Indian electric vehicles market to take off in 2020, says Arthur D. Little
Scrutinising the Government of India’s plans to electrify all new vehicles by 2030, professional services firm Arthur D. Little estimates that 2020 will be a major launching point for the electric vehicles (EV) segment in India. The prediction is based on analysis of the legal and infrastructural preparedness of the country.
The internal combustion engine is on its way out across the globe, with a number of governments rapidly pushing the transition to more sustainable EVs. In France, for instance, the government announced last year that no petrol or diesel cars will be sold in the country after 2040, which means that all new vehicles will be electrically charged.
Britain has an identical deadline of 2040 for ceasing the sale of combustion engines. Major economies such as the US, China, and Japan have already made considerable headway in terms of adoption of electric vehicles, and have set their targets accordingly. China, for instance, currently accounts for a 33% share of the global electric vehicles market.
In line with this progress, the country has set a target of manufacturing 7 million new EVs by 2025. Japan, which occupies 6% of the global EV market, has a target of 50% market penetration for EVs by 2030. India’s target, meanwhile, is far more ambitious in this regard, currently occupying less than 0.5% of the global EV market share, while hoping to achieve 100% penetration in the domestic market by 2030.
The target has been pegged as overly ambitious on a number of counts, as detailed in a new publication from management consultancy Arthur D. Little. For starters, the biggest task is matching the volume itself. For instance, according to the International Energy Agency, 10 million EVs will have to be sold in order to match the target, a quantity that exceeds five times the current count of EVs across the globe.
Secondly, running 10 million EVs requires a substantial number of charging points; a department in which India is severely lacking. For instance, China has 210,000 charging points, while Japan has 40,000 and the US has 16,000. India, meanwhile, has a total of 230 charging points across the country, which is nearly negligible in its functionality.
Barriers exist at a policy level as well, given the fact that most automotive companies are currently striving to comply with BS 6 standards, which have been stipulated by the Government of India with a deadline of 2020. As a result, oil firms, original equipment manufacturers and auto companies are cumulatively spending up to $14 billion on making their ICEs more compliant with BS 6.
On the other hand, India is an ideal market for cost-effective EV manufacturing, in light of the country’s strong battery manufacturing industry, which accounts for between 40% and 50% of the total cost of EV production. Moreover, since a number of major economies have already experimented with EV policy frameworks, India has the ability to examine the practical manifestation of key policies.
This relative mix of conducive factors and unpreparedness has prompted the management consultancy to give India two years before the EV market begins to flourish to its true extent. For starters, establishing the policy framework for EVs, which includes policies around parking, incentivised registration charges and number plates, is expected to take till 2019 at the very least.
Thereafter, the infrastructure will need to be developed; a task that faces a mountain of volume for one, but also faces the challenge of space constraints in the larger Indian urban centres, where EVs are most likely to gain initial momentum.
Manufacturing chargers is a whole other dimension, which the government plans to keep within the local market for cost-effectiveness. The state of Maharashtra has taken the lead in manufacturing chargers, which will then be deployed through a joint public private partnership, thereby incentivising industrial actors to commercially distribute chargers.
On the predicted scenario in 2020, the report states; “We estimate the penetration rate for EVs (in volume terms) in four wheelers in 2020 at 1.5–2 percent, 10–12 percent for 2025 and 25–30 percent for 2030. Fleet operators and government transport unions will drive the initial adoption. The draft of the recent national automotive policy is a credible indicator. Post 2020, as enablers related to charging infrastructure and battery production fall into place, we expect the penetration to be much higher.”
