Powering Change: EV market trends and developments

EV market trends and developments

While electric vehicles (EVs) are still a long way from becoming mainst­r­e­am in India, the EV market has started showing trends of increase in demand. Sm­all commercial vehicles are powering the revo­lution of EVs in the country. A report by CRISIL Rese­ar­ch estimates that electric two and three-wheelers will continue to grow and by 2024, their penetration is expected to be 12-17 per cent on new vehicle sales for electric two-wheelers and 43-48 per cent for three-wheelers. Meanwhile, EVs’ share in the four-wheeler space is expected to remain low in the next five years.

Currently, nearly 2 million battery-powered three-wheeler rickshaws are plying on Indian roads that are primarily low-speed e-rickshaws that come with a maximum speed of 25 km per hour. Not only are they cost-effective for the owner or the driver, but are also easy to charge and run efficiently for a day.

Current scenario and major issues

The Indian EV market is expected to grow at a compound annual growth rate of 44 per cent during 2020-27, with annual sales hitting 6.3 million units by 2027. However, the country is still in a nascent stage of EV adoption as it is grappling with several challenges such as high prices of EVs, battery production capabilities, electricity consumption and a shortage of charging stations. Of all these, the lack of ro­bust electrical charging infrastructure is a significant issue.

As per a MarketWatch report, India would need around 400,000 charging stations to accommodate the demand for 2 million EVs on roads by 2026. As of March 2021, the country has 1,800 charging stations. Further, an independent study by the Centre for Energy Finance indicates that the country would need around 2.9 million public charging stations by 2030, to support EV adoption under the base case target of NITI Aayog. Of these, about 2.1 million (71 per cent) chargers would be of low capacity, used for supporting two-wheelers and three-wheelers. Besides setting up more charging stations, lack of space is also a hurdle sin­ce people need a place to charge their EVs.

Electric charging infrastructure also fa­ces several gaps and challenges when it comes to development. In India, AC001 and DC001 chargers are the primary choices for public charging places, whereas most 2W, 3W and 4W models of EVs do not use them. The lack of support for grid development to cater to the increased load is another major problem. As per an industry ana­lysis, increased use of EVs by 2030 will shoot up the electricity demand by 100 TWh. Further, there are other challenges such as paucity of land, lack of instruments to lease government-owned and agency-owned land to set up public ch­arging stations, and the lack of affordable renewable energy.  Moreover, charging EVs will put additional pressure on the al­re­ady stressed electricity grid that runs on coal.

However, despite all these challenges, the demand for EVs for commercial use is expected to rise in the short term. The demand for EVs for commercial use is estimated to increase 15 times in the next six months, driven by the rise in fuel prices, incentives rolled out by the central and state governments and renewed emphasis by e-commerce companies to electrify their last-mile delivery fleets. The rise in de­mand for EVs in the commercial segment is expected to create a great opportunity for various stakeholders to develop the EV infrastructure in the long run and establish an ecosystem for environmentally friendly vehicles.

Conclusion

The market for EVs in India is currently in the budding stage and requires policy support from the government, along with financial assistance from the private sector. Automobile companies are showing a keen interest in launching EVs in India as luxury car-maker Mercedes-Benz has claimed that the possibility of assembling its electric cars in India is feasible, given how well it has been received in the market.

A massive market opportunity for EVs might also be a key driver of India’s post-Covid econo­mic recovery, creating jobs and economic value throughout the value chain in existing businesses and establishing new sectors.

In order to make India a 100 per cent EV nation by 2030, the government is taking seve­ral measures to overcome the challenges. How­ever, whether these measures are adequate to achieve the goal in the stipulated time frame is yet to be discerned. A balanced ratio between the number of EVs on the road and charging stations is required to motivate early adopters to choose EV and alleviate range anxiety.