Challenges faced by EV Industry in India

Stringent FAME II Scheme

In a bid to boost the electric vehicle adoption in India, the central government launched
the second phase of FAME scheme (Faster Adoption and Manufacturing of (Hybrid &)
Electric Vehicles) in March. The scheme was launched with an outlay of INR 10,000
crore to be invested in three years.In a letter to NITI Aayog, SMEV had highlighted that
the Indian component suppliers are far from being ready to manufacture components
given the present low volume of EVs. Apart from this, the safety tests and checking
processes can take at least 1-1.5 years, thus making it impossible to comply with
immediately.Apart from this,linking of incentives with battery capacity can impose
difficulties. According to the scheme, the incentive has been reduced to INR 10K per
KWh of battery capacity. Due to this, the incentives for two-wheelers have been
reduced by INR 10,000-12,000 thus increasing the price of the vehicles. This in turn
may affect the demand for two-wheelers.

Charging Infrastructure

The second phase of FAME proposes setting up of 2,700 electric charging stations
across the country. However, the question remains is it enough to eliminate range
anxiety — fear of losing battery before reaching destination or charging point — among
the users. For instance, Ola’s EV pilot in Nagpur failed to pick up due to longer wait time
at charging stations and high operating costs, according to reports.

High Costs

As of now, electric vehicles are costlier than traditional fuel-run vehicles. In May, it was
reported that Maruti Suzuki was testing 50 models of WagonR Electric with plans to
launch the model next year. However, Maruti Suzuki’s MD Kenichi Ayukawa said that
the electric model would cost around INR 12 lakh as opposed to the petrol cars which
cost 4.20-5.70 lakh, according to reports.

Battery Technology

Lack of proper battery technology is one of the major concerns for the EV industry.
According to a Livemint report, almost all electric vehicles in India have been produced
after importing the lithium-ion batteries, especially from China. Imports of the battery is
thus in turn increasing the cost of the vehicle. However, the silver lining is that the
National Democratic Alliance (NDA) government is reportedly exploring new
technologies such as polymer-based solid state batteries in order to reduce dependency
on lithium-ion batteries.
Lack of Trained Personnel

While issues with charging infrastructure and lack of battery technology have been
majorly highlighted, lack of trained personnel in the electric vehicle space is also
seemingly becoming a setback in the EV industry. There is a shortage of experts on
design, product, infrastructure, storage for the EV industry. Due to this, search firms are
increasingly looking for personnel from other countries such as France, Germany,
Japan and China. Speaking with ET, CV Raman, Senior Executive Director of
Engineering, Maruti Suzuki India, said that the electric vehicle space is at a nascent
stage and thus firms will face challenges in talent acquisition.

Range Anxiety

Range anxiety is what consumers suffer from knowing that the electric vehicle might not
have sufficient range to take them to their destination. This is deeply linked to the lack of
charging infrastructure in the country, and while conventional vehicles can be refueled
at petrol stations, such regularised infrastructure is not yet available for EVs.

Rudratej Singh, president and CEO of BMW Group India, also earlier said that the
infrastructure for electric vehicles is still ambiguous and uncertain, which would affect
the price and acceptability of the vehicle among Indian consumers. Toyota too has
recently halted the manufacturing of electric and hybrid cars for the Indian market, citing
inadequate charging infrastructure.

The success story of e-rickshaw in India and can it replace diesel auto
rickshaws
India’s embrace of electric vehicles has been disorganized, like so much else in the
country. The first e-rickshaws appeared about a decade ago when small manufacturers
imported ready-to-assemble kits from China, where the vehicles were used mainly to
haul cargo.

The government ignored the rise of e-rickshaws until 2014, when a 3-year-old child was
knocked into a pot of hot oil by a driver who hit the boy’s mother. The Delhi High Court
ruled that the vehicles were illegal and banned them.

The national parliament stepped in and legalized e-rickshaws in 2015, but most owners
do not get the required licenses for them. Sunny Garg, who runs G&G Automotive, a
New Delhi manufacturer of higher-end e-rickshaws that cost about $2,000 apiece, said
that elected officials had realized drivers were important constituents.One e-rickshaw
has at least four to six votes referring to the members of each driver’s family.

E-rickshaws reduce air pollution in places like New Delhi, one of the world’s smoggiest
cities. Officials there now offer a subsidy of 30,000 rupees, or about $425, to drivers
who buy new ones.As the vehicles’ popularity has grown, Indian companies have
tweaked the original Chinese designs. New brands like Saarthi, one of the biggest
manufacturers of e-rickshaws in the Delhi area, have emerged, as has an ecosystem of
parts suppliers and neighborhood parking lots where drivers can store and recharge
their vehicles overnight.

