This post is a part of EV Next’s EV Perspectives.
EV Next, a division of EAI, is a leading market intelligence & strategic consulting firm for the Indian e-mobility sector.
This post reviews the key drivers and constraints for electric vehicle adoption in India, and provides insights on what could be the resulting trends.
The drivers for EV adoption
The main drivers for electric vehicle adoption in India are the following:
- Significant battery price reduction
- Government policies that provide significant incentives and enablers
- A dramatic increase in the availability of EV charging stations
- Availability of many different EV models across all types of EVs
- Significant progress in super-fast battery charging
- Batteries with high range
The constraints for EV adoption
The three key constraints to EV adoption in India are:
- High Cost – This is predominantly owing to the high cost of the battery. The Li-ion batteries currently are about $220-250/kWh at the pack level, which currently could imply that batteries alone contribute to about 35-40% to the total cost of the vehicle.
- Long charging time
- Poor availability of charging infra – Public charging infra in India is currently very limited. Estimates suggest fewer than 200 normal AC charging stations and fewer than 50 DC fast charging stations in India currently for public use. This number needs to increase at least 10 fold in the main cities for vehicle buyers to feel comfortable purchasing electric vehicles.
Other constraints include:
- Lack of awareness – While there exists a general awareness about electric vehicles, especially among the urban users, specific details on running costs, safety and performance have not yet percolated to the end-user segments.
- Low range or electric vehicles – while this is not the primary constraint for many sectors, for some sectors such as large cars which are used many times for inter-city travel, this constraint is applicable
- Limited availability of EV models in India, especially for electric 3 wheelers and cars
EV adoption trends changing by time frame(short, medium, long)
We review EV adoption trends for three timelines: Short term (2020-2022), medium-term (2022-2027) and long term (beyond 2030).
- Short term – We expect the rate of adoption to be gradual during this phase except for electric rickshaws and lightweight electric three-wheelers for which India is already registering one of the highest sales in the world today – about 7 lakh electric 3 wheelers sold in India across all categories, with a dominant portion as electric rickshaws
- Medium-term – Starting 2023, we expect a continued increase in electric 3 wheelers across all segments – passenger and cargo. In addition, we expect a significant uptick in the sales of electric 2 wheelers, from the current (2019) sales about 1 lakh electric scooters to grow beyond 3 lakh electric scooters per year, mainly owing to the reduction in the cost of vehicles.
- Long term – Expect India to be one of the top 3 markets for electric vehicles by 2030 in terms of total electric vehicles sold. By type of electric vehicles, India is likely to be #2 behind China in sales of electric scooters, and continue to be #1 in the sale of electric 3 wheelers. In the case of cars, buses and heavier vehicles, India is likely to still significantly lag behind countries such as the USA, China, Japan, and leading EU countries, though the sales of electric cars would have increased multifold from the current low thousands (about 2000 electric cars sold in 2019) to a significant percentage of total cars sold. Estimates from research firms such as BNEF suggest that India could have about 7% of its total number of cars sold in 2030 to be electric. This will still imply a sizable number of about 700,000 electric cars sold in the country by 2030 (total expected car sales in India in 2030 is 10 million)
EV adoption trends changing by different Business Models( Opex, Capex)
- Capex model – For the B2C sector, the CAPEX model will be the dominant one even though innovative financing schemes could evolve to significantly decrease the actual upfront cost. As the batteries contribute the most to the capital cost of an electric vehicle, we also foresee financial models where the cost of the battery is either taken out of the upfront cost (through concepts such as swapping) or made into an operational expense (through innovative financing schemes for batteries alone). We have also already seen companies such as Revolt offering the entire vehicle (in its case, electric motorcycle) as a monthly payment model, thus making it much easier for the end-user to make a purchasing decision.
- Opex or EV as a service model – We expect the OPEX or EV as a service model to dominate for the B2B, B2I and B2G segments. We expect this to be the case across all vehicle categories. Instances of this are already seen in companies such as Gayam Motors and Euler offering such a payment model for carrying goods through electric 3 wheelers, Lithium Urban offering a similar payment model for electric vehicle fleet for corporates, and companies such as Ashok Leyland offering such models for their buses for many state governments. Other versions of this model include offering vehicles on lease or on a monthly subscription basis, both of which once again eliminate the upfront cost involved in the purchase of an EV
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Categories: E-mobility, E-mobility Perspectives, Electric Vehicles
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