03 Feb What is stopping India from being the world leader in Electric Vehicles?

In 2019, India was the fourth-largest car manufacturer and seventh-largest manufacturer of commercial vehicles. Can India become the world leader in electric vehicles (EVs) too? According to a 2018 McKinsey report, the EV adoption rate in India was less than 1%. India surely has the potential, but a range of challenges need to be overcome to reach that stage.

Charging Infrastructure

India just has around 1332 public charging stations, of which only 10% are fast charging. Due to the lack of charging infrastructure for EVs in India, consumers have a fear that the EV will not have sufficient charge to complete a trip, especially over longer routes. A seamless wide-scale adoption of EV requires heavy investment in infrastructure. The government needs to launch initiatives for instalment of public chargers at residences, offices, and community hubs. Additionally, the proportion of fast-charging stations needs to increase to solve the problem of long charging hours and queues.

Expensive Purchase, Batteries & Innovation

Electric Vehicle industry is still at a nascent stage. Due to the high battery costs and technology involved, purchasing an electric vehicle is very expensive compared to an ICE vehicle. In a country like India where majority of the consumers belong to the middle-class category and are price-conscious, mass EV adoption in the passenger vehicle segment will be a challenge. The average cost of electric cars in India is around INR 16 Lakhs, which is much higher than the average INR 6-7 Lakh cost of ICE cars.

Batteries used in EVs are very expensive and account for up to 40% of the cost of manufacturing an EV. Lead-acid batteries have been used in India for the longest time as they are cheaper compared to lithium-ion batteries that are popularly used across the globe. Lead-acid batteries have a poor lifespan and are not very efficient, hence, there has been a trend to switch to lithium-ion batteries. However, India lacks lithium reserves which makes it dependent on imports from China, Taiwan, Japan, and South Korea to meet its battery demands.

As long as India is dependent on imports for batteries and other EV components, manufacturers will not be able to achieve price parity with ICE vehicles to entice the price-sensitive Indian consumers into switching to EVs.

The government needs to promote domestic manufacturing of all components with suitable incentives. There is a need for heavy investment in R&D to come up with alternatives to lithium-ion batteries and improve the overall technology.

Government Initiatives

Even though the government has come up with various policies, it has not been enough to boost demand. The Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (FAME) policy has failed to deliver the expected results, mainly because of the strict localization and technical criteria the government had introduced. As a result, very few vehicles have received subsidies than the target number. Experts believe that there is a wide gap between the government’s strict criteria and the readiness of the market. A strategic, refined plan to transition to e-mobility is still missing.

Poor Consumer Knowledge

Buyers do not possess enough knowledge and awareness about electric vehicles and the technology associated with it. Concerns regarding safety and usage make them wary to switch to EVs.

Lack of Choice & Features

There are very few EV choices available for the buyer to choose from in India. Though EVs can offer instant torque and deliver a smooth, silent drive, it still lacks a lot of features in comparison with ICE vehicles. EVs cannot cruise, accelerate or climb fast enough to compete with gasoline-powered cars. The pay-back period for EVs is also relatively higher.

COVID-19

Coronavirus has impacted industries and economies globally, and the EV industry in India has not been immune to it. The supply chain has been disrupted due to the extended lockdown. In a situation where firms are struggling to survive, investment in new technology and research for EVs has been put on hold for the time being. With salary cuts and lay-offs, demand will also be reduced significantly. Without government support, the industry may take a long time to recover.

In conclusion, the government needs to support electric vehicle firms to overcome the challenges it faces. Consumers need to be provided credit support to make the EV purchase more affordable and attractive. Unless there is an advancement in technology which would result in price parity with fuel vehicles, cheaper and more efficient batteries, resulting in better EV products, the overall industry growth in India would be slow.