Future of Indian EV Ecosystem in The Post-COVID-19 Era

Future of Indian EV Ecosystem in The Post-COVID-19 Era

Future of Indian EV Ecosystem in The Post-COVID-19 Era
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Dr Deb Mukherji is Managing Director at Omega Seiki Mobility

Electric vehicles were the most discussed and debated topic in the pre-COVID-19 era. Several start-ups mushroomed to produce two-wheeler/three-wheeler EVs all over, with many getting funded too. The government pitched as the biggest electrification drive with mandatory conversion norms on two and three wheelers by 2030. The government also came out with subsidy support through its FAME 2 policy – it has been consistent and serious in its auto sector-related policies, especially related to the environment through emission control, end of life scrappage, etc.

Enter COVID-19 in March. Coming out of nowhere, the pandemic has disrupted lives of millions globally shattering the economic environment of practically every nation on this planet. While the economic losses would be computed in months to come, we continue to reel under the devastations caused by the pandemic, post-lockdown opening. The auto industry, which is the barometer of the economy is going through its worst year in the last 20 years. With an expected drop of 40 % & higher, the industry will have a forgettable year.

This brings us back to the original question about the future of the EV ecosystem in India post-COVID-19. The Indian automotive ecosystem was largely created by Maruti Suzuki in the late eighties. After entering India as a partner of the Indian government, Suzuki invested capital, technology and human resources in the Indian supplier industry. Over the next two decades, the industry matured into a well-organised manufacturing industry supporting over 3 million cars, 20 million two-wheelers and about 1 million other commercial vehicles. This pitched India as the 4th largest auto industry globally, even though the car density still ranks pretty low as compared to global leaders like the USA and some of the European countries. Later Hyundai would adopt the same model for the Indian market and grew to become the No. 2 player. Today both Suzuki and Hyundai control around 70% of the Indian market and the remaining 30% is fiercely contested by more than 20 automakers. In two-wheelers space, the story is similar as Hero and Honda are the number one and number two players.

Unfortunately, this also brings a problem of a different kind. Unless Maruti Suzuki and Hyundai introduce a product or a technology, it doesn’t get the volumes so essential for the investments required in the auto industry to service returns on investment. So far we have not seen a serious attempt by either of these two powerhouses on the EV front. One reason could be the large investments both made in their engine & powertrain and upgrading them to BS 6 recently. Because of the simplicity (with less than 20 moving parts compared to 200 in an IC engine car), electric vehicles are relatively easy to make. The real core technology remains with the battery. Battery and the powertrain make up for more than 50 % of the vehicle cost. Therefore it is extremely important to get the battery technology right for the EV. The EV ecosystem will consist of battery, battery management system, motor, controller, drivetrain and the electronics parts of the vehicle. So far in India, we see two and three-wheelers as the early adopters of EV technology. Three-wheeler imports from China have created a sizeable pool of low-cost cheap vehicles. These are used for last-mile connectivity, both in passenger as well as commercial space. However, now this opportunistic model would be over and the industry needs to focus on producing high-quality vehicles in India. Two-wheelers are also getting into the act with several startups announcing their entry in the market.

While we get on with our lives post-Corona, the industry needs to carry on with the transition to the EV. This is the future of the automotive industry. EV is a great leveller technology. We see many non-automobile players in the fray with their products. While it is good to have such players, we need to adopt a focussed approach to become a long-term serious EV country. We need to focus on the entire supply chain. On the supply side, the critical elements are battery, drivetrain and electronics, while on the demand side, we need a boost through charging infrastructure. Users must not get range anxiety to allow them to switch over from a conventional IC engine to EV. For battery manufacturing, cell manufacturing in India is the key. Today most of the makers buy cells from the makers in China, Taiwan or Korea. Module making and battery casing happen in India. To become self-reliant in EV, this needs to change. We need to manufacture cells in India with the right chemistry for Indian climate. It’s a a complex piece of engineering. Optimising the battery technology to get the best efficiency from the powertrain is the key. We need research and development in this. The battery technology is also evolving rapidly. Charging density is increasing with the battery life cycle, thereby driving the cost down. Large volumes will tip the cost down, which will again have the spin-off effect of driving the volumes.

Next comes the drive train consisting of motors, gearbox and controller. These are available in India as IC engine cars also use motors, controllers and differential and drive assemblies. These makers can develop the parts for the EV quickly. Joint R&D efforts are required between these key component makers and vehicle makers to get the product quality right. We also need innovation to make the product efficient, high quality and cheaper. Tesla is a perfect example of this. Instead of focussing on just the vehicle assembly with parts sourced from suppliers, Musk focussed on technology. Technology is at the core of everything that Tesla does. The biggest success of Musk was to get some of the brilliant engineers you could find globally, onboard Tesla team. He then worked with the best in the business and set up a battery plant. We need a similar approach in India. Instead of being dependent on imports, we need to build the complete ecosystem here. We need to get the integration of various technologies like the battery, power electronics, motors right to get the perfect vehicle, which would be high in quality, reliability and durability. On the demand side, the charging infrastructure plays a major role. This is where the role of the government will come in. Public sector entities like Indian Oil, BPCL, GAIL can come in and partner with private players to set up the charging stations – these players have the bandwidth to set up large scale cluster of charging stations. We will also need innovative financing models on the demand side. Other than outright sale, leasing, subscription, pay-for-use and space-based spend model need to be worked out with customers. There would also be other non-cash monetisation opportunities through energy sale, data analytics, IoT etc. EV is just a part of the whole energy ecosystem, it is an active energy source which could be deployed in the grid during idle time. Vehicles like three-wheelers are business enablers and earners for the owners.    

And to create the complete ecosystem, we need to adopt a holistic approach with infrastructure back-up both on supply as well as the demand side. It will need investments which seems hard at these difficult times. However, with the economy expected to be back on track in the next financial year, it is time we plan now and work with a long-term approach. There are no short cuts here.