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Indian Mobility is undergoing one of the most transformational social, technological and economic shifts of a generation mainly shaped by electric vehicles and alternative fuel vehicles. Sectors are being disrupted, with new markets emerging, while others are converging, and some are disappearing entirely. The automotive, transport and wider mobility market is undergoing a transformational social, technological and economic shift, fundamentally changing the way people and products are moved.
This calls for swiftly adapting business and operating models to adapt to the changes. In India, with the rapid increase in population, urbanization and environmental concerns it is important to adopt new forms of mobility as today’s mobility systems suffer from congestion, inefficiency, accidents and high prices.
The use of electric and connected vehicles is likely to replace our current vehicle‑centric system with a radically more efficient, data‑enabled and driverless ecosystem – with consumers at its heart. With the transition to electric vehicles, new business models are likely to emerge. The central and different state governments are introducing various policy measures which are also significantly supporting the use of EVs.
The electric vehicles have had a promising start but we need to accelerate. EVs will positively impact the shape and pace of development of the new mobility ecosystem and with their use the future looks more promising with less impact to health and the environment.
Let’s find out our experts’ views on the same…
Even after 6 years of Electric Vehicle (EV) adoption and promotion through aggressive schemes and policies, EVs currently constitute less than 1% of total vehicle sales. The underlying challenge still lies with the higher upfront cost and range anxiety for consumers. On the other hand, EV charging infrastructure (EVCI), being a substantial financial investment, is currently poised with lower utilisation rates, leading to lower returns to the investors. With limited financing options and incentives from the government, the electric mobility market remains a high-risk venture for investors unless innovative mechanisms are explored.
PRESENT EV ADOPTION REGIME
At present, the lower total cost of ownership (TCO) and higher utilisation have compelled the adoption of EVs in the commercial vehicle segments guided by a demand aggregation model. Compounded by a comparative price parity between the Internal Combustion Engine (ICE) and EV variants, the 2-Wheeler (2W) and 3-Wheeler (3W) segments are witnessing a boom in their electrification. Start-ups in these segments are focussing on providing last-mile connectivity as well as delivery services both in the B2B and B2C sphere, keeping in tandem with the demands of the post-COVID era.
In the case of e-cars, the aggregation and EESL`s bulk procurement model is pushing the adoption. EESL is engaged in decarbonising the government’s fleet of cars by leasing models, procured in bulk from car manufacturers, to government organisations and achieve economies of scale. However, this model met with shortcomings in achieving the set target due to substantial lack of EV model variants, limited range and insufficient demand from organisations. In the past two years, many start-ups have also ventured into the ride-hailing and car rental market, and some have even tied up with EESL for leasing the vehicles in their fleet. Overall, the electrification of fleet vehicles has gained much traction with aggregators vowing to curb down their emission levels.
EVCI BUSINESS MODELS
In the EVCI domain, EESL pioneered its deployment as a charging service provider using its bulk procurement model in Delhi NCR by building partnerships with Urban Local Bodies. Besides this, DISCOMs, vehicle manufacturers and many start-ups are locating their EVCI at suitable sites in partnership with electric ride-hailing operators. However, investment in this space has not been able to reach breakeven costs with limited charging demand at present.
EXPLORING INNOVATIVE & SUSTAINABLE BUSINESS MODELS
The development of the electric mobility landscape in India will have to deal with the sale of EVs and deploy quality EVCI in a symbiotic relationship through the enabling of innovative and sustainable business models. New financing options and strategic partnerships between stakeholders can therefore be explored, especially in the form of leasing and aggregation models.
