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E-mobile Atmanirbhar Bharat poised for take-off
Speaking on how the Atmanirbhar Bharat Abhiyan (Self-reliant India Mission) will enable India to rise up to global competition, Prime Minister Narendra Modi emphasized on the importance of local manufacturing, local market and local supply chains. "Now, it is time to be vocal about the local products, and help these local products become global."
While the PM was referring to the deftness with which we managed to locally fulfil the demand that arose due to the pandemic lockdown, he went on to stress on the need to be self-reliant across sectors and industries. A tall order indeed, but not out of reach; most players proclaim. Whether their bullish outlook comes out of a sense of patriotism or confidence in the country's ability to overcome, it remains to be seen how we can rise to meet the tall order.
This article is an attempt to explore the hurdles and the opportunities on the road to becoming self-reliant in the field of EV manufacturing. There are many factors to consider here. For one, different segments (e-2W, e-3W, e-4W, e-public transportation, etc.) have different development graphs; they work on different specifications, have different demand drivers, and different price points to consider. But there are certain challenges that are almost similar when we talk about self-reliance.
Manufacturing of vehicles depends a lot on components and parts supply. In EVs, these are considerably reduced. One major part of the EV, in terms of the cost factor, is the battery pack; as we all know, it constitutes almost 40 percent of the cost of the EV. Localization in battery manufacturing calls for a whole new write-up. We are newbies in the field yet; not so much in battery pack assembly, as in making the cells that go in a battery pack. The government is showing keen interest in the procurement of essential minerals (e.g., lithium, cobalt, etc.) that go into the making of cells. The setting up of KABIL (Khanij Bidesh India Ltd.), to explore mining agreements with countries rich in these resources, is a beginning.The recent arrangement with Argentina is an encouraging step. How will the procurement process develop and benefit the battery storage sector? remains to be seen.
Of the other major components required to make an EV, we can claim to achieve complete localization. Electric motor, controller, converter, on-board charger, battery management system (BMS), etc., we can make them all. So then, what is holding the EV market from opening up? India has made ambitious plans to achieve complete electrification of vehicles in the next decade; everyone has the figures on their fingertips. According to published data, there are over 200 million vehicles on Indian roads to date; which means we are talking about putting an equal number, if not more, of EVs on road by 2030!
The industry view on the long drive to 100 percent electrification is not all clouded. There will be a sure progression, but not at the rate which the government has anticipated. Let us look at the factors that will contribute to the growth and those that could prove counterproductive. There are essentially two categories in which the EV segments can be divided: Commercial and Personal.
The 3-wheeler dominance
In the commercial category you have public transportation: e-rickshaws, e-buses, tempos, and maybe two-wheelers that are used for deliveries. The e-rickshaw or the e-3W segment is the fastest-growing EV category in India, perhaps the first to reach complete electrification.
According to Harsh Thacker, Director, Consulting Services with Customized Energy Solutions – "As per reports, over 60 million Indians travel by e-rickshaws daily, and that is a massive transport industry by itself. There are various estimates of over 1-1.5 million e-rickshaws that are on road in various northern and eastern States of India. CES estimates that the annual sales figure for this industry (slow speed e-rick) is in the range of three to four lakh per year. It is very difficult to exactly quantify this market as over 50 percent of sales come from non-ICAT registered models."
States that dominate in e-rickshaws are Delhi NCR, Uttar Pradesh, Punjab, Haryana, Rajasthan, Bihar, West Bengal, Jharkhand, Assam, and other States where predominantly cycle rickshaw was a common mode of transport. "That is why," Mr Thacker adds, "you see a lower penetration in southern States where people mostly travel by moped and cycles instead of cycle rickshaws.
"On the kala-peela (black and yellow) auto-rickshaw market - traditionally a high-speed 3W market, penetration has just started. We think it will be beyond 2030 for this market to get completely
This article is an attempt to explore the hurdles and the opportunities on the road to becoming self-reliant in the field of EV manufacturing. There are many factors to consider here. For one, different segments (e-2W, e-3W, e-4W, e-public transportation, etc.) have different development graphs; they work on different specifications, have different demand drivers, and different price points to consider. But there are certain challenges that are almost similar when we talk about self-reliance.
