Despite recent fires, EVs is a Rs 3L crore opportunity in India
NEW DELHI: Electric vehicles (EVs) present an opportunity of almost Rs 3 lakh crore for various stakeholders in India in the five years through fiscal 2026, and the recent incidents where several EVs caught fire are unlikely to impact on sales in the long-term, according to rating agency Crisil.
In the last two weeks, five incidents of EVs going up in flames were reported from different parts of the country. In March, a video clip of an electric scooter catching fire in the Lohegaon area of Pune went viral on social media. A day after that, another e-bike went up in flames due to an electrical short circuit mishap in Vellore, Tamil Nadu.
Earlier this week, in perhaps the biggest EV fire accident, 20 brand new electric scooters from a company called Jitendra EV, caught fire. While the Ministry of Road Transport and Highways has ordered a probe and is examining all issues, the government is likely to get stricter with battery standards.
Electric vehicles have a high energy load, which puts stress on lithium-ion batteries. ” With the government push for adopting EVs, a host of manufacturers have sprung up in the electric scooter space, many of whom who just assemble Chinese-made kits in India, compromise on lithium cell standards as well as a good Battery Management Software,” said an industry expert on condition of anonymity.
According to Hemal Thakkar, Director at Crisil, EVs is a new age industry, which is bound to have teething issues. Since the government has already set up an independent probe into the incidents, he said long-term it should not be an impediment for EV sales, though it may have a short-term negative outlook.
Hence, despite the recent fires, Crisil thinks the time is ripe for opportunities across the space, which includes potential revenue of about Rs 1.5 lakh crore across vehicle segments for original equipment manufacturers (OEMs) as well as component manufacturers, and Rs 90,000 crore in the form of disbursements for vehicle financiers, with shared mobility and insurance accounting for the balance.
The drivers of EV adoption are for all too evident. Rising fuel prices and higher cost of ICE vehicles are impacting their affordability, and government support for EVs is also playing a huge role. Central schemes such as Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME-India), Phased Manufacturing Plan, and Production Linked Incentive have jump-started the country’s EV journey.
Start-ups with new-age business models as well as OEMs with an established business have evinced interest in manufacturing EVs. Many state governments have also provided demand incentives, and capital assistance for setting up greenfield manufacturing plants. EV adoption continues to surge, meanwhile, as more people shift from internal combustion engine (ICE) vehicles.
Data on the Vahan portal shows the share of electric three-wheelers (3Ws) increased to almost 5% of 3Ws registered in fiscal 2022 from less than 1% in fiscal 2018. For electric two-wheelers (2Ws) and buses, the percentages rose to almost 2% and 4%, respectively. CRISIL’s analysis of the total cost of ownership suggests electric two-wheelers and three-wheelers attained parity with ICE vehicles last fiscal even when running a mere 6,000 km and 20,000 km, respectively, annually.
By 2026, the analysis indicates, adoption of 2Ws and 3Ws will rise even sans subsidy, due to parity of ownership cost with ICE vehicles. “Considering the improving cost parity and the government’s focus on electrification of vehicles, we should not be surprised if EV penetration reaches 15% in 2Ws, 25-30% in 3Ws, and 5% in cars and buses by fiscal 2026 in terms of vehicle sales,” said Thakkar.
Several new trends and business models are expected to emerge: Battery-as-a-service and public charging stations, for one, typically has a pay-per-use model and aims to reduce the initial outgo of the customer, improve viability, address range anxiety and, in turn, increase asset utilisation.
Mobility-as-a-service is yet another. It focuses on shared mobility by linking operations with charging infrastructure. Here, too, the vehicle and charging infrastructure are deployed on a pay-per-use model. Then there is micro-mobility, which provides last-mile distribution of cargo by way of micro-rental of electric 2Ws and 3Ws, operating on a self-drive rental model. The model is typically asset-light and based on open-source operations, where the user can hire and deploy vehicles.
“The emergence of EVs is an opportunity for both existing and new industry participants to innovate and capitalise on the quickly evolving passenger and cargo mobility. To address ecosystem challenges of the EV industry, the government is considering rolling out a structured battery swapping policy. Such facilitations will go a long way in realising the EV potential. In addition, improvement in availability of finance will push EV adoption,” said Jagannarayan Padmanabhan, Director, CRISIL Limited.