COVID or Not, Indian EV Startups Continue to Push Forward
In a post-pandemic world, social distancing norms and increased need for hygiene might push consumers towards EVs
Historically, mobility and fossil fuels have been inextricably linked, and electric vehicles (EVs) have been on the fringes relevant only in a few niche markets. But with climate change taking precedence, electric mobility is gradually inching towards the center stage.
The advancements in the field of battery technology have also facilitated faster adoption of electric mobility in recent years. The Indian automobile industry is one of the largest in the world, and it is currently undergoing a transformation with sales of electric vehicles rising year after year. However, like all other segments of the economy, the EV segment has also been affected by COVID. Still, there is optimism, and the industry sees a bright future for itself post-pandemic.
Disruptions Due to COVID-19
The pandemic plunged the economy into an unprecedented crisis. The problem was exacerbated by the extensive lockdown and mass exodus of the workforce from the cities. Manufacturing units that rely heavily on such workforce bore the brunt of the labor migration.
Speaking to Mercom, Alok Ray, Assistant Director-Operations at Society of Manufacturers of Electric Vehicles (SMEV), said, “The COVID-19 pandemic has ruptured the manufacturing and sales activities across all sectors, including EV. The pandemic is showing no signs of slowing down, and this has resulted in the industry’s all-time low performance right now. Post the lockdown period, the digitized manufacturing and servicing will help in ensuring the safety and efficacy of the sector. Public sensitization around climate change and alarming pollution levels have helped the sector grow because now people are looking for sustainable mobility options. All these factors, including certain public behavioral changes, will help the EV sector to grow in the post lockdown period.”
Even in an economy affected by COVID, several Indian EV startups have managed to raise funding, which speaks to the potential that investors see in this segment.
Commenting on the impact of the COVID-19 pandemic, Tarun Mehta, CEO, and co-founder of Ather Energy, said, “The COVID-19 crisis has certainly disrupted the local supply chains and manufacturing, and has also impacted demand in the short term. But it’s important to keep the medium and long term in perspective and not let the short-term issues impact the strategic direction more than they need to. This disruption will have a strong impact over the next 2-3 quarters, post which we should begin to see the industry starting to get back to pre-lockdown levels. One of the best things to happen with the pandemic is people have now realized the importance of a clean and green environment and have witnessed the quick results that can be seen with reduced air pollution. The transport industry can only reduce air pollution by making a systematic shift to electric mobility, and this will drive the transition in India.”
While the country is grappling with the virus, the looming global recession is also a cause of concern for businesses. But is there a silver lining in these dark times?
“If we look at any big recession across the world, a lot of people find some sense of normalcy even during a financial crisis. It is a global phenomenon, and auto sales in China and some parts of Europe are already back. Moreover, in the short-term, people are not going to take shared mobility. It was an economics-driven choice in the first place, and that augurs well for any sort of premium automotive solution, be it cars or electric two-wheelers. People who were originally in the market for a premium scooter, temperamentally, are still there to buy the product. So, by that logic, we like to believe that we are relatively more insulated than the rest of the market and are focusing on offering innovative ownership models, for instance, battery subscription models or leasing models,” added Mehta.
According to Mehta, the electric mobility segment is a classic example of the chicken and egg situation. Manufactures did not produce EVs, citing low demand and lack of charging points, while buyers kept complaining about limited options and patchy supply. However, much has changed in the past two years.
“With new and existing brands launching more efficient and powerful electric two-wheelers that are near-equal or better in performance than their Internal Combustion Engine (ICE) counterparts, electric vehicles will be the future of mobility in India. People are a little more aware now about the impact of human activity on the environment. We need to see how much of that realization converts into making the switch to electric. While there are enough people today who acknowledge the benefits of electric mobility, a lot of those who were fence-sitters have now got the motivation to shift toward technology. Now, we will see some upswing,” according to Mehta.
There are two key customer segments in the EV market today – one that is looking at EVs purely from a TCO (Total Cost of Ownership) perspective, and the other that see EVs as the future of automobiles and as technologically superior.
“For the former, the tough economic environment makes a stronger case to shift to EVs soon. And for the latter, preference is already skewed towards the premium end of the market and will be relatively less vulnerable to the economic impact,” noted Mehta.
Preparing for the Future
In India, the EV market has been primarily driven by the two and three-wheeler segments. That said, several automobile makers have also started introducing premium electric cars in the country in the last couple of years. India is at a unique position in the global EV landscape, offering enormous opportunities for stakeholders who are mindful of price-sensitive consumers.
After the lockdown, the consumers are likely to be more inclined towards using personal vehicles for the commute as the new normal now includes optimum hygiene and social distancing. This could be an opportunity to be leveraged by the EV segment. And for that, the stakeholders and the government should unite to form a solid roadmap for growth.
Talking about India’s role in leading the electric mobility revolution, Moran Price, CEO, and Co-founder of IRP Systems, said, “India has great potential to lead the EV revolution— the combination of its bold government policies, rising environmental awareness, and continued popularity of its two and three-wheeler market have put the country on the path to EV adoption. All the parts are in place, but only time will tell if India can truly be at the forefront of the EV revolution.”
Though there is immense potential, several factors are impeding the momentum. One of the biggest reasons is the shorter driving range, which acts as a deterrent to many customers. India can address this issue by developing a robust fast-charging infrastructure across the country and, get into battery development.
Speaking on the importance of batteries in facilitating the growth of EVs, Price said, “The most expensive component of an EV is the battery pack. EV makers are working towards improving the size, weight, and composition of the batteries so that EVs can be made more affordable for everyday consumers. But tackling the battery issue alone isn’t enough. EV makers are advised to take a more holistic approach to bring reliable, affordable EVs to the mass market; this entails improving the efficiency and performance of all EV components, not just the battery.”
“The major issue with the EVs is the cost parity with ICE. The industry is looking for the government’s support on policy changes to help small businesses and startups in the EV segment. The EV industry also needs support for building the required infrastructure and advancing current fiscal subsidy limit provided under the FAME II program,” Ray added.
“We would like to see policies around creating supplier parks at concessional rates, supplier side incentives for import of raw materials and incentives around capital expenditure (CAPEX), and R&D investments in India, which will go a long way in building up the supplier ecosystem in India. In terms of charging infrastructure, we would like the government to set up charging points in every apartment complex, just like they did with the postbox set-ups in every apartment. This will increase visibility and build confidence in consumers looking to buy an EV. We also recommend creating a pool of capital that startups in this sector can tap into for long-term debt to the tune of $100 million each. It will go a long way in helping accelerate capacity creation in the industry. Increasing usage of vehicles is shifting to models like lease/pay-as-you-use etc. and recommend supporting these with existing incentive programs,” concluded Mehta.
Mercom has been consistently tracking the infrastructure development for EVs, and this year has seen tremendous progress. The Department of Heavy Industries has, as of January 2020, approved 2,636 electric vehicle charging stations in 62 cities across 24 states and union territories under the second phase of FAME India (Faster Adoption and Manufacturing of Electric Vehicles in India) program. The Energy Efficiency Services Limited (EESL), in partnership with the New Okhla Industrial Development Authority (Noida), plans to set up 162 public charging stations and related infrastructure. Tata Power announced its plans to expand its EV charging network in the country to over 700 by the end of the financial year 2021. There also have been a slew of tenders by government agencies to set up EV charging stations.