Introduction
The future of mobility is at a critical point of inflection. EVs (Electric Vehicles) are mentioned in almost all cases whenever there is a discussion of climate change or oil prices spike. While challenges to the electrification of the mobility sector persist in India, opportunities worth fighting for also lay ahead. This is particularly evident in metropolitan cities where emissions, congestion, and potential health complications constitute major issues today. If the trend continues, mobility issues will increase further as population and GDP growth drive increased car ownership and vehicle miles traveled. The future of passenger vehicle powertrains is electric, and the transformation is ongoing.
At a global scale, the tipping point in passenger EV adoption happened in the second half of 2020, when EV sales and penetration accelerated in major markets even after the mayhem caused on the economy by the COVID-19 pandemic. However, the continued acceleration of electrification is putting a lot of pressure on OEMs (Original Equipment Manufacturers), their supply chains, and the broader EV ecosystem to meet these targets. There has never been a time before when setting up the required charging infrastructure is so critical. Fortunately, things are looking good for India as a lot of crucial policies were revealed in the Budget 2022 session and a lot of new players and opportunities are emerging in the e-mobility sector and related industries.
Budget 2022
The proposals and announcements by the Government of India in the Budget 2022 session were majorly favorable for the EV segment. Finance Minister Nirmala Sitharaman announced a battery swapping policy as an alternative to setting up charging stations in urban areas. To fuel EV adoption, robust but versatile charging infrastructure is imperative, and the new policy is expected to strengthen the ecosystem. The move could push the adaptability of EV to 10x and generates opportunities for collaboration between vehicle manufacturers and battery/service technology providers to enter a novel space of BaaS (Battery as a Service). This is also expected to reduce the running cost of the vehicle.
In addition to the proposed battery-swapping policy, the budget also touched base over the interoperability among wired EV charging stations to increase EV adoption. Interoperability is also known as ‘EV Roaming’ and allows drivers to access a wider (if not universal) range of charging networks. Roaming in India is very vital to establish greater EV adoption in the country. The ability to use any EV network along a driver’s route has been argued to allow for greater discoverability, price transparency, higher user confidence, and more technological standardization.
Further, the move will also help battery manufacturers reduce costs through economies of scale. Proposals were announced for EV in the public transportation system as well and to create special mobility zones for EV in addition to allocations under FAME II (the second phase of Faster Adoption and Manufacturing of Hybrid and Electric vehicles) scheme.
Disruption in more than the Automotive Industry
If India is to achieve the accelerated scenario of around 70 percent EV sales by 2030, it will have a lot of implications for the entire EV value chain and ecosystem. At the same time, the industry must decarbonize the full lifecycle of vehicles to get closer to a net-zero target. Current automotive suppliers need to shift production from ICE (Internal Combustion Engine) to EV components. India will have to build new battery giga-factories to supply local passenger EV battery demand. The industry will need to install a large number of public chargers and provide maintenance operations for them to support the huge fleet of EVs on Indian roads by 2030. Renewable electricity production needs to be increased as well to catch up with the ever-increasing EV charging demand. Finally, emissions from BEV (Battery Electric Vehicle) production must decline, since BEVs currently have 80 percent higher emissions in production than ICE vehicles.
The transformation of the automotive industry towards electrification will disrupt the entire supply chain and create a significant shift in market size for automotive components. Critical components for electrification such as batteries and electric drivetrains and for autonomous driving like LiDAR (Light Detection And Ranging) and radar sensors will likely make up almost half of the total market by 2030. Components that are only used in ICE vehicles such as conventional transmissions, engines, and fuel injection systems would witness a significant decline to about half the size of 2019 levels. This drastic shift will force traditional component players to adapt quickly to offset the decreasing revenue streams. Although the chart below is for the European market, a similar trend would be expected for the Indian market as well.
The buildup of charging infrastructure needs to accelerate with the same rate of growth of the EV market to avoid becoming a potential bottleneck. So, maintaining a charging infrastructure in line with the EV fleet will be very essential in the coming decade. While early EV buyers may rely mainly on private charging, the next generation of buyers will depend on public charging. More than 70 percent of Indians will be living in multifamily homes without access to private chargers and public chargers would ensure the practicality of EVs for long-distance trips, which would still be considered as the main concern by prospective EV buyers.
Conclusion
Almost all the auto giants in India have stepped into EV since the launch of the e-mobility mission. In fact, several startups have also launched electric vehicles to leverage the shifting focus towards EVs over ICEs. However, creating a balance between supply and adoption has been a long-stalling challenge for every player. Imagine, when the consumer is ready to buy an EV but gets hesitant due to the absence of charging infrastructure. This could not have been achieved without ample government support towards creating the right infrastructure and fueling the adoption at consumers’ end. Electric vehicles are coming, and we are on the right track regarding decarbonizing the transport sector. The pace at which this industry transformation is taking place is unprecedented. It is also crossing industry borders, involving energy, infrastructure, mobility, and automotive players. While a major challenge, it represents a huge opportunity for incumbents as well as new players to take the helm in creating new multi-billion industries and jobs. The key here will be to couple sustainability with economic viability through innovative tech and properly guided mobility transformation driven by strong government policies and incentives. Based on its diverse mobility landscape and its focus on sustainability, India could emerge as a role model for other countries globally.
References
- Charan, Parth. 2022. Budget 2022 gave a boost to electric vehicle ecosystem. February 3. https://www.moneycontrol.com/news/business/budget-2022-gave-a-boost-to-electric-vehicle-ecosystem-indian-automobile-industry-says-8033001.html.
- Kersten Heineke, Timo Möller, Asutosh Padhi, Dennis Schwedhelm, and Andreas Tschiesner. 2021. “The irresistible momentum behind clean, electric, connected mobility: Four key trends .” McKinsey Quarterly, April 6.
- Khan, Safa. 2021. India’s transition to electric vehicles – the road ahead. November. https://www.opml.co.uk/blog/india-transition-electric-vehicles-road-ahead.
- NITI Aayog, Rocky Mountain Institute. 2019. “India’s Electric Mobility Transformation.”
- Sachdev, Navanwita. 2022. Budget 2022 reaction: Electric Vehicle. February 7. https://thetechpanda.com/budget-2022-reaction-electric-vehicle/35417/.