The central government is now trying to force motorcycle and auto-rickshaw makers to
go all-electric, too. It just cut taxes on electric vehicles and has proposed subsidies for
batteries and charging stations. Along with those carrots is a stick: a requirement that all
new three-wheeled vehicles be electric by 2023 and that two-wheeled ones meet that
goal by 2025.This is good for the earth.Safety remains a concern. E-rickshaws, with
their slow speed and rickety design, are prone to accidents. Drivers are supposed to
avoid major roads but many do not. Utility companies complain about charging lots
stealing power using illegal connections.

India’s hot climate also punishes electric batteries. They lose their charge more quickly
here than in cooler countries, and they can overheat and shut down.

Big companies are starting to see potential in solving the problems.

Ola, an Uber competitor in India, is experimenting with e-rickshaws that can exchange
lithium ion batteries quickly so there is no downtime for drivers. Ola has built a battery-
swapping station just outside of Delhi and has raised $250 million from the Japanese
conglomerate SoftBank to invest in electric vehicle technology.

However, for e-rickshaws to be successful the stakeholders, which include government,

vehicle and battery manufacturers, and private operators, will need to work in
tandem.The business models should aim at promoting acquisition, deployment, usage,
and monitoring and control of these vehicles effectively, the report said.The business
models for e-rickshaws ideally should be such that they help in furthering adoption of
EVs in the cities by ensuring better connectivity of services. These business models
would need to promote accessibility, adequacy, affordability, safety and reliability of
passenger services and facilitate efficient last mile connectivity. Electric three-wheelers
could be the “low-hanging fruit” that can accelerate faster adoption of electric vehicles
(EVs) in India due to their unparalleled relevance in first and last mile connectivity in
urban areas, according to a Deloitte report.
The report, Recharging India’s Electric Vehicle Ambition by Electrifying Public
Transport, also said that while the government will play an indispensable role in creating
a conducive environment for EVs to be successful in India, it should not consider taking
all the risk initially. The government should rather be more of a facilitator by providing
support, such as subsidies and developing policy framework, it added.Emphasising on
the importance of electric three-wheelers, or e-rickshaws, in the Indian context, the
report said urban transport systems generally end up servicing the major route
networks, leaving first/last mile connectivity unattended.

Provision of public transport services for these cities or areas by electrification of auto-
rickshaws appears to be one of the optimal solution...The electric three-wheelers, also
termed e-rickshaws, could, thus, be the low-hanging fruits in EV adoption due to lower
lifecycle costThese electric three-wheelers are expected to complete the value chain for
public transportation by providing first/last mile connectivity, or urban public transport
services, to commuters, the report added.

The relevance of e-rickshaws in providing first/last mile connectivity and/or public

transport services in some urban areas is unparalleled.

Initiatives done by other countries in terms of EV

Norway has the highest market penetration per capita in the world, and also has the
world's largest plug-in segment market share of new car sales, 49.1% in 2018. As of
2018, 10% of all passenger cars on Norwegian roads were plug-ins. Amsterdam has the
highest density of EV charging stations in the world.Electric car use by country varies
worldwide, as the adoption of plug-in electric vehicles is affected by consumer demand,
market prices and government incentives. Plug-in electric vehicles (PEVs) are generally
divided into all-electric or battery electric vehicles (BEVs), that run only on batteries, and
plug-in hybrids (PHEVs), that combine battery power with internal combustion engines.
The popularity of electric vehicles has been expanding rapidly due to government
subsidies, their increased range and lower battery costs, and environmental sensitivity.
However, the stock of plug-in electric cars represented just about 1 out of every 250
motor vehicles on the world's roads by December 2018.
Global cumulative sales of highway-legal light-duty plug-in vehicles reached 2 million
units at the end of 2016,3 million in November 2017 and the 5 million milestone in
December 2018. Sales of plug-in passenger cars achieved a 2.1% market share of new
car sales in 2018, up from 1.3% in 2017, and 0.86% in 2016. The PEV market is shifting
towards fully electric battery vehicles. The global ratio between BEVs and PHEVs went
from 56:44 in 2012, to 60:40 in 2015, and rose to 69:31 in 2018.
As of December 2018, China had the largest stock of highway legal light-duty plug-ins
with over 2 million domestically built passenger cars. China also dominates in plug-in
electric bus deployment, with its stock reaching 343,500 units in 2016 out of global
stock of about 345,000 vehicles. As of September 2018, the United States had one
million plug-in cars with California as the largest U.S. plug-in regional market with
537,208 plug-in cars sold up until December 2018. More than one million light-duty
passenger plug-ins had been registered in Europe through June 2018, with Norway as
the leading country with over 296,000 units registered by the end of 2018. Norway has
the highest market penetration per capita in the world, and also has the world's largest
plug-in segment market share of new car sales, 49.1% in 2018. As of 2018, 10% of all
passenger cars on Norwegian roads were plug-ins.Amsterdam has the highest density
of EV charging stations in the world.

