Will The Current Pandemic Accelerate Growth Of India’s Electric Vehicle Ecosystem?

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Sushovan Bej Senior Consultant – Electric Mobility and Renewable Energy Ernst and Young LLP

Before the COVID 19 outbreak, the year 2020 was to be a crucial year for automakers worldwide over selling electric vehicles, with several industry titans opening new factories and rolling out new models. Countries, like China, already have more EVs than any other, thanks to government policies encouraging production and the generous subsidies to help consumers buy them. India, like many other countries, has also experienced massive popularity for EVs, thanks to the government initiatives (such as the FAME scheme) adding to the growth. The novel coronavirus (COVID-19) crisis has caused a slowdown in the economic growth of countries globally. The majority of the production facilities remain closed or are not able to attain full production capacity due to shortage of staff and raw materials.

While in the short term, the stumbling oil prices and the economic slowdown may delay the discretionary consumer spending which will definitely have an impact on the EV sales. The continued and concentrated efforts of the public and private stakeholders alike, will surely drive the EV growth in India.

Though the cost of ownership of an EV is more viable than the equivalent gasoline vehicle, the technology is still evolving, the cost of batteries has to come down and we need to have infrastructure in place. The need of the hour is to rethink (and redesign, if required) the growth and customer acquisition strategies, strengthen R&D initiatives, strengthen the infrastructure (charging and battery swapping) requirement and develop an export competent manufacturing hub in India, to reduce import dependency (especially on batteries). And, governments should continue to play a facilitative role by developing holistic (and realistic!) roadmaps, efficient policies/regulations/guidelines and a support structure (for the industries) to enable the sustainability of the ecosystem being/to be developed.

Dr. Rashi Gupta, Managing Director, Vision Mechatronics Private Limited

The world is renovating and  mankind is innovating, however there are certain economic challenges that are to be dealt with. This pandemic has a very positive effect on mother earth and during these unprecedented times the electric vehicle industry is surrounded by many challenges including higher upfront cost of EVs, inadequate charging infrastructure, infant local manufacturing ecosystem are a few to begin with. The Government of India has very actively taken steps like Fame 2, making standards for EV, adding public charging infrastructures, improving the policy framework are a few amongst others. At present, the consumer mindset is more inclined towards self sustainability and getting immunity from the pandemic.Another important aspect is the new rules of the import duty, which were to be implemented from 1st April 2020, will certainly be detrimental to import from our neighboring country, but at the same time, were made to boost the manufacturing ecosystem within India.Owing to the pandemic many such manufacturing plans have been deferred which may further increase the strain on your pocket to own an EV.Presently there are very few choices for the consumers in the EV domain and many of the Auto giants have postponed their EV plans as they have to focus on their bread and butter.Though in the long run owning an EV is cheaper than the conventional vehicle but as the Indian  consumer is extremely price sensitive, and given the global economic crisis which we are also not exempted from, the consumer mindset may move towards opting for capex light models though still wanting to preserve the environment. Shared Mobility, which was offering this, will now take the backseat for a while until the new normal of life is adapted to. Leasing or Renting of personal vehicles, both 2W & 4W,offering convenient and flexible solutions, will see a substantial growth but it will be the consumer who will decide whether he wants to choose a cleaner mode of transport or still continue with a traditional one. In the coming quarters of 2020 EV’s will see a decline but then will see a continuous growth from the year 2021

Arvind Noel X L, Automotive-EV Consultant

Amidst the Global crisis due to the pandemic, the Indian EV market would require a tremendous change in the ecosystem, to keep the spark of hope for electric vehicle manufacturers and tier 1 suppliers. India has been strongly relying on imports from other countries (mainly China, South Korea and Japan) for components such as batteries, management systems, drivetrain and power electronics parts. High impact in the supply areas will be due to production shutdown, supply chain disruption and risk of low labor, the breakthrough for ICE vehicles came through domestic manufacturing and that’s the direction that many EV players are focusing on the big boost of the EV industry. 

In Q1 of automotive sales in India, the auto industry has already been going through a plunging decline (transition period of BS 4 to BS 6) even before the pandemic began. The recent outbreak will definitely impact consumer behavior and business operations through the company’s future spends. 

The various factors that will Impact and the solution towards the growth of Automotive EV Value Chain;

  1. Reorganize supplier network: There will be a quick assessment for seeing new opportunities to manufacture components in-house or find alternative suppliers in various geographic portfolios.
  2. Strategy for auto manufacturers: The decline in sales is going to be a short term impact, OEMs will look into more sustainable spends on R&D, conserve cash for future spends, and higher automation in factories to rely less on contract labors. 
  3. Restructure EV infrastructure network: As PHEVs and EVs are being the next focus point in the auto industry in India, companies can look into feasible solutions to bring EV infrastructure networks to a larger scale to draw more customer acceptance. Any new technology requires high customer acceptance while regulations and government incentives always drive technology adoption. 
  4. Sales of EVs post crisis: As social distancing will have a long lasting impact in urban regions, personal commute will be preferred as mass/shared mobility is expected to take high impact. This will benefit the rise of sales in the 2 wheeler EV market and entry level EVs. 
  5. Virtual Sales Platform & Online Aftermarket Support: Digital marketing and virtual reality showrooms were the most transformational change that the auto industry has been focusing on. Since retail and service stores are expected to have long term impact of low footfalls, using digital platforms is currently an opportunity to be introduced for consumers to continue their ownership experience. 
  6. Lure consumers with eye-catching Cost of Ownership:  Offer more personal customer- dealership experience by offering virtual tours, online negotiations with discounts and financing options through digital retailing. 

As the crisis will take a few months to subside, OEMs should step towards restructuring their supply chain by bringing more localized production through automation and digital retailing platforms. By end of 2020, Consumers will most likely be attracted with better purchase price through incentives and a more reliable EV infrastructure network.

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