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Tuesday, April 07, 2020

E-drive: High voltage, low charge

Budget incentives, a mission plan, and a 2030 target show the govt’s intention to get India’s sluggish electric vehicle market going. However, from infrastructure and price bar, to policy confusion and a worried market, there is a long way to go. The Indian Express on the many speed breakers

Written by Anil Sasi , Sandeep Singh | Updated: July 14, 2019 7:49:02 am
e-cars, e-vehicles, electric cars, electric vehicle market, Indian electric car, race car, car race, indian express, sunday story  The government has also revised its National Electric Mobility Mission Plan 2020

On a muggy Tuesday morning last week, half-a-dozen Hyundai SUVs tailed a black pilot car zipping around the 5.14-km grid at the Buddh International Circuit in Greater Noida. In contrast to the last major international event here six years ago, when open-cockpit, single-seater Formula One cars had spun around the track with ear-splitting wails, the all-electric posse barely emitted a sound.

South Korean car manufacturer Hyundai’s move to showcase its Kona Electric SUVs at the race grid, three days after the Union Budget offered a patchwork of incentives for EVs, was more a demonstration effort than a serious sales pitch. However, it made Hyundai the first firm to introduce a long-range battery vehicle in India —and to herald the start of many.

The Kona will soon face competition from MG Motor India, a unit of China’s SAIC Motor Corp, which is slated to offer its eZS electric SUV by the end of December. The two premium-segment offerings will add to the modest line-up of electric cars available currently — the Mahindra e-Verito and e2o (discontinued since March 2019 due to low sales) and the Tata Tigor EV. India’s largest carmaker Maruti Suzuki is evaluating a commercial launch next year in the lower end of the segment, with 50 electric WagonRs being tested currently; Mahindra is working on an electric KUV100; Audi is planning an all-electric e-tron in India mid-next year; while by late-2020, Jaguar will have the I-Pace here.

The Modi government has set a target of 30% vehicles becoming EV by 2030. At a Society of Indian Automobile Manufacturers’ (SIAM) conference in September last year, Road Transport Minister Nitin Gadkari had put the target at 15% in five years.

The government has also revised its National Electric Mobility Mission Plan 2020, on faster adoption of EVs and their manufacturing. Under it, electrification of public and shared transportation is to be supported, with subsidy push for 7,000 e-buses, 5 lakh e-3 wheelers, 55,000 electric & hybrid (xEV) four-wheelers and 10 lakh e-2 Wheelers.

But the Budget, the slew of launches and the government’s good intentions notwithstanding, India is only playing catch-up in the global push for EVs, with no clear guiding policy. While global sales of passenger EVs crossed 4 million last week, just about 2,000 EVs were sold in India last year. China, where the government has handed out hefty subsidies and incentives to manufacturers, made up over a third of the global sales.

In the Budget, the government announced lowering of GST on EVs from 12% to 5%, an income tax deduction of Rs 1.5 lakh on interest paid on loans taken to purchase EVs, and Customs duty exemptions on imports of specific components. Additionally, some states offer a waiver of registration tax.

But to come anywhere close to meeting the target that Gadkari outlined, the smattering of incentives are a drop in the ocean.

The EV push

While India has seen a rapid rise in vehicle ownership — from 53 per 1,000 population in 2001 to 167 in 2015 — there is a stark difference from other countries in terms of the vehicular mix. NITI Aayog and the World Energy Council’s (WEC) ‘Zero Emission Vehicles: Towards a Policy Framework, 2018’ report lays this out analysing six years of sales data. In that period, two-wheelers made up 79% of the total sales, three-wheelers (passenger and goods) 4%, buses and large goods vehicles like trucks 3%, non-premium four-wheelers (costing less than Rs 10 lakh) 12%, and premium four-wheelers (costing over Rs 10 lakh) 2%.

