EV Conundrum!

 

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I am back to my favourite topic, Electric Vehicles or EV! A couple of days back there was a meeting called by NITI Ayog to discuss and decide EV policy for two-wheelers, in India. I am going to write only about the Indian scenario. My observation is that the electric four-vehicle of similar specification as the IC engine costs almost double the price. Plus per charge range of these vehicles is about 110 km. The specs are not good enough for the car to be used for out of station travel. With these limitations, it is going to be challenging to sell such vehicles. But in two-wheelers, I have observed that the price of EV’s is comparable with IC engine version. Distance travelled using two-wheelers is much less compared to four-wheelers. In India, parking two-wheelers at home is manageable compared to four-wheelers.

There are many angles to this issues. First and foremost is the fuel. With limited petroleum product reserves, there is bound to be a tough situation for the whole world if no action is taken, we will have difficulties. Add to this a new dimension; the US has threatened India to stop buying oil from Iran or else! If the US is so much worried about the whole world vis a vis Iran, then they should sell Oil to India at the same price as sold by Iran and that too in Rupees! But the US can get away with anything in diplomacy.

Petroleum product based fuels are adding to pollution is a known fact. The whole world is trying to reduce pollution by tightening the pollution norms, but apparently, there are limitations of investments to achieve the goals. Again the US has opted out of the body which is trying to track pollution world over. Again, it is the act of a bully.

All the nations are trying to reduce pollution in their cities and India is also trying its best. NITI Ayog meeting was held for the same purpose. Four-wheelers are still miles away from reaching the balance between the price targets and the cost. As four-wheelers will be expensive, their sales will not match current sales volumes at a price expected today. The second most crucial aspect in India is the challenge of charging the car batteries. Majority of the cars in India are parked in public places. Many of them are parked on roads and streets. How to provide a facility to charge batteries for such vehicles? Do we provide charging points on roads like we have parking meters? I don’t think that is a practical way of doing it. Another issue is that fast charging techniques are coming up but are still not good enough. With such limitations, NITI Ayog is trying to put pressure on the two-wheeler segment.

As already discussed, EV’s in this segment will have a comparable price, and because of lesser parking issues, charging the batteries using home electrical outlets may be possible. Charging is manageable; costs are manageable, and the number of these vehicles produced is very high. The number of two and three-wheelers manufactured in the latest financial year is 30 million plus. Total of fuel used by these vehicles is massive.  If totally converted to EVs, there can be a significant impact on pollution.

There are two groups in this segment. First and the main is the group of established manufacturers like Honda, Hero and Bajaj. They are already developing EVs. The second segment is the startups who are in the process of developing EVs. They have no hangups and are trying to support the government. But the established ones have the issue of scaling up. NITI Ayog is insisting that by 2025, majority two-wheelers manufactured should be EV’s. The Giants have a vast experience in manufacturing and can visualise or foresee the issues. Startups really don’t have manufacturing expertise and experience. They probably do not understand the meaning of manufacturing 2.5 million vehicles a month.

Now here is a complicated situation. Established manufacturers have to keep on producing IC Engine vehicles and ramp up EV production. Tremendous efforts and money will be needed. Startups may know the EV technology but do not have the wherewithal to manufacture one hundred thousand vehicles a month. Selling these numbers without the right experience is going to be very tough. What about funding? They are solely dependent on financing by VCs. Today I read an article about VCs trying to go away from electric vehicle manufacturers, in China, as there are too many variables. These startups will never get bank funding. Don’t forget that even Tesla is still a VC funded company! They are already facing production bottlenecks, and their sales are going down!

Will Lithium producers make a cartel like the petroleum cartel? It is a million dollar question. India does not have Lithium reserves, but China has done brilliantly. They have taken controlling shares in many mines across the globe. Till foreseeable future, it looks like the Lithium, and to some extent, Cobalt is going to be the key elements. Their control will be the key to success.

https://www.mordorintelligence.com/industry-reports/india-lithium-ion-battery-market

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The cost of the battery pack was the US $1000/ kW-hr in 2010. In the year 2016, it came down $273. At this rate, the EV’s will become affordable over a period. By 2020 it is expected to be sub $200/. By 2026 the price is projected to be $100/. But till that time it is going to be a tricky question about change over. Those who can afford will buy the EV’s, but the mass production models will take some time to become affordable. In the countries, where parking of cars is an issue, it is difficult to predict what the solution will be.

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One pertinent point discussed by NITI Ayog was that if the pollution goes out of hand, then the courts will intervene. Once that happens then, the discussion will be between manufacturers and the courts. NITI Ayog suggested that some policy decisions need to be taken while interested parties are involved in the debate; it will enable both sides to come to an excellent resolution.

It is more of a chicken and egg situation. It is known that EVs are good for pollution management. On one side, nobody even knows which startups will even survive five years hence. Hence there is no point in putting your money on them. But the existing giants have their issues. They need to run their current business, which has its unique problems. They have to simultaneously scale down and scale up for old and new business. Hence they have shown their apprehension with the year 2025. How will they come out of this conundrum is anybody’s guess.

Are Electric buses the real solution for pollution control and to take people away from personal vehicles?

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One thought on “EV Conundrum!

  1. Very well detailed update from you on your (our) favorite subject!
    Your “EV” Blogs have always provided kind of easy to understand detailing.
    Look forward to your next Update on the subject………..

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