Leasing Model: Although the electrification of fleets has gained momentum, the scale of finance required compared with ICE variants remains a barrier that needs to be addressed for encouraging new entrants in this spectrum. Traditional bank lending options limit the scope of funding expensive EVs, requiring a high upfront contribution from investors while placing start-ups with limited credit history and correspondingly higher risk profile at the crux of this paradigm. In this sphere, a leasing model for vehicles could be of major relief. Companies could foray into vehicle leasing like EESL, by playing an intermediary role between vehicle manufacturers & fleet operators & providing the required EVs on lease to the latter. As EV models are evolving each year with better performances, such leasing mechanisms would cut down on capital extensive initial purchases and concerns over the fleet getting obsolete within a few years.
There is also a bright opportunity for investors to take a cue from the recent regulation on the sale of EVs without batteries by entering into battery leasing ventures. Since batteries constitute 40-50% of the purchase cost of an EV, private customers or fleet operators could lease batteries as a service from battery lessors (battery or vehicle manufacturers) in newly purchased EVs on monthly or annual leases. Separating the lease between the vehicle and battery allows buyers to finance EVs with more competing terms compared to ICEVs.
The degraded batteries, after extensive usage, can be repurposed as an energy storage system for fast charging fleets at peak hours or storing surplus renewable energy. This second life application to batteries will provide the benefits of peak load reduction and integration of green energy in the grid at the DISCOM end and also be an additional revenue resource for battery lessors.
Aggregator Model: As discussed earlier, demand aggregation is playing a crucial role in pushing the electrification regime. Such a model not only helps in better utilization of the asset but also makes an easy case to avail financial resources. Aggregators who can pool risks and achieve better credit control have the opportunity to reduce loan interest rates by lending money from EV specialist lenders. Even fleet operators can collaborate with DISCOMs in identifying suitable charging locations that can help in their smooth operations and contribute to efficient planning of charging infrastructure right from the early stages of deployment.
Since the EV ecosystem is a nexus of a multitude of stakeholders, including private consumers, fleet operators, OEMs, DISCOMs, energy operators, etc, strategic alliances providing mutual benefits between these players could help in the better preparedness of the whole ecosystem in the long run. Addressing the uniqueness of challenges associated with the ecosystem through innovative business models is the need of the hour for leapfrogging India’s transition to a green future.
Dr. Parveen Kumar – Senior Manager, WRI India &
Anshika Singh – Student, M.Plan., SPA, New Delhi
Electric Mobility is still very nascent in the country and around the world, though there have been early adopters decades ago, many new realms of business are about to find their way.
The current scenario around cities comprises huge air pollution, dense construction, chaotic traffic, bustling spaces with people and services, often ignored is the quality of life around this, where we believe electric mobility with a new age shared economy could drive the transformation.
The limitations of the current battery and drive technology lead to range anxiety, higher upfront costs, highly depreciated assets and no clear resale value, however this is where new business models could arise paving the path to the next wave of adoption.
One such potential business model is to have a separate battery lease and vehicle financing, where the good drive train designs have a much longer life beyond the financing period, could be a comfortable 10~15 years. The battery pack in the lease could be replenished with a newer technology 5~6 years with a good resale value for Home or Industrial like Telecom towers or commercial office energy storage, where in driving a more sustainable energy market and reducing the dependency on hydrocarbons for power.
Like the erstwhile coin operated telephone boxes, there could be simple AC charge points with transparent billing well democratized across the city to give the EV’s good range. While you have a quick bite or refresh with a snack, could charge the EV as a top-up. Many smaller parking structures with charge points could be created across the city near the key commercial spaces and on the land of unused Petro outlets to free-up valuable road space from parking.
Creating large asset management companies, as there are less moving parts and oils in the EV, consumables are very limited i.e less service and maintenance. Rather than owning the assets, longer term leasing could be encouraged where in per month cost could come down significantly. New technologies could replace the ageing assets and would increase responsible recycling of resources by asset management companies.
New generation entrepreneurs, especially women like self help groups, can emerge with many new business models in India around E mobility. Exclusive Solar Charge stations can be established – Off grid – along the highways combined with restaurants and rest places, a win-win situation for business and EV adoption.
By Prasad Sreeram – Founder and CEO, COGOS Technologies
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