Manufacturing of vehicles depends a lot on components and parts supply. In EVs, these are considerably reduced. One major part of the EV, in terms of the cost factor, is the battery pack; as we all know, it constitutes almost 40 percent of the cost of the EV. Localization in battery manufacturing calls for a whole new write-up. We are newbies in the field yet; not so much in battery pack assembly, as in making the cells that go in a battery pack. The government is showing keen interest in the procurement of essential minerals (e.g., lithium, cobalt, etc.) that go into the making of cells. The setting up of KABIL (Khanij Bidesh India Ltd.), to explore mining agreements with countries rich in these resources, is a beginning.The recent arrangement with Argentina is an encouraging step. How will the procurement process develop and benefit the battery storage sector? remains to be seen.
Of the other major components required to make an EV, we can claim to achieve complete localization. Electric motor, controller, converter, on-board charger, battery management system (BMS), etc., we can make them all. So then, what is holding the EV market from opening up? India has made ambitious plans to achieve complete electrification of vehicles in the next decade; everyone has the figures on their fingertips. According to published data, there are over 200 million vehicles on Indian roads to date; which means we are talking about putting an equal number, if not more, of EVs on road by 2030!
The industry view on the long drive to 100 percent electrification is not all clouded. There will be a sure progression, but not at the rate which the government has anticipated. Let us look at the factors that will contribute to the growth and those that could prove counterproductive. There are essentially two categories in which the EV segments can be divided: Commercial and Personal.
The 3-wheeler dominance
In the commercial category you have public transportation: e-rickshaws, e-buses, tempos, and maybe two-wheelers that are used for deliveries. The e-rickshaw or the e-3W segment is the fastest-growing EV category in India, perhaps the first to reach complete electrification.
According to Harsh Thacker, Director, Consulting Services with Customized Energy Solutions – "As per reports, over 60 million Indians travel by e-rickshaws daily, and that is a massive transport industry by itself. There are various estimates of over 1-1.5 million e-rickshaws that are on road in various northern and eastern States of India. CES estimates that the annual sales figure for this industry (slow speed e-rick) is in the range of three to four lakh per year. It is very difficult to exactly quantify this market as over 50 percent of sales come from non-ICAT registered models."
States that dominate in e-rickshaws are Delhi NCR, Uttar Pradesh, Punjab, Haryana, Rajasthan, Bihar, West Bengal, Jharkhand, Assam, and other States where predominantly cycle rickshaw was a common mode of transport. "That is why," Mr Thacker adds, "you see a lower penetration in southern States where people mostly travel by moped and cycles instead of cycle rickshaws.
"On the kala-peela (black and yellow) auto-rickshaw market - traditionally a high-speed 3W market, penetration has just started. We think it will be beyond 2030 for this market to get completely
electrified as it is difficult to compete with subsidized CNG as an alternative fuel."
Along with the e-3W segment, e-2Ws are also seeing encouraging growth. According to a report on global EV outlook by BloombergNEF: In India, 2W- and 3W vehicles will be more attractive targets for electrification in the short term. These also form the majority of EVs sold in the country today. Mr Thacker envisages, "As per our projections for EV market 2020-2030, 2Ws in numbers are going to dominate the market with over 80 percent market share, whereas cars are going to bring over 35-40 percent of battery demand in the next decade."
Along with the e-3W segment, e-2Ws are also seeing encouraging growth. According to a report on global EV outlook by BloombergNEF: In India, 2W- and 3W vehicles will be more attractive targets for electrification in the short term. These also form the majority of EVs sold in the country today. Mr Thacker envisages, "As per our projections for EV market 2020-2030, 2Ws in numbers are going to dominate the market with over 80 percent market share, whereas cars are going to bring over 35-40 percent of battery demand in the next decade."
Electric run on two wheels
India is the world's largest 2W market, with over two crore motorcycles and scooters sold up to March 2019. In the EV market, 156,000 EVs were sold in 2019-20, of which 152,000 were e-2Ws. So, while for the EV industry the figures can be encouraging, in terms of sales the difference between petrol 2Ws and e-2Ws is yawning. It is expected that the sales will pick up gradually; whether we will be able to make the 2W electrification target by 2025 will be reflected in how the market matures in the coming years.
One of the main factors delaying the adoption of EVs is affordability. E-2Ws are far more expensive than petrol 2Ws. Speaking of the cost factor, Director General and official spokesperson for the Society of Manufacturers of Electric Vehicles (SMEV), Sohinder Gill, says: "Even after government subsidies the e-2W are not coming in the price range of the customer. While for public transport the solutions are different, for the personal vehicle segment (2W and 4W), you can't force a customer to convert to electric. He has to find merit in it, he has to find confidence in it, and he has to see that when he changes from petrol to electric he is not going to get short-changed."
