Climate change has been a cause of concern for many. In order to maintain a liveable climate, the emission of greenhouse gases has to be reduced drastically and as soon as possible. A major move towards this is the adoption of electric vehicles (EVs). Governments of many countries are trying their best to improve the infrastructure involved with EVs and are promoting faster adoption of EVs, But it is important to remember that EVs existed about 20 years ago as well, but they haven’t become mainstream yet.
The Indian Perspective
In the year 2001, India’s first electric car, Reva from the Maini group was unveiled. Soon it became one of the world’s best-selling and the most affordable electric car. It offered a good range for commuting within a city and we hoped that it would lead to reduced crude oil imports if many people started using it. While many industries have done exceptionally well in the last 20 years, the automobile industry is still dominated by diesel and petrol vehicles.
The market penetration rate of EVs is as low as 0.8% in India, and they have seen limited adoption. Lack of innovation, high costs, lack of proper charging infrastructure, and lack of awareness among people are a few factors that lead to the snail-paced adoption of EVs in India.
Come 2022, EV numbers are increasing!
This year, the EV industry has changed a lot. As per a report in the Economic Times(ET), EV sales have escalated. They have tripled in the first half of the year.
- Newer EVs are packed with features and customers are willing to pay a premium: Ola Electric sold 85,000 e-scooters worth ₹1.3 lakhs per scooter in just two days, in September 2021 in India. This is approximately 1100 Crores. There were only 6 lakh electric vehicles on the road at that time, hence 85000 is a good number of units sold for just two days. And why not? Ola scooters offer a top speed of 115kmph, a range of 150km, voice control, safety features, ability to control the vehicle remotely, digital key and more.
Other electric vehicles such as Aether offer reverse assist, play music, accept/ reject phone calls, and the ability to control the vehicle using a smartphone. If we compare the EVs that were available 10 years ago, versus today, we find that newer EVs are packed with wonderful features and some of them are better than those offered by petrol/ diesel vehicles. Customers are willing to pay a premium for such features.
- The full-stack approach: OEMs are going beyond manufacturing and distribution. Unlike other automotive, EV OEMs do manufacturing, distribution, selling, setting up charging infrastructure, as well as providing financing options. This full-stack approach will help EV manufacturers to capture a large market share. Over time, it is expected that the charging business might be done in collaboration with separate entities.
- Lower running costs: While customers have to incur a high cost to buy an EV, the total cost of ownership is pretty low. This is due to the running cost component. Though the initial cost of an EV may be anywhere between 20 to 50% higher than an IC vehicle, the running cost is only 15 to 20% of what is paid for the cost of fuel that is required for an IC vehicle.
- Beneficial policies: The automotive industry contributes about 7% to India’s GDP, therefore it is important and it is expected that there will be many policies related to this sector. 18 states in India already have or are forming policies to benefit EV manufacturing. EVs are not only cost-effective but also environmentally friendly. In an effort to make India a global hub for EV manufacturing, schemes like Faster Adoption and Manufacturing of Hybrid and Electric vehicle (FAME) and Production Linked Incentive Scheme (PLI) have been formulated and implemented for the benefit of EV manufacturers.
In Closing
The mass adoption of EVs will create a ripple effect in the direction of innovation in other spaces like EdTech and FinTech. Such companies are interesting areas for investments, especially for venture capitalists. It is paving the way for several innovations. Governments of several countries, including India are willing to have only EVs on roads by 2030, if possible. Many people in India do not own their own vehicles, yet the pollution levels are alarming. Many people might buy EVs considering that the total cost of owning an EV is pretty low.
Considering the number of EVs that people will buy, or will have to buy in the coming years indicates that this sector is all set to give positive and good returns on investments in the coming years. Six companies from the Tata group have joined hands to make an EV ecosystem. This will lead to convenience and faster adoption of EVs. Entrepreneurs are trying their best to innovate this space. Investment in the EV sector is good, especially for the long term.
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