Macro Moves

Future of Electric Vehicles in India

Created on 21 Oct 2019

Wraps up in 3 Min

Read by 5.6k people

Updated on 16 Nov 2019

electric vehicle segment as an emerging sector

India is among the top polluters in the world, that's right. In some cities, the air is so toxic that it's killing people. Air pollution claimed one million lives in 2018. Now the Government is moving to clean up the atmosphere and is pushing for more electric vehicles on the road .

But there are speed bumps on the way, there are companies who are resisting the change, but it will happen however may you resist it as the process is inevitable, so we are asking what the future of e-mobility in India is?

Policy Framework

The Modi government has set targets for their clear vision of an Electric vehicle-future in India. Finance Minister Nirmala Sitharaman also announced an additional income tax exemption of Rs. 1.5 lakhs for the purchase of electric vehicles in 2019-20.  She also said that the GST rate on electric vehicles would be lowered to 5%. From a market-shaping perspective, the tax concession is a positive budget announcement, but in terms of numbers GST, it is a more significant benefit.

"Today, the market does not have many financing options for electric vehicles. By incentivizing EMI purchases, the government has ensured that banks and NBFC's will cater to the interests of the ones who are interested in the segment.
The second advantage is that this would take upfront sticker shock out of the battery, motor, etc. making people realize that the total cost of ownership is so much better", says Tarun Mehta, head of electric scooter start-up at Ather Energy.

Is it really that important?

Well, the most critical concern of all is infrastructure per se. With this comes the chicken-egg story according to which any part of the multisided model can go up first, and then the Government and the ecosystem players can collaborate to make the industry more viable and move forward with the other part.

There is one more perspective to this problem that is India still generates 54.4% of its electrical energy from coal, forming a major proportion that adds significantly to making the air pollution scenario adverse. Reality Check: Just having a green subsidy program is no longer enough, it's imperative to realize how incentives have to be targeted and suited to the country's situation where the conventional automobile market is already seeing sales slump of 18 years low.

Lack of Resources

According to our data, 94% charging is done at home and the rest in public spaces," says Ravneet Phokela, Ather's Chief Business Officer. However, for a moderate level of adoption, India needs about $6 billion for charging infrastructure, $4 billion in incentives and a further $7billion to build out battery capacity as estimated by Goldman Sachs Group Inc.

That's a far cry from the enlarged $1.4 billion outlay, with its $140 million for charging. That means most of the burden for providing charging stations still falls on the government for now ---not home chargers.

Pricing has been a disappointment for customers excited about EV as there is a big tag starting from roughly $35000 for acquisition, but Gaurav Gupta, Chief Commercial Officer of MG Motors simplifies, that affordability marches straight when calculated for long run as the per-unit cost of electricity would be way less than the fuel-driven vehicles so the overall efficiency of running an EV over a period of 5 years would be much better. He also believes that shared mobility is the future of the automobile in India.

Upcoming Tech

High upfront costs, lack of charging infrastructure and uncertain performance of a battery-powered vehicle may hold back rapid adoption of EV but carmakers have realized that they have to start somewhere which brings us to Hyundai’s Kona which was introduced in the market on July 9, 2019.

It is seeing a good response for the five-seater monocoque EV. MG Motor, the iconic British carmaker, is also gearing up to launch its first electric SUV in India by the end of this calendar year. The process of scaling up will be slow, and MG Motors would be satisfied selling 100 cars a month initially.

Electric is Inevitable!

 India is the 4th largest automobile market. Does the Indian government have enough leeway to be spending this kind of money? Can India make a smooth shift to the Electric Vehicles? Summing it up, I think this transition will take more time and a planned study to cater to the need of the participants. And hopefully, when it hits the market, it does it with a bang.

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Ayushi Upadhyay

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A Keen Learner. Tiny, brainy, and studious, this quiet one stays in her zone until she pops. And once she does, boy, are her comebacks snappy! There is no financial question that she can't answer through her magical blog-writing. 

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