The Future of Electric Vehicle: Beyond the Hype

EVs are rapidly gaining traction globally, with India experiencing significant growth, but overcoming infrastructure, cost, and battery technology challenges is crucial for sustaining this momentum, writes Atul Arora, Director of Wiserfeed Consulting and Aditi Chandra, Assistant Manager, Wiserfeed Consulting.

The internal combustion engine, a marvel of human ingenuity, has dominated personal transportation for over a century. However, its reign appears to be nearing its end. Climate change concerns are no longer fringe issues but a stark reality. A staggering 29% of global greenhouse gas emissions, as reported by the World Resources Institute, can be attributed to the transportation sector. This dependence on fossil fuels creates a two-fold challenge: environmental degradation, resource depletion and rising economic concern.

The finite nature of oil reserves is a growing concern for industry experts. The era of cheap and abundant gasoline is fading, replaced by price volatility and supply chain vulnerabilities. This precarious situation, coupled with the urgency to address climate change, has ignited a global search for sustainable transportation solutions.

Studies by the International Council on Clean Transportation (ICCT) show EVs can significantly reduce emissions compared to traditional vehicles, contributing to a cleaner future. The

International Council on Clean Transportation (ICCT) estimates that compared to gasoline cars, BEVs offer reductions of 66%–69% in Europe, 60%–68% in the United States, 37%–45% in China, and 19%–34% in India. This translates to a substantial reduction in harmful emissions, contributing to a cleaner future. Additionally, EVs offer a hedge against volatile fuel prices and a finite oil supply, promoting long-term economic stability.

EV Gold Rush

EVs are capturing the imagination of both environmentalists and economists, promising a cleaner future with potentially lower running costs. Globally, the EV market is experiencing explosive growth. According to the International Energy Agency (IEA), global EV sales surged by over 50% in 2023 compared to the previous year, reaching a record 10 million units sold. This surge is fueled be of factors, including government incentives, falling battery prices, and growing environmental concerns.

The excitement surrounding EVs is reaching a fever pitch in India as well. The data on the Vahan portal, reports a staggering 33.3% increase in electric two-wheeler sales in India during the 2023-24 financial year compared to the previous year. This phenomenal growth isn’t limited to consumer sales – the EV sector is attracting significant investments. Venture capital funding for Indian EV startups reached a record USD 1.8 billion in 2023, as reported by Mercom India.

This surge in funding has led to a burgeoning startup ecosystem focused on various aspects of the EV revolution. Companies like Ather Energy and Ola Electric are leading the charge in electric two-wheeler manufacturing, while startups like ChargeUp and PlugIn India are building robust EV charging infrastructure. Established players are taking notice too. Major Indian corporations like Tata Motors and Mahindra & Mahindra are venturing into the EV space with significant investments in electric car production.

The excitement isn’t just from domestic players.  Globally, Tesla, the electric car market leader, has announced plans to enter the Indian market in 2024. Elon Musk, CEO of Tesla, tweeted in May 2024, “India has immense potential for electric vehicles. We are looking forward to entering the Indian market soon and contributing to a sustainable transportation future for the country.” This statement from a global leader adds fuel to the fire of the EV hype in India. However, a critical question remains: Is this excitement all just hype, or is there a solid foundation for an EV revolution in India? Let’s delve deeper and separate perception from reality in the Indian EV market.

If the sales and investment are not enough to flame the hype more around the EV let’s focus more on what the players in the industry are trying to do

Forget just sales figures! The real story of India’s EV revolution lies in the audacious moves of its players. Remember Reliance Industries, one of India’s biggest conglomerates? The development of battery storage solutions is a part of Reliance’s bigger $10 billion green push towards clean energy projects.

The Indian government wasn’t about to be left behind. In April 2024, they stomped on the gas pedal with the FAME-III policy extension, offering sweet financial incentives for both EV makers and buyers. Suddenly, EVs became more affordable, a prospect that sent a jolt of excitement through the market. 

But wait, there’s more! Just as the hype reached a fever pitch, a young Indian startup named Ionix Energy emerged in May 2024, wielding a secret weapon – a revolutionary new battery technology. Their breakthrough promised faster charging times and longer ranges, potentially eliminating “range anxiety,” a major concern for many potential EV buyers. This innovation was the cherry on top, sending the EV hype into overdrive. 

These are just a glimpse of the bold moves that are fueling the fire of India’s EV revolution. But with all this excitement, a crucial question lingers: is the hype around EVs justified by real-world penetration, or are we witnessing a case of overenthusiasm?

Beyond the Hype: Is the Electric Hype Sustainable in India?

This burgeoning sector, driven by environmental concerns, rising fuel costs, and government initiatives, presents a captivating opportunity for sustainable mobility solutions. However, separating genuine progress from the hype surrounding the EV revolution is critical for informed decision-making by industry leaders.

Growth Trajectory and Market Landscape:

While the two-wheeler and three-wheeler segments display encouraging growth, the electric four-wheeler market remains in its nascent stages. As of 2023, registrations hover around a modest 10,000 units, translating to a negligible market share (Source: Ministry of Power).

Sales of electric two-wheelers have exhibited a remarkable six-fold increase between 2018 and 2023, with registrations rising from 50,000 to 300,000 units (Source: Society of Indian Automobile Manufacturers [SIAM]). This growth is primarily fueled by affordability, rising fuel costs, and the suitability of electric two-wheelers for urban commutes.