How other countries can impact India’s growth in EV industry

With India planning to replace a significant portion of its conventional internal
combustion engine fleet by electric vehicles in the next one decade, particularly to
reduce pollution and also to create jobs through manufacturing of such vehicles, China
may continue to play a huge role in realisation of that dream.

Currently, China is the biggest market for electric vehicles and it also controls the supply
of major chunk of the key raw materials needed for making the battery used in these
vehicles.

This is particularly because electric vehicles continue to use lithium-ion batteries which
consists of lithium-ion cells that use metals like lithium, nickel, cobalt and
manganese.With purchase of mines in countries like Bolivia, Chile, Australia and
Congo, China has emerged as a key supplier of these metals.According to the "Global
EV Outlook 2019" report brought out by International Energy Agency (IEA), the global
electric car fleet exceeded 5.1 million in 2018, up two million from the previous year and
almost doubling the number of new electric car sales.

China remains the world's largest electric car market, followed by Europe and the US,
while Norway is the global leader in terms of electric car market share, it added.By the
end of 2018, electric two/three-wheelers on the road exceeded 300 million and the vast
majority of them are in China. With sales in the tens of millions per year, the Chinese
market for electric two-wheelers is hundreds of times larger than anywhere else in the
world.In 2018, more than 460,000 electric buses were on the world's road, almost 100,
000 more than in 2017.

But these dynamics could dramatically change in the next decade due to India's push
for electric vehicles. Some automakers estimate that the demand for electric vehicles,
especially in the two-wheeler segment, may surpass the demand in China.In fact,
Chinese automaker SAIC Motor Corporation Limited's subsidiary MG Motor has been
busy preparing for the launch of electric compact SUV -- ZS -- slated for next year.The
ZS will be one of the first locally-produced global EVs in India. However, its battery will
be imported from Chinese battery manufacturer and technology company CATL.
Nonetheless, depending on demand, the company may consider to assemble battery
packages in India in association with CATL. The compact SUV ZS EV will have a full-
sized boot and room for five. In order to create a hype, the company plans to deploy a
limited number of ZS EV in India, even before the car's official launch.As per plans, the
company will deploy a limited number of ZS EV units for giving select customers a
unique experience ahead of launch. Furthermore, the automaker's fast-charging
infrastructure at limited locations is expected to be in place by October. MG Motor India
has made an investment of Rs 2,200 crore at its plant and has installed an all-new
assembly line.

China's leading electric vehicle company, Sunra, earlier this year expressed interest in
setting up a factory in the country as it sees India emerging as the world's biggest
market for electric bikes in the next four to five years.It is expected that once the proper
public infrastructure for electric vehicles is in place, more and more global giants in this
segment, including those from China, will make a beeline for grabbing a pie of the
Indian EV market.

Bringing transportation decisions closer to the people is understandable and necessary.

Transport challenges such as congestion, affordability, infrastructure and transit
systems availability are localized issues. Consumer preference for more expensive EV
would highly depend on citizens’ income levels. Since investment in local research and
development is necessary to bring prices down, it makes sense to leverage local
universities and existing industrial hubs.

However, the ecosystem of multi-stakeholder players will need to plan future production
based on a clearer understanding of local objectives and plans. Especially for a huge
country with vast aspirations, a critical element is missing - an objective evaluation of
the states’ various policies using a common denominator. To address this gap, the
World Economic Forum and the Ola Mobility Institute have supplied a value-chain
framework with three integrated value chains - electric vehicles, charging, and the
surrounding network - to all 10 of the Indian states and union territories that have
drafted policies around EV. This framework ensures that within each state’s policies,
overall sustainability is considered from cradle to grave. It also helps to highlight the
gaps in the value chain that need investment and further policy attention.

Operationalizing this mass transition to electric mobility for a country of 1.3 billion
people is not an easy feat. Thus, a strong common vision, an objective framework for
comparing state policies and a platform for public-private collaboration are needed.
These levers will allow leaders to show clear action to our future generations.