The Unique Story of Mobility Electrification in India
India’s EV origins
Like every EV origin story, the Indian one has an unlikely star: the Lovebird. The Lovebird was created in Chalakudy in the state of Kerala, home to Eddy Current Controls. Eddy still proudly displays the vehicle on its website, but Eddy has only ever sold a handful of units. The small two-seater electric car with a nominal range of 60 km suffered from the same issue as a lot of early EVs — impracticality.
The wonderfully named Lovebird’s demise was followed by a long EV hiatus until 2001 when the Reva hit the roads. Called the G-Wiz in the UK, it was the result of a joint venture between the Maini Group and Amerigon Electric Vehicle Technologies. The Reva, an upgrade compared to the Lovebird, was conceived by Chetan Maini and Dr. Lon Bell while the former was at Amerigon. Maini pitched Bell the idea that an EV designed using technology available at the time could make sense in markets such as India where there was a big difference between electricity and gasoline prices. The Reva was born and sold about 4000 units over the next decade (you can still find the original Reva on Bangalore’s roads), but it was not anywhere as practical as a regular car. Powered by lead-acid batteries, the 3-door hatchback did not even qualify as a car in Europe. It did not help that Top Gear frequently had it serve as a punching bag and even used it as a projectile in a game of extreme battleships.
Eventually, the Reva was taken over by the automaker Mahindra and rechristened as the E2O, in the process receiving significant upgrades including lithium-ion batteries, a longer wheelbase and 5 doors. Around this time, a different transportation segment was being electrified — lead-acid powered electric rickshaws (3 wheelers) began proliferating on India’s streets. These bare bones machines provided last-mile connectivity and offered a ride for incredibly low fares. Although slow and unsafe, these impractical machines ignored by traditional automotive players found compelling use cases in India because they were really cheap to run. In retrospect, while Chetan Maini was a bit too early with the Reva, his belief that lower operational costs could drive adoption in India was fundamentally sound.
Segments, Total Cost of Ownership (TCO) and Subsidies
The Indian electric vehicle market can be divided into 2-, 3- and 4-wheelers and further bifurcated into commercial and passenger applications. For the sake of brevity, this article will focus on the passenger segment; the commercial vehicle segment (buses and trucks) is developing at a slower pace. As the chart below illustrates, vehicle sales in India are dominated by two wheelers.
India is hence a very price sensitive market; while the Indian middle class has grown exponentially, an automobile is still a significant percentage of yearly earnings for a vast majority of Indians.
Blume Ventures estimates that 2- and 3-wheelers in India are already superior to ICE vehicles in terms of total cost of ownership. While some of the assumptions in the projections are optimistic, the total cost of ownership (TCO) for commercial 3W is already positive today by a wide margin, even without subsidies. And this is reflected in sales today — 55% of passenger 3Ws (commonly used for-hire) and 40% of 3W cargo sales were electric. The chasm has been crossed and it is safe to say that this segment will go almost fully electric in the near future. 2Ws for commercial use share a similar story. 2Ws and 3Ws are currently being manufactured by a combination of startups and incumbents, whereas Tata Motors has a near monopoly on the market for 4Ws.
Compared to commercial vehicles, the demands of passenger markets are different as they need to offer higher levels of practicality, convenience and desirability, which lead to higher upfront costs. Hence, subsidies still play a major role in these segments. The price of a new electric 2W is ~1500 USD, and without subsidies, the price of the two most popular models of electric 2Ws would increase by ~750 USD. Taking subsidies away would make electric 2Ws twice as expensive as a comparable ICE 2W. The story is similar in the 4W segment. Without subsidies, Tata Motors’ latest EV hatchback offering, the Tiago, would cost more than twice its ICE counterpart and negate any long-term benefits on TCO.
Policies and Localization
India has a lot riding on electrification in the coming decade because
- It imports 85% of its fuel. India also has some of the highest fuel taxes in the world (the highest at one point) and fuel prices have a direct impact on inflation, accounting for 17% of household spending. While the government benefits from the tax revenue, it has the unenviable job of deciding whether to pass on increases in oil prices to its citizens, who already spend a lot on fuel.
