Part I – EVs in India – Massive Potential, Not Enough Charge

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With virtually no policy measures, past government’s myopic vision, skewed lobbying, and misplaced priorities, India is set to lose the EV wars…even without participating in them.

In Part 1 of our analysis on the Electric Vehicles in India, we look at how a lack of supporting infrastructure will likely destroy the industry even before it takes off. Even if the industry sustains its struggle to build a future for electric cars in the country, India’s dirty electricity mix brings newer complexities in the picture.

India is one of the most rapidly growing automotive markets in the world. In fact, automotive experts estimate that by 2020, India may well become the third largest automotive market in the world, after China and the US. Sales across all industry segments have almost doubled in India over the past five years, be it two-wheelers, passenger cars or commercial vehicles (See SIAM Table).

The electric vehicle (EV) sector in India, however, continues to struggle. In fact, since the advent of India’s first commercial electric car, produced by the erstwhile REVA Electric Car Company (RECC) back in 2001, the number of such cars in use is dismally low at just about 4,000 units. RECC began exporting REVAi to Europe in 2004 and has reportedly sold over 4,600 units across the world. What’s ironical is that the same model, rebranded as G-Wiz in the UK and other European countries, went on to become the largest selling electric car over the world. It was only in 2009 that Nissan’s LEAF EV went on sale in Japan and is now the world’s first mass-produced electric car, having been sold to over 100,000 customers (as per January 2014 data from Nissan).

Globally, electric cars have recorded significant growth over the past few years, especially in developed economies in Europe, the US and Japan (see EVI Chart). According to media reports, an estimated 200,000 electrified vehicles were sold globally in 2013, up from up to 135,000 units in 2012. Sales of all plug-in electric cars (those with a rechargeable battery and capable of driving on electric power alone) in the US almost doubled from 52,835 in 2012 to 96,702 in 2013, according to data from US Electric Drive Transportation Association (EDTA). In Japan, some 68,000 electric cars were sold in 2013. China, which looks set to leapfrog US to become the world’s largest economy, stood at a distant third with 45,000 units.

Another integral element of the global green car movement is hybrid vehicles. They have been around much longer and are increasingly being touted as the ‘next big thing’ in the automotive space. Toyota, the largest maker of hybrid cars in the world, has sold 6 million units of its hybrid vehicles world over as of December 2013, with sales particularly higher in the developed world.

India’s One Man Army

India, however, has no success stories to tell when it comes to electric or hybrid cars. Except that for REVA – the only recognizable Indian electric car brand – to sustain over a decade of sporadic sales at its home turf is no small feat.

Businesses, especially those engaged in niche sectors, would daresay that sometimes an idea needs to be marketed before the product itself. For RECC, which has now transformed into Mahindra REVA Electric Vehicles (MREV) – post acquisition by Mahindra & Mahindra (M&M) – the idea of ‘going electric’ remains a hard one to sell to an average Joe in India.

Electric Vehicles Stock - Estimates at end 2012

In order to reckon whether electric cars will become relevant to Indian customers in the near future, we must dwell into why they haven’t, yet?

Picture this, a tiny, rather unattractive, two-seater hatch with a top speed of 40kph that can drive for some 70-80kms before it needs a recharge for 5-6 hours. Sounds appealing? Perhaps; to some of us, as a second or third household car to just run errands within the city? At a price of INR5 lacs? Not quite.

The REVA electric car was rolled out of a little-known start-up at a time when utility and price were the two biggest factors driving vehicle purchases. Fast forward a decade; REVA is no longer the small start-up, now rechristened into a full-fledged electric arm under the flagship of M&M, one of the largest vehicle manufacturers in India and also the largest producer of tractors in the world. What hasn’t changed much is the stigmatic perception of electric cars in the mind of an average price-sensitive Indian customer.

A new shot in arm

MREV’s latest offering, the e2O, was a much-awaited vehicle that hit showrooms in major Indian cities in March of 2013. The diminutive appetite of Indian vehicle buyers for anything electric on wheels naturally led to plenty of skepticism. Majority of auto experts lamented the electric vehicle’s chance to carve a niche, especially when the Indian car industry reeled under pressure from lowest car sales in over a decade.

