The problem with battery electric vehicles

Atkinson has, in a way, said the quiet part out loud about the problem with countries simply copying Norway’s template on a successful EV model. It could be of particular relevance to India, as the central and state governments chart the path to a net zero emissions future.

Currently, the Centre offers clear tax incentives for primarily one category of cars, with practically all other vehicular technological platforms clubbed together towards the upper end of the tax bracket. India’s electric mobility plan is largely focussed on battery electric vehicles (BEVs) replacing internal combustion engine (ICE) vehicles, with Li-ion seen as the most viable battery option for now. The EVs that qualify for a clear upfront tax incentive are the ones referred to as BEVs — the category of cars that Atkinson primarily targets.

Issues in Battery Electric Vehicles push

UPFRONT SUBSIDY: The BEV experience across markets from Norway to the US and China shows the electric push works only if it is backed by state subsidies. An elaborate system of incentives is central to Norway’s EV policy, which has fostered the world’s most advanced EV market. The government waives the high taxes it imposes on sales of non-electrics, it lets electric cars run in bus lanes, toll roads are free for them, and parking lots offer a free charge.

The problem with this overt subsidisation of EVs, especially in the context of developing nations like India, is that much of the subsidy, especially the one offered as tax breaks for cars, ends up in the hands of the middle or upper middle classes, who are typically the buyers of battery electric four-wheelers.

CHARGING NETWORK: A World Bank analysis found that investing in charging infrastructure is 4-7 times more effective in EV adoption than providing upfront purchase subsidies. Norway and China have seen faster EV adoption through sustained efforts at expanding the public charging infrastructure, while also offering purchase subsidies. China, the leader in the number of publicly available chargers, accounts for 85% of global fast chargers and 55% slow chargers.

In India, the number of EVs had crossed 1 million by mid-2022, and will likely grow to 45-50 million by 2030. But only about 2,000 public charging stations are currently operational across the country.

Also, India’s charging infrastructure demands, according to KPMG’s ‘Electric vehicle charging — the next big opportunity’ report, are unique, because the vehicle mix is dominated by two- and three-wheelers. The charging network strategy has to be tweaked, given that the power requirement varies — 2Ws and 3Ws have small, low voltage batteries for which normal AC power charging is adequate, while 4Ws have varied battery sizes and use different charging standards.

Single-phase AC chargers are suitable for cars with single-phase onboard chargers, while three-phase AC chargers are required for cars with larger onboard chargers. Buses, on the other hand, have large batteries and high power requirements, which makes DC fast charging the most suitable.

Most e-2W and 3W models in India are suited to slow charging, and battery-swapping is emerging as an alternative for cases where fast charging is required.

ELECTRICITY SOURCE: In several countries that have pushed EVs, much of the electricity is generated from renewables — Norway has 99% hydroelectric power. In India, the grid is still fed largely by coal-fired thermal plants.

Unless the generation mix changes significantly, India would be using fossil fuel generation to power EVs. Theoretically at least, this would mean reduced tailpipe emissions in the cities, but continuing pollution from the running of the thermal plant. There is the advantage of substitution of oil imports, though.

VALUE CHAIN: As India struggles to make inroads into the global lithium value chain, there is discussion on the need to diversify the country’s dependency on Li-ion batteries in the EV mix. The demand for Li-ion batteries from India is projected to grow at a CAGR of more than 30% by volume up to 2030, which translates to more than 50,000 tonnes of lithium requirement for the country to manufacture EV batteries alone.

But more than 90% of the global Li production is concentrated in Chile, Argentina, and Bolivia alongside Australia and China, and other key inputs such as cobalt and nickel are mined in the Congo and Indonesia — India would, therefore, be almost entirely dependent on imports from a small pool of countries to cater to its demand. While other options to Li-ion are being explored, viability remains a key factor.

China is miles ahead of the rest of the world, with a strong base in the entire sourcing chain, and with industry leaders such as battery makers CATL and BYD, and carmakers such as Nio, Li Auto, and XPENG Motors.

Picking winners

There is a larger argument against the government picking winners based on a preferred technology. There is no denying that Li-ion has been a runaway success at the lower end of India’s EV segments, with 2Ws and 3Ws seeing a sharp surge. But the same cannot be said of the four-wheeler segment, although there is promise. What needs to be noted is that globally, the EV definition covers, besides BEVs, Hybrid Electric Vehicles, Plug-in Hybrid Electric Vehicles, and Fuel Cell Vehicles.

While there is little debate that electrification is the future, the roadmap remains unclear. Many countries have pushed e-mobility through stringent regulations and lucrative tax incentives; however, monetary incentives alone cannot drive EV penetration, according to McKinsey & Co data. For example, the US state of West Virginia offers the most monetary incentives for EVs but has seen low adoption, while California offers fewer monetary incentives but has the highest penetration, thanks to the government’s investment in robust EV infrastructure, parking benefits, and workplace charging facilities.

In India, the two major objectives seem to be to cut emissions and reduce costly fuel imports. Government officials argue that while upfront tax incentives may be limited to BEVs, technologies such as hybrids get incentives under the flagship FAME subsidy scheme. But vehicle manufacturers maintain that a technology-agnostic approach that spells out the emissions objectives that they have to meet, irrespective of technology, might be beneficial.

New technologies

Indeed, there are a lot of technologies to choose from.

HYBRIDS: The hybrid technology is seen as a good intermediate step towards achieving the all-electric goal. Hybrids typically have improved fuel efficiency through electrification of the powertrain, but do not require the charging infrastructure base that is an essential for BEVs. Additionally, manufacturers claim that a hybrid vehicle base also spawns the manufacture of the battery ecosystem, which can then be leveraged for a BEV push.

However, hybrids too have the issue of Li-ion batteries being the main source, even though the self-charging mode obviates the need for charging points. There are also questions about hybrids achieving their famed fuel efficiency claims when the air conditioner is active for most of the drive, as is typically the case in many parts of India for much of the year.

ETHANOL & FLEX FUEL: A flex fuel, or flexible fuel, vehicle has an internal combustion engine, but unlike a regular petrol or diesel vehicle, it can run on more than one type of fuel, or even a mixture of fuels such as petrol and ethanol. A nationwide pilot that is currently underway aims to replicate the commercial deployment of this technology in other markets such as Brazil, Canada, and the US.

FCEVs & HYDROGEN ICE: Hydrogen fuel cell electric vehicles (FCEVs) are practically zero emission, but a major hurdle to their adoption has been the lack of fuelling station infrastructure — even though fuel cell cars refuel in a way that is similar to conventional cars, they cannot use the same station. Safety is also a concern. Hydrogen is pressurised and stored in a cryogenic tank, from there it is fed to a lower-pressure cell and put through an electro-chemical reaction to generate electricity.

Hydrogen ICE vehicles are similar to conventional internal combustion engine vehicles, with a few tweaks to prep them to run on hydrogen. Certain components of the engine like the fuel delivery system and spark plugs are modified or changed to enable compatibility with hydrogen, instead of petrol or diesel. However, these vehicles are not zero-emission, like the FCEVs.

SYNTHETIC FUELS: German manufacturer Porsche is developing a synthetic fuel that it says can make an internal combustion engine as clean as an EV. Porsche’s eFuels are made from carbon dioxide and hydrogen, and are produced using renewable energy. The fuel production is being tested in Chile.

The idea is to make this usable in all petrol-engine cars, rendering their use virtually CO2-neutral, and thereby give ICE cars a fresh lease of life. Incidentally, Formula One will use synthetic fuel from 2026.