers. It is up to the OEMs to take up concrete steps towards the creation of demand for electric cars. Bajaj went on to cite the success of CNG three-wheelers as an example. During the initial days of the introduction of CNG three-wheelers within the market, difficulties arose due to the lack of CNG stations. However, the demand for CNG three-wheelers was not affected. The consumers adopted such a conveyance keeping in mind its eco-friendly qualities and easy availability. The hope with the manufacturers is that the demand for electric vehicles is regulated by the same cognizance applicable to the demand for CNG three-wheelers.

 

According to a report by Crisil Research, by 2024 up to 17 percent of the new two-wheelers, and roughly 43-48 percent of the new three-wheelers sold in India could be electric. These statistics are similar to those in China before it became the largest market for electric vehicles. It all began with electric two-wheelers. China had the highest number of electric two-wheelers before it included cars. Indian market is still at infancy when it comes to the adoption of electric vehicles. However, progress is being made in the sale of such conveyances. 

 

3. Customer Preference

Any sensible consumer will go for an electric variant of the same car if the price gaps are kept at the minimum. Moreover, the trick is to keep the difference as close as possible without compromising other features. A price tag of Rs 10 Lakhs with a driving range of 300 km and a single charge will appeal to an average consumer. However, consumers are not being offered the same. For instance, Tata Nexon EV, whose very popular ICE variant sells at around Rs 6.7 – 11.4 Lakhs, is scheduled to hit the market with a price tag of Rs 15 -17 lakhs. Tata has up to a certain level managed to incorporate some of the consumer preferences. One of these consumer preferences is a driving range of about 300 km with a single charge. But many experts believe that they have exceeded the price bracket. Furthermore, Mahindra and Mahindra are all set to bring in an e-KUV 100 with an aggressive price tag of below Rs 9 Lakhs. However, it has a driving range of only 150km with a single charge, which isn’t enough for an average consumer. Hence the challenge for any OEM is to set the right price and driving range.

The target set by the Indian government by 2030 is to achieve an increase of up to 30 percent of sales of electric vehicles in India.

Conclusion

The target set by the Indian government by 2030 is to achieve an increase of up to 30 percent of sales of electric vehicles in India. Faster Adoption and Manufacturing of Electric Vehicles (Hybrid) in India (FAME) scheme is a flagship scheme to encourage the manufacturer to launch more environmental-friendly vehicles by addressing vital issues such as the growth of manufacturing capabilities and development of charging infrastructure. The scheme also offers an upfront incentive on the purchase of electric vehicles. According to a recent report by BIS Research, the electric battery and the charger market are expected to witness CAGRs of 53.64 percent, 58.86 percent, and 59.58 percent respectively during 2019 to 2030, which is excellent news for those who intend to invest in the EC market of India. And lastly, 9 out of the 10 most polluted cities in the world belong to India. Consequently, the adoption of electric vehicles is no longer a matter of choice but a necessity.

 

 

References:

https://www.crisil.com/content/dam/crisil/our-analysis/reports/Ratings/documents/2019/november/auto-componets-slow-drive.pdf

https://auto.hindustantimes.com/auto/news/carmakers-can-t-turn-out-evs-cheap-enough-to-convert-indians-41581222804238.html

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HT Accelerate

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