2- and 3-wheeler fleets first to see EV adoption in India: EY study

Two-wheeler fleets and three-wheelers will be the first in India to witness electric vehicle (EV) adoption followed by intra-city buses, corporate cabs and government fleet. The primary reason for fleets being early adopters are the economics that EVs offer over combustion engine vehicles and that the fleet owners base their purchase criterion on the total cost of ownership (TCO) and not just the acquisition cost of the vehicle. This, essentially, is the summary of an EY Report: ‘Standing up India’s EV ecosystem - who will drive the charge?’

According to Rakesh Batra, Partner and India Automotive Sector Leader, EY, “The growth of EVs in India will witness differential growth patterns across cities, vehicle segments, and vehicle applications. In terms of vehicle segment and applications, shared vehicles and fleets will offer a better value proposition for all stakeholders – manufacturers, as higher volumes can help them achieve scale as well as fleet operators because the TCO of EVs is lower than ICEVs. The current cost dynamics of an EV used for commercial purposes are quite comparable with the TCO of an EV merely 12% more than that of a comparable ICEV. This would further change in favor of EVs as post the implementation of BS VI norms, the TCO of an electric car is expected to be 4% lower for a commercial user.”

Mahindra & Mahindra launched its electric three-wheeler e-Alfa Mini priced at Rs 112,000 (ex-Delhi) in September this year.  

The two-wheeler and three-wheeler segments offer a huge opportunity for electrification in India given that it is the world’s largest two-wheeler market as well as one of the biggest for three-wheelers and widely used for personal mobility and cargo transportation.

Intra-city buses is another segment which is amenable for electrification as the route predictability is very high, thus enabling the development of charging infrastructure on the route / bus depots. However, high cost of e-buses due to heavier and pricier batteries remains a challenge. While the trucks segment makes more economic sense to electrify because of the fixed routes and larger distances covered, high battery capacity requirements and uncertainties around decline in residual value with decline in battery costs are impediments to their electrification, says the report.

This transformational shift has significant implications for the existing supply chain as well- manufacturing systems, charging infrastructure and ownership models, distribution and aftermarket. The existing suppliers will not have to deal only with the transition, but also face severe competition from new entrants in the industry such as technology companies and battery producers. The charging infrastructure in India is another aspect that comes into play with this transition; with various roadblocks such as longer charging time, high cost of batteries and range anxiety, battery swapping emerges as a feasible solution for public fleet including e-buses, and e-three-wheelers (rickshaws and autos).

Challenges associated with EV adoption
Given the high price of lithium-ion batteries, the current sticker price of EVs remains very high. As a result, consumer acceptance remains low given the value proposition of EVs does not match with ICEs in most cases / applications

The number of EV models available in the market is very limited and much lesser than the ICE counterparts. Also, the range of EVs offered is very less – up to 140km for an electric car (making them unviable for certain applications/ user groups) as compared to 250-300km of an ICE car. Also, India has just about 206 community charging stations and would require scaling up for mass adoption of EVs.

Nevertheless, a judicious mix of both fiscal and non-fiscal incentives is critical to providing stimulus to the Indian EV industry.

Other key findings of the study
- The total cost of ownership of an electric scooter used for private purposes is 13% higher than a petrol-powered scooter whereas it is 22% lower, if used for commercial purposes.

- For a commercial user of a PV, the differential in acquisition cost can be recovered in around 5 years due to lower operational expenses.

- Acquisition cost of an ICE scooter used for commercial purposes is 24% lesser than an electric two-wheeler. However, the operational cost is 60% higher.

- Currently, the TCO of an electric car is 37% more than an ICE car (for a private user).  After implementation of BS VI emission norms in 2020, petrol and diesel PVs are expected to get pricier by 8-15%, reducing this differential to only 14%.

- The two-wheeler segment is amenable to electrification as the maximum daily run of a scooter or motorcycle is 100-150km a day in India, and generally, intra-city.

- E-rickshaws in India typically use lead-acid batteries which need to be replaced within 7-8 months.

- Currently, typical earnings of an e-rickshaw operator vary between Rs 200-400 due to the presence of a number of middlemen. This is set to go up as the e-rickshaw industry gets organized.

- Utilisation of a shared vehicle is 25-30% as compared to only 4-5% of a private vehicle.

- The available technologies are not viable to electrify heavy commercial vehicles which have high payload capacity requirements and a daily run of 300-1,000km.

Also read: Mahindra & Mahindra expands EV range with new e-Alfa three-wheeler