We can see that the automotive industry globally is undergoing a paradigm shift at present wherein all the major companies are trying to switch to alternative/electric options. India, too, is not behind and is investing in this electric mobility shift.
We have a number of solid reasons to actually do that. The burden of oil imports, rising pollution, and international commitments to combat global climate change are among key factors motivating India’s recent policies to speed up the transition to e-mobility.
By making the shift towards electric vehicles (EVs), India stands to benefit on many fronts: it has a relative abundance of renewable energy resources and availability of skilled manpower in the technology and manufacturing sectors.
Nevertheless, while the EV industry is growing in India, it has much ground to cover to be able to realize the government’s ambitious 2030 target. Especially with the COVID-19 pandemic, not only did the industry’s progress slow down, but also the overall market demand fell. Hence, we have a considerable amount of work to be done in order to improve the investment outlook for the Electric vehicle business in India.
Some of our experts were asked about what makes the EV business an attractive investment option and here are some great insights from them…
By 2030, about 30% private cars, 70% commercial cars, 40% buses, and 80% two wheelers and three could be EVs.
The increasing fiscal deficit due to crude oil import, efforts to combat the changing climate, the need for creating local manufacturing capacity and jobs, all these factors put together are proving to be the catalysts for the electric vehicle (EV) industry in India. While EVs have been in discussion and existence since, the recent surge in adoption is on the account of increased innovation, which has bridged the gap between total cost of ownership (TCE) for an EV and internal combustion engine (ICE). This, sure enough, is a reason for increased investors’ appetite for exploring a high potential marketer where valuations are far from peak.
Scratching slightly beneath the surface, despite short term supply issues on account of Covid-19, India is one of the largest automotive markets in terms of sales volumes. As per Society of Indian Automobile Manufacturers (SIAM), about 21.5 million vehicles were sold in the country. While at the moment, EVs make a small fraction of this sales, the trend is fast changing with strong policy push at states as well as Center Government’s level. For instance, Center Government’s strategic think tank NITI AAYOG has charted out Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME II) and many other policy interventions which are propelling the sector in the right direction. NITI AAYOG also projects that these measures, if implemented in the right spirit, can increase the penetration of EVs in India to 30% of private cars, 70% of commercial cars, 40% for buses, and about 80% for two wheelers (2W) and three wheelers (3W) by 2030.
As per the KPMG-CII report titled ‘Shifting Gears: The Evolving Electric Vehicle Landscape in India’, light electric mobility will be the crusader of EV growth story in the country, as with the pace of adoption for 2Ws and 3Ws expected to pick up in the coming years. In India, 2Ws dominate EV sales, given their value for money proposition, both in terms of upfront price and fuel economy. The position will further strengthen as prices of petrol inch up, in line with global crude prices. The report also draws several similarities between India’s electric light mobility story and the rise of China’s EV market, where electric bikes and scooters played a key role towards building demand and adoption, which had a further trickle down effect in other segments. Intra- city transport buses are also ripe for EV adoption.
FAME II subsidies along with monetary incentives from some state Governments, for example, Delhi, have helped customers own an EV at more affordable prices. Some other state Governments have been incentivizing the supply-side stakeholders to make investment in the EV sector more attractive and create more employment opportunities. This combination of demand and supply side incentives will go a long way towards reducing the upfront cost differential between ICEs and EVs and make EVs a sought-after proposition for consumers and businesses. Besides these incentives, the Governments have also been working with industry stakeholders to speed up the development of the EV ecosystem, i.e., charging points, retail sales and finance network, skilled professionals, R&D and manufacturing facilities and so on. These elements will have a cascading effect on demand and adoption of EVs in the country.
All in all, the stage is set for India’s EV industry to usher into a new era of clean and more affordable way of transport. The industry will see massive investment into various aspects, which bear fruit over mid to long term. Considering the initial signs, for investors looking for new, high growth, long term avenues, India’s EV industry is one of the most appropriate choices.
By Jeetender Sharma, MD & Founder, Okinawa Autotech
The current EV technology is standing at a similar place where ICEV technology was standing in early 1900, a time when mobility sectors were ruled by horse buggies & carriages. Being better, efficient, convenient, it is just a matter of time EVs will overtake ICEVs disrupting the complete automotive world. With EVs arrival, automobiles are slowly becoming off the shelf consumer goods like white goods, in which almost all technology giants like Apple, Sony, LG, Huawei, Oppo and Xiomi etc. are foraying with full force. The future of automobiles is not going to remain the same. The arrival of EVs is going to open up a host of new business opportunities as well as challenges in Indian automotive sector where conventional wisdom may not survive. Global EV industry is projected to grow from US$ 246.74 Billion in 2020 to US$ 985.72 Billion in 2027 at a CAGR of 17.4% and considering the fact that India’s oil import bill is around US$ 101.4 billion, India had to jump into thus new means of mobility.
In the last FY (2019~20), the EV sales in India were merely 0.38 million units, in which the electric 2W was the highest selling product. The EV battery market was at 5.4 GWh during the same year (IESA report, released in Dec’2020). With the recent push from GoI for electrical mobility through its new EV policy, the EV market is expected to grow at a CAGR of 44% during 2020~2027 hitting 6.34-million-unit annual sales by 2027. The annual battery demand is forecasted to grow at 32% CAGR to hit US$ 15 billion by 2027 (with a capacity of 50 GWh out of which 40+ GWh would be Li-Ion).
With such a high growth rate in EV market, while it will be offering new opportunities in already established automobile businesses, it is going to open many new business opportunities in the areas of engineering, electronics, software & hardware, energy & battery management, automation and control system to name a few, covering complete market verticals. We take a look at some of these.