- It needs to improve its poor air quality and reducing emissions is part of the solution. It has to balance environmental concerns with economic growth to raise the income of its young population, a challenge no other country faces at the scale that India does today.
The government, for its part, has been aggressive in its policymaking for EVs and renewables. For context, 42.5% of India’s installed capacity for generating electricity is renewable.
India’s EV policies are devised at both the central (federal) and state levels. The flagship program for promoting electric mobility is the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, but the central government also has a Production Linked Incentives (PLI) scheme for advanced cell chemistries, and another PLI for the automotive and auto components industries. These schemes are intended to increase consumer demand while also encouraging companies to design and build in India. The states pitch in as well with their own incentives which is illustrated in detail here. The combination of these subsidies combined with a 50% increase in the FAME subsidy for 2Ws resulted in a spike in sales during the 2022 financial year. Over a million EVs were sold in India last year, with 2-wheelers leading the charge.
Challenges
While the effect of the policy is evidenced by the sales numbers, the effect on the localisation of technology and manufacturing has not been as obvious. A number of OEMs have been accused of simply importing components and assembling them locally, and there has also been confusion over the interpretation of the eligibility norms. As a result, the government has been tight-lipped about the future of the FAME scheme and has very recently reduced the subsidy amount per kWh for the 2-wheeler segment while also reducing the ceiling for the subsidy. Further policy changes to a fledgling industry that has just had a breakout year needs to be carefully weighed. The flux around the disbursal of FAME has impacted EV sales and the subsidy cuts (effective June 1) will further impact sales. The subsidy cuts offer an advantage to companies with access to PLI schemes but smaller players will now have to work harder to compete. Given the time necessary for plants to scale operations, the nascent Indian cell manufacturing industry is unlikely to be able to meet demand, which currently stands at 3 GWh and is expected to swell to at least 105 GWh by 2030. Local cell manufacturing at scale is expected to bring down cell prices and hence vehicle prices significantly, but in its absence, higher range will come at a significant premium.
Regulatory supervision had also lagged in this market, although recent standards have provided some technical direction to the battery industry. Most prominent among these are those concerning safety. Following a spate of fires last year, the older AIS 048 was updated to AIS 156, which became effective on Apr 1, 2023. These new standards include a thermal propagation requirement in addition to updated mechanical integrity tests for batteries. Additionally, the Ministry of Heavy Industries has introduced its own set of criteria based on UL 1642 and IEC 62133 which are now part of the eligibility requirements for subsidies and PLI schemes. On top of this, the Bureau of Indian Standards has introduced the IS 17855: 2022 for traction batteries.
While the tightened regulatory regime has forced manufacturers to improve their battery design, there is more to designing batteries for Indian conditions. Vehicles that are successful in the Indian market are associated with high reliability, ruggedness and low cost. To satisfy these, vehicle designs must pay attention to structural and environmental considerations unique to the local infrastructure, as well as user behavior. All of these lead to equally unique operating scenarios boundaries for designing EV batteries in this market. For instance, most batteries are passively cooled and operate at high ambient temperatures, and the choice of chemistry has a huge bearing on battery life. The tug of war between fast charging and battery swapping is a real one in this market for 2/3Ws, which then have to contend with unique abuse cases. Stay tuned for a deep dive into these topics in part 2!
Shreyas is a mechanical engineer and leads Battery and Powertrain at Ather Energy, a manufacturer of smart electric 2 wheelers. He and his team designed three generations of batteries for the Ather 450X. There are over 120,000 450X vehicles on India’s roads, and Shreyas and his team are plowing back their learnings into subsequent design iterations. He holds a bachelor’s degree in mechanical engineering from Anna University and an MBA from the Indian Institute of Management, Bangalore.
The views expressed in this article are those of the author and do not reflect those of Ather Energy.
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