The future of mobility is set to shift as a result of climatic change, growing fuel prices, and urban transportation issues. To a large extent, e-mobility addresses all of these issues.
Town: Dr Yogesh Bhatia, CEO & MD, LML Electric
The future of mobility is set to shift as a result of climatic change, growing fuel prices, and urban transportation issues. To a large extent, e-mobility addresses all of these issues. While the first electric vehicle was launched in India way back in 2001, the fundamental shift from internal combustion engine (ICE) based vehicles to electric vehicles (EV) started only in the last five years. According to NITI Aayog and Rocky Mountain Institute, India’s EV market could touch US $ 152.2 billion by 2030 by 2030. Moreover, about 80% of two- and three-wheelers and 50% of the country’s four-wheelers would be electric vehicles. This trend demonstrates the enormous possibility that major OEMs and startups alike can take advantage of to bring significant disruption to the global automobile sector.
Here’s what is driving the growth of e-mobility in the country:
A supportive regulatory regime
Currently, the automobile industry contributes about 7% to the Indian GDP. Thus, it is a high priority sector. Moreover, the priority of this sector also increases due to India’s commitment to its carbon footprint reduction goals. Therefore, affirmative regulatory schemes such as Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) and Production Linked Incentive Scheme (PLI) have been highly encouraging for OEMs to invest in Made-in-India manufacturing facilities. Moreover, several states have formed their own E-mobility policies that incentivize EV manufacturing. The government’s support also comes in the form of the Phased Manufacturing Program (PMP), which introduces custom duty and mandatory local component sourcing to allow OEMs to be eligible for demand-side subsidies.
Turn to Total Cost of Ownership
There is a misconception that EV two-wheelers cost more than their traditional ICE counterparts. While the upfront cost of an EV could be more than an ICE, the calculation is half-baked unless we consider the total cost of ownership (TCO). TCO is the lifetime cost of using a vehicle. It comprises the purchase price, operating costs (fuel / charging costs and maintenance), and adjustments for resale value.
Our data-backed calculations suggest that the charging cost of an EV two-wheeler is merely a fraction (~ 15 to 20%) of the cost of fuel for an ICE vehicle. This gap widens with every instance of a fuel price hike and makes EVs more affordable over the long term. Moreover, an EV also has lower service costs as it consists of fewer moving parts. On average, the long-term maintenance cost of an EV could be 30–40% less than an ICE vehicle. All-encompassing, a two-wheeler EV could be 50% cheaper compared to its ICE-based counterpart over its lifespan.
Charging infrastructure density
A couple of years ago, the lack of charging infrastructure was a significant constraint for consumers’ adoption of EVs. However, various initiatives by OEMs, states, and central governments have helped accelerate the growth of charging infrastructure. This helps reduce anxiety among passengers who want to use EVs for long-distance travel. Moreover, as economies of scale come into play, we will see more innovation on the charging infrastructure front, ie, fast charging, interoperable charging points, battery swapping, etc. As a result, consumers will have more charging options and will be keener on cleaner mobility.
Acknowledging the rising adoption of EVs, several banks and NBFCs now provide retail finance to acquire an EV two-wheeler. This is a significant relief to consumers who could only obtain financing for an ICE until a few years ago. Similarly, financial institutions are also keen to finance the EV deals to start and continue their operations. This is a gamechanger for the last-mile availability and adoption of EVs.
As legacy automobile companies focus on e-mobility, we can expect several innovations in the space. These companies can leverage their R&D capabilities, business intelligence, and dealership networks to propel the adoption of EVs. While four-wheelers may still have some work before the TCO of EVs becomes more lucrative, two-wheelers will be the crusaders of E-mobility. To conclude, despite infrastructural and demand challenges, the future of e-mobility in India is very promising.
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