Manufacturing a better set of wheels
Electric vehicles will soon be the norm. But it will be some years before India can catch up
When the 2019 Budget was announced in February, while the automotive industry was not mention directly, Finance minister Piyush Goyal reaffirmed the government's commitment towards electric vehicles and their mission for 30% electric mobility by 2030. For long, there has been a stress that India should embrace electric mobility to overcome reliance on imported fossil fuels and gas, and greatly boost sustainable energy in India.
But much needs to be done before the country can adopt EVs. At the back-end, much work remains to be done be it in components or rules. Standing up for the automotive component makers, the Automotive Component Manufacturers Association of India (ACMA) said that the government should adopt a pragmatic approach to create a stable and long-term road map for a smooth transition to electric mobility. There have been reports that the government was considering a proposal to ban sale of internal combustion engine (ICE) for three-wheelers by 2023 and less than 150cc two-wheelers by 2025.
Prashanth Doreswamy, market head, Continental India, says, “The move towards EVs has been in the works for a while now, and OEMs and other manufacturers have been preparing for this move. It would definitely help to have a clearer road map for the industry to avoid frequent disruptions. For a greener tomorrow, we need a mix of drive technologies - EVs, cleaner gasoline engine, carbon-neutral synthetic fuels and fuel cells. The transition from internal combustion engines to EVs as proposed by GOI will follow a linear trajectory, with a surge only expected in the 2025-2030 timeframe.”
He feels that considering that the auto industry is an investment-, research-heavy industry, vehicle manufacturers and OEMs should be indicated well in advance of possible policy changes. “The government should promote investments in R&D, especially in the fields of battery technology, alternative fuels that are suit the Indian requirements. A closer collaboration between policy makers, industry bodies, OEMs and other stakeholders would also be beneficial to making progress in this division,” adds Doreswamy.
According to a report by E&Y, from the perspective of component suppliers, large players are likely to adapt to the dramatic changes, however, small firms could be hit the hardest by this disruption, said the report titled 'Electrifying India: Building blocks for a sustainable EV ecosystem'. It also pointed out the urgent need for investment in domestic R&D and manufacturing capabilities to address the issue of absence of an EV supply chain in the country. "The growth of EVs will lead to profound changes in the automotive value chain, including technology, manufacturing systems, ownership models, distribution and aftermarket support," said the report.
Working out a way
Component makers are also expected to quickly come up with new products that are sustainable and EV friendly. Akshay Deep, plant head, Gabriel India, says, “The automotive industry sees continuous volatility in demand. We regularly report to our headquarters and offer feedback on what freshness can be brought into the components. Then there’s the close relationship we share with OEMs who want different kinds of components for the new models they launch. In terms of an electric vehicle, it is relatively simpler to build with only 20 moving parts against around 2,000 in an ICE (internal combustion engine) vehicle. This will have an impact on automakers while also disrupting the supplier ecosystem on the back of a major decrease in the addressable market for vehicle repairs/service and would require them to build new capabilities.”
Despite the uproar about the IC engine, Sandeep Sinha, MD, Cummins India, believes that the engine is here to stay. “India has a long way to go before it can adopt electric. Much work needs to be done and considering that we are perhaps the only country in the world to move to BS VI from BS IV, auto component makers are not having it easy.”
The transformational shift is expected to have significant implications for the existing supply chain as well. From the perspective of component suppliers, large automotive suppliers are likely to adapt to the dramatic changes; however, small players could be hit the hardest by this disruption.
Convincing the price-conscious Indian consumers about EVs will have to focus on two factors: the cost of ownership and vehicle quality. It is necessary to enhance demand for EVs and better performing vehicles so as to meet the 2030 target. Additionally, if one thinks of the long run, it is more economical to own and maintain an EV. Few Indian consumers are aware of the potential of EVs. They need to understand that the technology to power an electric vehicle with solar power is already available and this investment pays off faster when the solar power is replacing much more costly petrol. Also, many have the fear that their battery will run out and they will get stranded. There will be options of charging the vehicles at home, the government will be taking care of fast-charging stations along highways and in public places that can re-charge a car/bike in less than 30 minutes.
With a global growth rate of 60% in EVs, India has the opportunity to become a global player in the space. Most industry heads are of the opinion that public transport and fleet operators will have the greatest opportunity, as these vehicles run the longest and commute larger number of people. With the changing mobility landscape, India is seeing a lot of changes. A spokesperson from Mahindra Electric says, “When it comes to EVs, a ‘one size fits all’ approach would not work in India. There is a lack of a supporting supply chain, manufacturing and infrastructure ecosystem that deters the pace of adoption. Also, we need to have a supporting government policy framework that is technology agnostic. There is a need for initial financial support for businesses to bring in parity in the tax levied on batteries and EVs. Products and services need to have a high cost and value proposition to its users. Unlike other countries, the Indian market cannot afford subsidies due to the sheer scale of the industry.”
There are several deterrents that stop Indian consumers from adopting electric vehicles easily: EVs are definitely more expensive and this is mainly because of battery costs, the long charging time, range anxiety and lack of charging infrastructure. The price conscious market that India is, the country will take to electric mobility only if it finds it to be as cost effective and convenient as the current system for ICE vehicles.
“One way this can be achieved is separating the battery from the electric vehicle, thus reducing the vehicle cost significantly and using a smaller swappable battery,” says Sinha. “It is a solution that offers batteries with infrastructure as a service, on a pay-as-you-go model, similar to the refuelling ecosystem for ICE vehicles.”
The entry of EVs is not something that will come in without making certain inevitable impacts. When it comes to segments, engine parts and drive transmission are segments which would be impacted adversely, as the emphasis would move from engine management to batteries and drive motors. On the other hand, companies which make lighter auto parts would also reap benefits as EVs are supposed to be light-weight in order to get the preferred power output.