Auto observers, however, do not fail to acknowledge how e2o is a remarkably better machine than the outgoing variants – so much more like ‘a proper car’ and rightly so, as its manufacturer is no longer a stuttering start-up but an agile and much more resourceful business unit of an auto giant.

The vehicle is powered by more advanced lithium-ion batteries (REVAi used lead acid batteries), which enable it to drive up to 100km in one charge. The Exide battery from China, much lighter than lead-acid one, contributes to a more nimble handling and claims a significantly longer life span.

Despite all the adulation, e2o skeptics were right, unfortunately. A year and a half since launch, Mahindra e2o is still barely seen on the roads. The reasons are not hard to imagine, the most obvious one being its high price. The tiny hatch, which can comfortably seat four adults and needs to rest for over five hours charging, is priced upward of INR6.75 lacs on-road in Delhi, that too after a 29% subsidy granted by the state government. Dealerships across major cities are vocal about the dismal sales. The only exception is Bangalore where sales have been relatively better yet modest. e2o costs over 8 lacs in Bangalore. Overall, MREV has managed to sell only about 1,000 e20 units since launch.

Sales have clearly been hit the hardest by the vehicle’s steep price. Battery safety and durability are also matters of concern for consumers as Mahindra admittedly calls for a replacement in five years. The proverbial ‘range anxiety’ and a lack of charging infrastructure further intimidate an average car buyer who may not be as well informed. Meanwhile, in the US and a few European markets witnessing gradual proliferation of electric cars, industry observers emphasize on how range and charging network concerns are often overplayed. EVs’ typical driving range comfortably accommodates the average daily distance covered by most drivers. Also, notwithstanding the ever-expanding charging infrastructure in most EV friendly markets, majority of EV drivers charge their vehicles at home and it is still to be ascertained whether an expansive network is really necessary.

Slacked-up sops

The top seven automotive markets in the world can be easily categorized on the basis of one fundamental distinction: EV-supportive government policies. China, the US and Japan have been pro-actively promoting production and sales of electric cars. EV manufacturers and component suppliers in these nations receive significant support in terms of R&D funding, while customers are eligible for subsidies on EV purchases. Germany may be a laggard in terms of direct subsidies but has committed to spending roughly EUR12bn (USD15.5bn) over the next three to four years in advancing alternative powertrains, according to data from industry association VDA.

The remaining three fast growing auto markets, Brazil, Russia and India are regions with little government support to promote EV adoption. In India, a central government subsidy scheme which could have significantly reduced e2o’s cost – by as much as INR1.5lacs – still awaits implementation. To be fair, Indian government did introduce EV subsidies in November 2010 for electric two-and-four-wheelers but the scheme lasted until April 2012 only – an almost insignificant duration to provide any sizeable push to the niche sector.

Ease of implementation of EV plan

Ease of implementation of EV plan

Earlier this year, there was hope again. The National Electric Mobility Mission Plan (NEMMP) unveiled in January 2013 by the then Prime Minister Manmohan Singh was expected to be resurrected by the new government. No such luck.

For MREV, it has been a long wait. The company admittedly delayed launching the e2o whilst awaiting subsidies and has eventually launched it at a price where it is attractive to a select few – perhaps the eco-friendly elitist section of buyers.

 

 

But we always catch up…

Think of technology as a flowing river. It doesn’t matter where you jump into the river, you will start matching the flow within some time of jumping in. And after that there would be no difference between you and others swimming in the same river.

So making a hue and cry about missing the river’s origins is hogwash. Anyways the river is privately owned and flows through every country. It’s not about technology; it is about commercial interests that private enterprises are trying to protect through political lobbying veiled under the cover of catching up with the world and environmental protection.

Remember the PalmPilot? Chances are you won’t. It is a relic of the past when Personal Data Assistants (PDAs) and Phones had not yet been married into Smartphones and both stayed in separate pockets. Everyone in Silicon Valley had one and a few millions of PalmPilots, Cassiopeias and Handsprings were sold in their heydays across the developed world.