If price parity is a big influencing factor in the decision to buy, then we have to look at how prices can be reduced to make the EV transition more appealing to the buyer. Cost is not the only concern for the buyer; range anxiety and adequate charging infrastructure are also dissuading factors. All this is affecting the growth in demand. And without demand entire EV manufacturing is moving at a slow pace.
"Lack of demand is the only hurdle," Mr Gill feels. "Demand is the seed, it is the starting point, without demand nothing can happen."
India is the world's largest 2W market, with over two crore motorcycles and scooters sold up to March 2019. In the EV market, 156,000 EVs were sold in 2019-20, of which 152,000 were e-2Ws. So, while for the EV industry the figures can be encouraging, in terms of sales the difference between petrol 2Ws and e-2Ws is yawning. It is expected that the sales will pick up gradually; whether we will be able to make the 2W electrification target by 2025 will be reflected in how the market matures in the coming years.
One of the main factors delaying the adoption of EVs is affordability. E-2Ws are far more expensive than petrol 2Ws. Speaking of the cost factor, Director General and official spokesperson for the Society of Manufacturers of Electric Vehicles (SMEV), Sohinder Gill, says: "Even after government subsidies the e-2W are not coming in the price range of the customer. While for public transport the solutions are different, for the personal vehicle segment (2W and 4W), you can't force a customer to convert to electric. He has to find merit in it, he has to find confidence in it, and he has to see that when he changes from petrol to electric he is not going to get short-changed."
If price parity is a big influencing factor in the decision to buy, then we have to look at how prices can be reduced to make the EV transition more appealing to the buyer. Cost is not the only concern for the buyer; range anxiety and adequate charging infrastructure are also dissuading factors. All this is affecting the growth in demand. And without demand entire EV manufacturing is moving at a slow pace.
"Lack of demand is the only hurdle," Mr Gill feels. "Demand is the seed, it is the starting point, without demand nothing can happen."
Demand stalemate
While there are not many new entrants in the e-4W segment, the e-2W market is seeing a slew of new products mostly launched by startups or newer companies. For older established vehicle manufacturers, a transition
would mean a change in the manufacturing ecosystem, and till numbers are high it wouldn't make much business sense to make the move in a hurry.
The same can be said for component makers. While they have the capability to indigenously make EV parts and components, it is not cost-effective to supply those to OEMs unless the requirement is for bigger volumes. Small quantity requirements will make the cost go up, and manufacturers will only scale up production when buyer demand is generated.
As Mr Gill puts it – "Theoretically (apart from the battery), we have 100 percent capability to make EV parts in India. But for any Indian components manufacturer it won't make business sense. Today, the scale is so low, the number of vehicles are so less, any component maker will not make any profit unless there is a demand for a substantial quantity. If the requirement is less, then prices will be high, and for prices to be low a minimum quantity requirement has to be fulfilled. Which is not the scene today, as OEMs are not making EVs in those numbers. Localization should not mean making losses, it should make business sense."
A lot of people feel that the greening effect due to the pandemic lockdown will encourage the buyers to opt for clean energy products as they have now experienced the positive effects.
"Post-lockdown nothing is going to change," Mr Gill feels, "because the EVs are going to cost the same even with subsidies."
Charging the buyer's interest
Addressing the buyer's concerns includes setting up of adequate charging infrastructure. Which again has got stuck in the demand stalemate – why would companies invest in charging stations when there not enough EVs on the road yet, and vice versa for OEMs. Putting his thoughts across on this, Vikram Gulati, Sr. Vice President - Toyota Kirloskar Motor, says: "The journey for creating widespread charging infrastructure has just started in our country and we have a fair distance to travel if the range anxiety of the consumer is to be adequately addressed. In addition, another area which requires immediate attention is strengthening of the local electricity transmission as an increase in charging infrastructure would require this to take off." (Read Mr Gulati's complete interview in 'Leadership Speak')
For the e-4W segment to take-off in a big way, currently, seems to be an uphill task. One of the options that the government should look at is encouraging hybrid vehicles to generate buyer interest. It would not only make the transition to fully electric smoother, but also give time for the government to set up the charging infrastructure. The customer will get the electric experience, and not have range or charging worries. Once the buyer is confident of the technology and is willing to take the next step to electric, the government can make the complete switch to EV.