In nations like Norway, the world leader in EVs, the shift has followed a top-down approach since EVs are a technology-intensive and, hence, expensive proposition. But, as the data show, in India, premium four-wheeler car owners who would be most amenable to these technologies make up just 2% of the sales. This underlines the need for technological and manufacturing leadership in the mass market — incidentally something that has already happened, albeit haphazardly, in the case of e-rickshaws.
At the policy level, there is a recognition of this. The EV transition plan, for example, is now focused on the two-wheeler segment, compared to four-wheelers earlier. The other focus area is the explosion in shared mobility in India. Taxi aggregators like Ola and Uber went up from 130 million rides in 2015 to 500 million rides in 2016, and hence offer a lucrative market given the high vehicle utilisation.

Problem areas

While some of these are generic issues, there are several India-specific concerns.

In a 2016 EV survey, covering China, Germany, and the US, McKinsey found that consumers ranked not having enough access to efficient charging stations as the third most serious barrier to EV purchase, behind price and driving range. With EV prices declining and range expanding, charging could soon become the top barrier.

Maruti Suzuki Chairman R C Bhargava points out that most small car owners park outdoors in India. Plus, while in cities such as Chandigarh or parts of the NCR, many single-family, low-rise homes might have parking slots, in Mumbai, dwellings are largely high-rise apartments. These two scenarios have disparate charging-infrastructure needs.

In India, the debate on charging is still at an extremely nascent stage. Assuming a moderate level of adoption, India needs about $6 billion for charging infrastructure, $4 billion in incentives and a further $7 billion to build battery capacity, according to estimates by Goldman Sachs Group Inc.

Now, the India-specific problems. In countries such as Norway, a majority of the charging stations are located on the premises of a conventional fuel station. In India, this would not be possible at most fuel pumps, since the infrastructure is typically cramped into a tight plot of land. Ole Henrik Hannisdahl, the CEO of Green Contact, which sets up fast-charging stations in Norway, who has made several sorties to India, says spacing out charging infrastructure from fuel pumps is also needed on grounds of security. “Fresh thinking would be needed on where to house EV charging stations,” he told The Indian Express in an earlier interview.

What would also be needed is a combination of regular charging ports (typically at homes, offices) alongside fast-charging options (at supermarkets and along highways).
There is another issue. In Norway, 99% of the electricity comes from clean hydro power. Connecting the charging infrastructure to renewable energy and not coal was the most fundamental aspect of our EV push, Vidar Helgesen, Norway’s former minister of climate and environment, said, speaking with The Indian Express. But in India, over 70% of the electricity generation is coal-fired.

Hydro power, which could be a good source of peaking power requirements that EV charging typically leads to, has been steadily declining from India’s power mix.
With respect to the charging infrastructure, the government’s subsidy plan focuses mainly on public transport, like rickshaws, cars and buses, and personal two-wheelers.

Range anxiety

The fear of being left stranded due to an exhausted battery — known as ‘range anxiety’ — is a key reason that desists buyers from purchasing an EV. The other is worry that an EV’s battery would degrade over time. The solution is increasing the driving range of vehicles or going for hybrid options (see box).

The Kona claims to be able to cover 452 km on full charge under ARAI (Automotive Research Association of India) test conditions. Going by this, one can drive from Delhi to Amritsar on a single charge with the Kona. In real road conditions (during tests in the EU), this battery achieved a range of 289 km — roughly Delhi to Kasauli — on a single charge.

Mass market cars such as the Tata Tigor EV or the Mahindra eVerito have a more modest range — about 100 km in road conditions.
The government hopes to address the concerns regarding batteries by developing an ecosystem of fast-charging stations and swapping of batteries, at least on a transitional basis.

Directional flip-flops

The Indian automobile and components sector, which is witnessing its worst sales in over a decade, is currently in the process of investing upwards of Rs 1 lakh crore for manufacture of more environment-friendly BS-VI compliant vehicles from April 2020. The shift to the new BS-VI norms comes less than 3.5 years after BS-IV-rated cars were rolled out — an extremely tight window. The EV plan now comes smack in the middle of this transition.

Recent reports that the government is considering banning the sale of internal combustion engine (ICE) three-wheelers by 2023 and less than 150cc two-wheelers by 2025 has further ruffled feathers, with the SIAM calling it “impractical”. A SIAM functionary says the industry needs a “stable long-term policy” and that the shift to EVs requires “the building of an entire ecosystem and not piecemeal build-up”.