However, their high price points and complete pointlessness meant that PDA penetration in India was dismal. Only a few thousand were smuggled into the country and owners proudly flashed them at the first opportunity. They were as rare as Datsuns on the road today.
India had not yet jumped into the river.

Cut a few years and PDAs disappeared as Smartphones took over. The combined effects of the technology-price curve; Moore’s law and scale economics now mean that an Android Smartphone clocking 1-GHz costs USD 100 in India even without any carrier induced incentives. In contrast, the PalmPilot had a 16MHz CPU and an average price of USD 400.

In terms of swimming in the river technology adaption times, India is now at par with the world – Indians now jump into new Smartphone models at the same time as the rest of the world. In terms of Smartphone development, it doesn’t really matter, as the business is now a combination game of smart modules integration and the cheapest costs.

Smartphones are not alone; India, and Indians, could converge with the developed world easily in white goods, televisions, cars, and computers, without being there at the origin of the ecosystem.

So why this hue-and-cry over missing the Electric Vehicles race? And all because of a lack of government subsidies?

Government Effort is misguided

Electric Vehicles as a commercially viable technology is at the starting point in the technology-price curve. It is relatively unproven, has a nascent ecosystem, difficult to make commercially viable, and is a hardcore money guzzler. India jumping into it at this time is like Nigeria jumping into Formula One just because it’s fashionable. We simply don’t have the infrastructure, the juice, and the money to start the adventure.
Even more worrying is the way the adventure is being planned. The last time we threw money on electric vehicles was in typical government style – not properly planned, heavily lobbied for, and very short-term. The money was in the form of a short-lived subsidy for electric cars and two wheelers. It was an interesting scenario of the industry leading the government, in-turn leading the same industry into Alice in Wonderland.
For the electric car industry, it did nothing, as the subsidy did not even register a blip in the pulse rate of the industry. For the electric two-wheeler industry, it was almost suicidal as lured by government subsidy; many entrepreneurs entered the electric scooter market only to realize that the bottom fell as soon as the subsidies were withdrawn. The only real beneficiaries, for a few months at least, were the one serious electric car manufacturer and a couple of serious electric scooter manufacturers.

How do we get serious?

For electric vehicles to become seriously viable in a country like India, investment has to be focused on creating the infrastructure to support the vehicles. A complete absence of public charging points, high costs of acquisition, and the anxiety of driving a car with a crippling problem of limited range, are keeping customers away from EVs. The customer apathy is to the extent that the Mahindra e2O is not even on the consideration list of most any customer.

A solid infra backbone is the answer to many problems. An infrastructure of charging stations will push the rich, early adapters into buying electric cars. Selectively subsidising electricity at these charging stations would then attract the next wave of more practical customers.
Another way of pushing the electric vehicles agenda is to selectively select towns / cities – small enough for experiments to be successful and where vehicular pollution has the potential to destroy the local economy. Several Himalayan and South India based hill-stations can be made EV only zones with government support entering in the form of cheap electricity, a network of charging stations, restrictions on conventionally powered vehicles, and even direct subsidies to the locals to buy EVs.

The challenge of charging individuals for using public charging stations, arising mostly due to very low penetration of credit cards in India, is also diminishing continuously and is no longer a major factor in urban centres.

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The second and concluding part of this analysis would be published next Thursday (6th November 2014)

This analysis is contributed by Priyanka Shekhawat, Guest Editor for IAR. Based in Jakarta, Priyanka keeps a keen eye on the Global EV industry. In her earlier roles, Priyanka has covered the global EV scene for IHS Automotive. 

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3 Responses

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  1. Ganesan
    Nov 01, 2014 - 05:11 AM

    1. The part about jumping into the river was interesting. I remember ‘pagers’ were popular in India just for a while, before mobile phones invaded and killed them.
    2. The article rightly focuses on commercial viability and govt policies. But I feel Indian R&D is equally important. If there are breakthroughs (why do I remember the failed Nano!) may be people will adapt..

    Reply

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