Going Hybrid
The government should have encouraged the move, starting with auto companies who sell cars in India, and already have hybrid models. Mr Gulati is of the opinion that the government should adopt a technology-neutral stance and provide proportionate taxation advantage to all electrified technologies including hybrids. He adds: "The biggest bottleneck in realizing investment viability for
EV parts manufacturing is the
very low demand. Globally, the approach adopted by most automotive manufacturing nations to break this vicious cycle is to aggregate demand for EV parts across all EV technologies, including hybrids and plug-in hybrids as
these technologies have common EV parts.Consumer acceptance
of all electrified technologies over ICE will aggregate demand and make investment viable for large scale local manufacturing of EV parts in the country." (Toyota has over 40 EV in their global line up, including HEVs, PHEVs, BEVs, and FCEVs)
Adding to the hybrid point of view is Jayakumar G, MD and Group President - Valeo India – "The adoption of hybrid technologies in conventional vehicles will improve the efficiency of ICE and keep them relevant in the market. Companies who are able to synergize technologies for both ICE vehicles and EVs will succeed, as they would be able to harness the growth in the market and benefit from economies of scale." However, he cautions that in the long-term, a gradual decrease in ICE volumes would be expected and the OEMs and component makers have to be prepared for this and diversify to suit this changing trend. (Read
Mr Jayakumar's complete interview in the following article)
How arduous is the journey to 'self-reliance' going to be? Let's take a look at some industry perspective on the challenges and opportunities.
Sohinder Gill, Director General – SMEV and Global Head –
Hero Electric
"Localization can't be a tactic, it has to be a consistent long-term policy to be self-reliant, not based on short term local incidents. We should be self-reliant irrespective of whether we are friends with China or at war with China. That will make it clear for manufacturers to start planning to invest in India, get technologies in India, because they know that India is a big market.
"Once there is demand creation, automatically an environment for localization is created - can't put the cart before the horse. Whenever a product is introduced, demand has to come, and then the supply chain will follow.
"Demand generation is the responsibility of the industry and the government together. They have to think of ways and means for the short run, not a long term plan. Get the first 4-5 million vehicles on the road so that the customers start talking positive about the vehicles. Today, there are hardly any on the road. What is required is a little bit of tweaking of the policies so that affordable vehicles and not just high-end vehicles also start getting subsidies.
"Some suggestions that the industry would like to put forth to the government
1. Listen to EV manufacturers, work together with them, guide them and be guided by them. Work cohesively with the industry, not across the table.
2. Promote awareness and education about e-mobility. When as an association we conducted surveys on call to create awareness, we found only five percent of whom we spoke to knew about EVs. Beyond main cities awareness is zero. EVs are a national agenda too; put air pollution under the Swacch Bharat campaign. No extra budget required, use the existing money judiciously to create awareness.
3. Create rules that will dissuade the polluter and motivate the non-polluter. In the next three years, get 4 - 5 million EVs on the road in the most polluted cities (among the world's 20 most polluted cities in the world, 13 are in India). Let the users experience the vehicles in enough numbers and enough density, and see the difference. Then take back the subsidies and open up the market. Imagine the 5 million happy customers; they will create the next 50 million."
Akhil Aryan, Co-founder and CEO - ION Energy
"The auto industry has experienced technological breakthroughs in the last decade that have completely transformed the automotive landscape. Almost every major carmaker has launched or has plans to launch EVs, keeping up with the growing demand. In the first ten months of 2019, EVs took over 2.2 percent of the global vehicle market as new models were launched.
"Around 50 percent of the cost of EVs lies in its electronics (excluding the battery). This dramatic shift from mechanical control to electronics is sending waves across the entire auto parts sector. The industry is witnessing increased interest in alternative powertrain technology worldwide as more people want to switch to an electrified, zero-emission mode of transportation." (Read Mr Aryan's complete interview in the 'Promising Startups' section)
Jayakumar G, MD & Group President - Valeo India
"Going forward, the industry will move towards manufacturing components such as motors and controllers in India. Due to the current lack of appropriate manufacturing eco-system and volumes, the industry may continue to import electronic sub-assemblies for vehicle electrification from other countries for some more time until the market matures."
Localization is a matter of time. The process has started, in the sense that companies have begun to look at their core competencies and build on them to deliver quality products. Affordability is going to be a challenge; it will require some focused thought. The bigger challenge though will be demand creation, because once there is need, all stakeholders will fall in line to deliver. And then, like a well-oiled machine, all sectors will move together effortlessly.
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