The public transportation segment is witnessing a similar trend, with electric three-wheeler registrations experiencing a significant increase from 20,000 in 2018 to 120,000 in 2023 (Source: SIAM). This expansion can be attributed to lower operational costs for fleet owners, government incentives, and stricter pollution control measures in major cities like Kolkata and Lucknow.

Market Share and Penetration Analysis

A deeper examination reveals a more nuanced picture(Fig-3):

• Two-Wheeler Penetration: Despite the impressive growth in registrations, electric two-wheelers still hold a relatively modest 12% market share in FY 2023-24 compared to gasoline models (Source: SIAM). This signifies significant room for expansion in this segment.
• Three-Wheeler Penetration: Electric three-wheelers have achieved greater traction, capturing a noteworthy 14% market share in FY 2023-24 compared to traditional alternatives (Source: SIAM).
• Four-Wheeler Penetration: Electric four-wheelers have achieved an 18% market share in FY 2023-24 compared to traditional alternatives.

Now that we look at the statistics related to EV penetration, we can say it is still relatively low compared to gasoline vehicles only 15% are EV vehicles compared to approx 15.75 Lakhs vehicles sales. We’re talking baby steps, not a giant leap for mankind just yet. While two-wheeler and three-wheeler segments show promise, four-wheeler electrification lags far behind. While looking up these data we can jot down the challenges that demand attention to ensure long-term sustainability: Infrastructure Gap, Battery Bottleneck, and Affordability Barriers.

Behind the Wheel of Demand

As per one of the recent EV Customer Survey done by Wiserfeed (among 18–55-year-olds), ‘Safety’ came out as the most important parameter for buying a vehicle followed by ‘Price’ and ‘Fuel economy/Low Operating Costs’. This demonstrates how crucial cost concern is to the Indian Vehicle Buyer. ‘Comfort’, ‘Driving Range’, and availability of Fuel / Charging Stations’ were also considered moderately important Parameters for buying a New Vehicle.
Environment came in last on people’s lists of priorities.

What does the Customer look for in any vehicle before buying it?

In short, the customer’s ideal vehicle appears to be reasonably priced, meets the promise of fuel economy and lower operating expenses, and is, above all, safe. 

When asked about considering EVs in their next purchase, every 2 out of 5 respondents said they are not even considering buying any EV in the future.

The reason is that though the potential for lower operating costs exists, the psychological hurdle of the higher upfront cost compared to gasoline vehicles proves to be the most prominent deterrent. Pervasive fear of limited driving range (“range anxiety”) and lack of widespread charging infrastructure create the second biggest barrier to adoption. This highlights the critical need for advancements in battery technology, expansion of charging infrastructure, and strategies to make EVs more price-competitive, ultimately bridging the gap between awareness and action for a sustainable transportation future.

Almost half of the respondents emphasized the necessity of an expanded range of ‘Over 300 km’ followed by ‘100–300 km’ on a single charge for them to consider EVs. Two out of three expect the charging to be ‘within 1 hour’ or ‘within 2 hours’ for them to consider EVs.

What’s the future of EV adoption

Here is my viewpoint on the EV Adoption: 

• Last-mile connectivity and Shorter-Distance travel modes will still be the growth engine (as no Range Anxiety is there). The 3-wheeler and 2-wheelers segments will continue to see faster adoption. 
• Battery Swapping will see more adoption (as it addresses the issue of charging time). Already delivery startups like Zepto, Blinkit, Zomato, and Swiggy has started adopting the same. 

Some challenges however need to be addressed for mass adoption:

• Limited Range and Charging Anxiety: Advancements in battery technology for faster charging times and longer ranges are crucial.
• Charging Infrastructure Gap: Increased government investments in establishing a widespread charging network, especially for four-wheelers, are essential to overcome the lack of readily available charging stations (a major concern for 94% of hesitant buyers).
• Upfront Cost Barrier: The development of a robust used EV market, incentivized by the government, can improve affordability and attract more buyers.

While lithium-ion batteries reign supreme for now, the future of EVs isn’t set in stone. Hydrogen Fuel Cell Vehicles (HFCVs) offer extended range and speedy refuelling, addressing range anxiety. However, India’s hydrogen infrastructure is still in its early stages.

The prescription for a thriving EV future in India is clear

Government investment: Speed up R&D for faster charging, longer-range batteries, and lower production costs. Invest strategically in a robust charging network to conquer range anxiety and drive adoption.

Educate the Public: Clear up misconceptions and highlight the environmental benefits of EVs through targeted campaigns.

Make EVs Affordable: Implement government incentives like tax breaks and rebates on used EVs to broaden the consumer base.

Hybrids: A Stepping Stone?

While hybrid electric vehicles offer a bridge from gasoline to electric, their role in India’s EV narrative requires further discussion.

The Indian EV market isn’t just hype. There’s genuine consumer interest and the potential for significant growth. However, addressing key challenges through continued innovation, infrastructure investment, and government incentives is crucial to turning this potential into reality. The future of Indian mobility is likely electric, but the specific technology powering that future—batteries or alternatives—remains to be seen.

Disclaimer: The views expressed by the author are his own and do not necessarily reflect the views of FMM magazine.