While electric two- and three-wheelers have led the “first wave” of adoption of electrical vehicles (EVs) in India, many individual buyers within the passenger car space are keeping faraway from buying an electrical car.
One of the most reasons behind buyers not going for an electrical car is that the high ownership cost. For buyers of EVs, the entire cost of ownership (TCO), which incorporates the value for acquisition, running, and maintenance, is that the most vital factor determining the viability of the vehicle, consistent with a white book on electric mobility released by strategy consultant firm Kearney.
That cost, a price analysis done by Kearney reveals, is higher for EVs than their conventional-fuel counterparts. “At current petrol prices, the TCO for
electric cars is costlier than for petrol cars with the daily running of but 40 to 45 kilometres. At distances beyond this threshold, electric cars offer a positive TCO proposition. most of the people in Indian cities travel about 35 to 40 km each day between their homes and workplaces, which limits the savings from the lower running costs of EVs,” the white book said.
Then there’s CNG. An already popular alternative fuel, EVs are likely to face strong competition from CNG-run vehicles considering their cost advantage for passengers with low daily usage. A TCO analysis for electric and CNG vehicles suggests EVs offer a favourable proposition only above a daily running of 170-180kms, making it more attractive for commercial fleet applications than for the individual buyer.
“At the present battery pack cost per kWh and therefore the share of the battery within the overall vehicle cost, a 30 to 40 per cent reduction in battery cost will cause acquisition cost parity of electrical vehicles with petrol and compressed gas offerings. Given the present trends in battery pack technology, it might take another three to 5 years before batteries are available at such price points in India,” consistent with Kearney.
The COVID-19 challenge
According to Kearney, disruptions arising thanks to COVID-19 are likely to keep off EV adoption in India by a couple of years.
“Macroeconomic factors and COVID-19 have led to a fall in petroleum prices, disruptions in supply chains, and a drop by consumer demand across industries. this might slow the thrust on widespread electric vehicle adoption. The short-term industry situation may give OEMs a reduced appetite to take a position in newer offerings and diminish consumers’ incentive to manoeuvre toward electric vehicles thanks to the reduced differential in running costs,” the whitepaper noted.
Further, it said that thanks to prioritised spending in other sectors, the govt can also have a reduced ability to supply long-term financial assistance to spice up EV adoption and charging infrastructure.
“While the present state of the industry and therefore the lockdown may have temporarily shifted focus away for the electrification agenda, there are still a variety of challenges to be addressed. The policy landscape across states remains not aligned, TCO hasn’t reached parity for several segments, and therefore the choice of options and acquisition cost of obtainable options are important drivers,” Rahul Mishra of Kearney said.
Further disruptions are going to be caused by lesser traction within the shared mobility space, and disruptions from EV-associated imports from China whilst India takes time to create local capabilities.