1. Battery Charging & Battery Management: With the rise of EVs, one sector which is going to explode is the battery management sector. Considering the economies of scale, though we may not be able to compete in battery manufacturing, there are many other business avenues for entrepreneurs to pitch in. Considering the current battery technologies, it can be confidently said that present batteries fitted on EVs may last anything between 10~20 years before they need replacement. However for their daily run charging would any way be needed wherever these EVs go. This factor alone opens up few major business opportunities in times to come e.g.
a. Building Charging Infrastructure: This is one opportunity area which is the basic need for any EV based mobility ecosystem. It’s the life line and would rise exponentially as the numbers of EVs on the road go up, needing a large-scale energy distributed infrastructure of battery charging. While it may look simple, yet this segment alone opens up many other interlinked tier 2 business opportunities involving DISCOMs, backward integration of charging station with 24*7 power supply as well as integrated metering, remote control & monitoring, billing & monetary transaction system.
b. Creating Battery Swap Stations: With growing electric 2W/3W EVs, batteries swapping is a possibility, if batteries are standardised by consensus or by regulation for these 2W/3 W EVs. However, till then these stations may have to stock batteries of several kinds/ types, a challenge yet with a good business prospects for providing ready to move, instant power to the drained 2W/3Ws instead of waiting at the charging station during the charging time. Some 2W EV manufactures have already tried to create such swapping stations which may need to be expanded across the country in order to increase acceptability of EVs. Let us see how this sector evolves in future with the coming up of a few Giga factories for 2W EVs having massive capacities but one this is sure that the battery swap business would be a winning strategy in times to come.
c. Battery Refurbishing/ Regeneration: When a battery reaches its end of usable life, there are two options: the most common is to replace it and send the old battery goes for recycling, both means have their own cost implications to both vehicle owner as well as recycler. This approach may not also be environmentally friendly apart from being highly capital intensive. Battery refurbishing or regeneration could be a solution which is an engineering process adopted by which batteries are brought back to a level which is functionally acceptable for a healthy performance. Moreover, this also is an environmentally friendly process due to less burden on the environment for creating new batteries needed for replacement and also for batteries getting disposed of.
d. Battery Recycling: This is an End of Life Treatment process for batteries. Though there are recyclers available for Lead-Acid Batteries used in existing 3W EVs, for other battery alternatives like Li-Ion, Al-Air Battery, and Fuel Cell etc. used in other EVs existing recycling technologies need to mature for commercialisation. However, with the current “battery war” going on behind the door, Li-Ion Batteries (70% market share) look to be the present leader. But if safe ways of recycling Li-Ion batteries are not established in time, very soon these EVs would be creating an e-waste time bomb for the coming generation. It is estimated that from the EVs sold globally in 2017 alone, in next 8~10 years, about 250 Million Tonnes of spent lithium-ion batteries would be generated & with approximate volume of about 0.5 million Cubin meters, would be enough to fill the Royal Albert Hall in London almost six times. The situation would be more serious than what we currently face with ICEVs related to fall in AQIs & global warming. Hence there are large business possibilities in developing process, mechanism & technologies to recycle the discarded Li-Ion batteries from EVs.
2. Development of New Supplier Base: The rise of EVs would be needing new tooling, new machining, new processes & new components in the existing US$70 billion Indian automobile components industry. The existing ancillary units will have to gear up for this new challenges and diversify as the automobiles move from being purely mobility means to consumer goods. In times to come probably most of the current manufacturing technologies would become irrelevant/ obsolete as EVs won’t be requiring many of them. The new EV ancillary industry would be based on high end automated technologies involving robotics, cobotics, 3D printing, high end electronics, new age electrical motors & solid state drive technologies (battery manufacturing will be a separate segment in itself) yet retaining some of the existing technologies. Many studies indicate that the current US$ 58 billion, Indian auto ancillary market will be more than US$ 200 billion by 2027, with a major chunk going to EV’s related business.
3. Vehicle Scrapping: With launch of Vehicle Scrappage Policy 2021, this new business avenue has already been opened. While India’s first authorized recycling plant has already been set up in Greater Noida, a New Zealand-based NRI of Punjab origin has also set up India’s first auto shredding plant in Punjab. With almost 380 Million Vehicles produced in India since 1971 most of which have never left the road, there are huge business opportunities in this business sector which literally is a gold mine.
4. Training & Skill Development: The rise of EVs, would need special skill sets in future technicians/ engineers, thus providing great business opportunities in the areas of training and skill development. Unlike the ICEV era during which the skills to handle ICEV were primarily acquired by hit & trial, complex skills needed to handle the EVs would require a highly structured, systematic and professional approach. Being sensitive to this expected future need, the GoI has already established many Skill Sector Councils under National Skill Development Corporation (NSDC). However to handle the projected growth numbers of EVs, the country would be needing large-scale skilling both in organised and unorganised sectors all across the country at various levels. This is an area in which I see a tremendous business opportunity in a wide range of areas of mechanics, electrical & electronics, controls, battery management & programming etc.
5. Last Mile Connectivity: Though this is already happening with 3W EVs which have replaced manual rickshaws in almost all the cities of India for good. Yet believing in Darwinian growth I believe that in times to come CAEVs (Connected & Autonomous EVs) would supersede EVs and would serve short distance movement needs of people – with a specified area range – unmanned & geo-fenced This would be offering many interesting business opportunities in times to come from operating & managing these CAEVs, maintaining them, monitoring the utilisation & performance as well as managing their parking etc. However this is a possibility and only time will tell how soon it becomes reality.
By Prabhat Khare – Director, KK Consultants, IIT Roorkee Gold Medalist
For more insightful articles, click here: https://emobilityplus.com/2021/06/10/emobility-india-apr-may-2021-magazine/