EVs Gear Up for a Breakthrough Year in 2022

Supply chain and charging infrastructure continues to be a stumbling block for domestic EV players

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The increasing number of green number plates on Indian roads is the best testament to the new vehicle buyers’ growing inclination towards electric vehicles (EVs). Though the number of vehicles sold across the country still constitutes a tiny part of the entire automobile market, it is increasing steadily.

The rising fossil fuel prices, increasing choices among EVs, climate consciousness, and falling prices have finally shifted the much-awaited spotlight on electric cars.

Established automobile firms in India are betting big on the EV ecosystem, given the growth prospects. Automobile giants like Tata Motors, Mahindra, Hero, Bajaj Auto, Ashok Leyland, Hyundai, and TVS Motor have started investing in the EV segment.

The Indian startup ecosystem is optimistic about EV growth, and many are investing heavily to gain a first-mover advantage. From charging infrastructure to battery technology to vehicle manufacturing, the entire EV ecosystem is witnessing the entry of new players. Startups like Ather Energy, Ola, Bounce now offer a wide array of electric scooters.

According to the CEO and Founder of Matter,  Mohal Lalbhai, India has seen a substantial uptick in demand for electric vehicles in 2021. Matter believes that the trend will continue in the coming year. However, according to Lalbhai, 2022 will see an increased focus on safety, reliability, and enhanced user experience in the EVs.

“It will be an exciting year for the companies like us, who have developed the core technologies, and will be launching our products. We believe that with the availability of the right products in the market, EVs will become mainstream in the coming years, and 2022 will be the inflection point for this change.” Lalbhai said.

Raj Mehta, Founder of Greta Electric Scooters, believes 2021 was a year of opportunity for both electric two and four-wheeler vehicles. “Despite the economic crisis faced by the automotive industry, this sector witnessed multi-fold growth. Post-Pandemic, with EV becoming the focus for all governments across the globe, this segment is poised for exponential growth. Government policies have played an important role in the growth of the EV industry.”

“They have helped both manufacturers and consumers to make the adoption of EVs lucrative. The concerted effort and policies by the government to promote the EV sector have whetted investor appetite. The EV industry is primed to attract many players in the coming year.” Mehta added.

Rising demand for shared mobility

Amit Gupta, CEO of YULU, believes 2022 will see shared mobility claiming a significant place in the overall EV mobility conversations. According to Gupta, two-wheeler EV mobility as a service (MaaS) makes a lot of sense for India. He claims that while owning a personal EV reduces a user’s direct carbon footprint, many indirect environmental and ecosystem costs remain as the consumption is still one-to-one. Secondly, he argues that India being a country with crowded cities and limited infrastructure, the problem of road congestion can be solved with only ‘one-to-many solutions’ like shared mobility. Gupta also pointed out that over 80% of Indians don’t own a personal vehicle, indicating affordability remains a big challenge, which only a pay-as-you-go model like shared mobility can solve.

Riding on the wave of favorable policies

The EV sector had a good year in terms of favorable policies in 2021. Assam, Odisha, Rajasthan, Goa, Maharashtra, Gujarat, West Bengal, and Meghalaya have all drafted EV policies. Most state-specific EV policies have been drawn up for five years, with many of them deciding to allot subsidies for EVs based on the size of their battery packs.

In June, the government issued a notification for the PLI incentives under the ‘National program on Advanced Chemical Cell (ACC) battery storage’ to implement ACC manufacturing facilities for EVs.

The Department of Heavy Industries announced amendments to the FAME-II program. A specific demand incentive for E2W of ₹15,000 (~$205)/kWh was announced. Earlier, there was a uniform demand incentive of ₹10000 ($137)/KWh for all vehicles. Also, the cap on incentive for E2W was raised to 40% of the total cost of the vehicles from the earlier 20%.

As of November 25, 2021, over 165,000 electric vehicles (EVs) have been supported through demand incentives of ₹5.64 billion (~$75.36 million) under the second phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME)-II program.

The policies launched in 2021 are undoubtedly set to become a solid foundation that will guide the trajectory of the EV sector in 2022. These policies have created a favorable space for all the verticals of the EV industry to gain momentum in India.

The rise of E-bikes

According to Aditya Munjal, CEO of Hero Lectro, the Indian e-cycle market is steadily expanding. The pandemic has acted as a significant trigger in the adoption of e-cycles, with consumers seeking healthier, sustainable, and affordable short-distance mobility solutions.

“We see several factors that will accelerate the growth and adoption of e-cycles in the country.  With rising fuel costs, increased congestion, pollution, parking hassles, and time to travel, e-cycles are best poised to address these challenges owing to their cost-effectiveness, ease of use, low maintenance costs, safety, and added benefits such as fitness and sustainability.” Munjal said.

He added that the country’s younger population is fast becoming early adopters of the product and that e-cycles can become a means of commute and a smart connected device for lifestyle needs.

Challenges

Numerous challenges need to be addressed to ensure the growth of EVs in India, from charging infrastructure to supply chain issues to the lack of government incentive programs. The major obstacle holding back the end consumer today from making the switch to EV is the lack of charging infrastructure in India. Except for the home charging station and a few public ones, the charging infrastructure is still in its infancy. While they are a promising option for commuting to work and for intracity rides, EVs are not yet a viable option for long journeys due to the lack of charging infrastructure.

“While India has made significant strides in the EV space, we’re yet to come up with a profitable charging business model as public charging stations lack the ability to charge the EVs rapidly. Additionally, OEMs, battery pack manufacturers, and charging station partners need to collaborate to overcome the technological challenges that shackle the industry,” says Arun Vinayak, co-founder and CEO of Exponent Energy, an EV charging startup.

Vinayak believes that building a sustainable EV charging ecosystem will become more critical, with more people expected to switch to EVs this year. He believes it is the perfect time to incentivize companies that want to discover a unique public charging model that works for India. “This year, we’re likely to see continued and robust growth in developing a rapid charging infrastructure that will simplify energy for EVs,” Vinayak added.

Gupta says there are some headwinds on the supply side, especially for semiconductors. However, with the right kind of supplier arrangements, the company believes it’s a risk that can be managed.

According to Mehta, the biggest challenge for the EV segment is spare parts availability. Currently, the industry depends on the overseas market for components, with China as one predominant supplier. This has to be addressed for the EV industry to scale up in India.

The EV segment is boosted by many factors, including tight emission regulations, government incentives, an extensive choice of EV models, falling costs, and consumer awareness. In India, the challenge is in the manufacturing ecosystem and the availability of locally made spare parts and batteries. The supply chain issues across the board have been disrupted as China faces power rationing and restrictions on manufacturing coupled with an increase in freight charges. The next big challenge will be to build an EV charging network throughout the country, without which mass adoption of EVs will be impossible to achieve.

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