Currently, EV makers, whether of cars, commercial vehicles or two-wheelers, have to deal with the Ministry of Heavy Industries and Ministry of Road Transport for guidelines, the Ministry of Power on charging infrastructure, as well as the Ministry of Finance and GST Council over taxation issues. NITI Aayog too has jumped into the fray. Other government agencies such as the ARAI are involved in certification of cars.

The duplication of efforts also means policy flip-flops. The first Modi government had said it plans to come out with a policy on EVs, but in 2017, the Ministry of Road Transport said a new policy was not required. Now it’s back to the original stand.

Subsidies and prices

Even if the charging issue was adequately addressed, EVs are currently priced out of the market. The Kona is pegged at Rs 25.30 lakh, while a comparable product, the Hyundai Creta, costs Rs 12-15 lakh for the petrol version. Hyundai says it does not expect big demand for the Kona and that it was introduced with a broader objective. “We will have a top-down approach… We will bring lower-end electric cars later. We think that the real demand and meaningful volume will be interesting in the mass market vehicle,” says S S Kim, MD & CEO of Hyundai Motor India.

Similarly, the Tata Tigor EV starts at Rs 9.9 lakh as compared to Rs 5.5 lakh for the petrol version. The electric WagonR may cost as much as Rs 12 lakh, compared to the Rs 4.20-Rs 5.70 lakh (ex-showroom, Delhi) for its petrol version. Maruti Suzuki’s Bhargava fears that the price of electrifying a small car may put it beyond the reach of buyers.

There seems to be consensus within the industry that for any material difference on the final price, there has to be large-scale production of three primary components of an EV — the battery, the motor controller and the electric engine. And that there has to be a combination of EV-focused incentives and disincentives for ICE vehicles. Norway, for example, waives the high taxes it imposes on sales of other cars for EVs, lets EVs run in bus lanes, exempts them from road tolls, and allows free charge at parking lots, while new charging stations are being continuously built on highways.

EVs in the US, Europe and China have up to 40% “all-in” subsidies, including direct federal or state subsidy to buyers and mandates to manufacturers. In Korea, Kim says, while the central government gives 25% subsidy on the cost of an EV, the local city authorities provide an additional 25% subsidy.
The leader in EV penetration level, with these making up over 40% of its light vehicle sales in 2018, Norway, is followed by Iceland (EV penetration of 17%), Sweden (7%) and the Netherlands (5%). China is targeting sales of 7 million new-energy vehicles by 2025, which may account for 15% of its market by then, according to the China Association of Automobile Manufacturers.

S&P Global Platts Analytics believes EVs and plug-in hybrids will account for nearly half of global car sales by 2040. Bank of America Merrill Lynch predicts global oil demand growth will peak by 2030, largely due to the popularity of EVs.

The way ahead

Charging infrastructure has to be at the centre of any policy push. Charging points can be rolled out on a city-by-city basis. This would be consistent with global experience where 33% of all EV sales take place in 14 cities alone, where charging infrastructure is widespread and convenient to use.

Given India’s unique mobility pattern, the focus should be on small, public and rural transportation. The two-wheeler focus also makes sense from the point of practicality. Small batteries, short-distance commutes, and vehicles being parked inside housing premises makes charging two-wheelers an easier prospect. Given the CNG station queues currently, cars must clearly be pushed only after charging infrastructure reaches a critical mass.

India has around 180 million two-wheelers. Assuming that each of these uses a little over half a litre of petrol per day, or about 200 litres per year, it works out to around 36 billion litres. At Rs 72 per litre, this would cost about Rs 2.6 lakh crore. On a conservative assumption that 50% of this is imported crude, there is a possibility of saving Rs 1.3 lakh crore worth of imported oil. If the EV push is planned right, there is a real possibility of such savings actually working out over the next few years.

According to the government’s latest numbers (June 2019), through the support given for the purchase of hybrids and EVs, approximately 48 million litres of fuel has been saved so far.

Clearly, there is a long way to go.

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