Electric Mobility: Why the pandemic won’t hurt the resilient EV demand in the global markets?
The nascent concept of Electric Mobility
Electric mobility or E-Mobility increasingly accounts for a large share of the global automotive industry and is changing the way the end-user comprehends mobility as a concept. Electric mobility, according to the definition of the German government and the National Development Plan for Electric Mobility (NEP) comprises all street vehicles that are powered by an electric motor and primarily get their energy from the power grid.
Drivers for adoption of this industry:
- Minimized the use of traditional fuel
- Reduced cost of high-capacity batteries
- Shift in consumer preference towards EVs
Accessible market and impact of its growth
In 2019, electric mobility seemed poised to reach a tipping point. With more than two million electric vehicles (EVs) sold around the world, electric cars accounted for a record 2.5% of the global light-vehicle (LV) market. There were 10 million electric cars on the world’s roads at the end of 2020, following a decade of rapid growth. The global pandemic did cause a severe economic slowdown in the automobile industry. However, The EV market is much more likely to see a faster recovery and strong growth. EV charging infrastructure has also followed suit, last year it hit one of the biggest milestones by crossing the 1 million mark worldwide. Most of the new infrastructure has been built in China and Europe. North America, with far less robust public subsidy and support, remains a distant third in the charging race.
New routes opening
Capital is the fuel for innovation and growth and the technological advance in mobility tech has been able to attract it in abundance. Since 2010, venture investors have invested $148.4 Bn into mobility technology, with $44.7 Bn invested across 426 deals in 2018. This helped the capex heavy mobility businesses like Uber and Lyft in bringing innovations, and revolutionizing and disrupting the commercial transportation sector. Recent trends suggest that autonomous vehicles will be the next phase of disruptive mobility technology, with startups including Zoox and TuSimple poised to usher in a new era.
- Regulatory policy: Governments have increased consumer incentives for EV purchases, often as part of stimulus. In Germany, for example, purchase-price subsidies for new EVs can amount to more than $10,000 per vehicle. In China, the purchase-price subsidy currently ranges from 16,200 to 22,500 RMB (approximately $2,350 to $3,265) by car.
- Infrastructure Investment: In addition to subsidies and incentives, several governments and PE/VC firms have invested huge amounts in infrastructure and technology development projects.
- Paradigm shift: In many countries, the demand for EVs remained fairly stable during pandemic. EV manufacturers that offer online sales have seen particularly high demand since lockdown and social distancing measures kept people at home.
Miniscule presence of Electric Vehicles in India
Electric mobility was introduced in India in 2011 and over the last decade has been able to carve a space for itself in the mobility market, inevitably increasing its relevance in the lives of Indians. India is the fourth largest car market in the world and has the potential to become one of the top three in the near future — with about 400 million customers in need of mobility solutions by the year 2030.
Despite everything, the EV industry in India is far behind, with less than 1% of the total vehicle sales. Currently, Indian roads are dominated by conventional vehicles and have approximately 0.4 million electric two-wheelers and a few thousand electric cars only.
The opportunities for Electric Mobility in the Indian Markets
The Indian market has always prioritized mileage and upfront cost over all other factors. As a consequence, EVs were initially relegated to a very niche segment of the population. Another factor that contributed to this was lack of charging infrastructure.
However, recent technological development has attracted a plethora of entrepreneurs, ranging from budding start-ups to decades-old conglomerates. In addition to this, they’re also creating new business opportunities for digital technologies like charging location finders and reservation applications, only on payments and ride-sharing services.
Ather Energy, a Bengaluru-based EV startup, develops and manufactures its own e-scooters, offers charging infrastructure through its Ather Grid, provides consumer services that include cloud software upgrades and new ownership models like subscription and leasing which are bound to attract customers. Backed by prominent names like the Government of India’s Technology Development Board, Tiger Global Management, and Hero Motocorp the company has attracted $166 Mn in funding.
Yulu, a technology-driven startup, is solving the matter of first and last-mile connectivity. Yulu Miracle is a smart, dockless e-bike that is meant for urban traffic conditions. Yulu has collaborated with Delhi Metro Rail Corporation to supply their services in and around metro stations in Delhi. Mumbai Metro Region Development Authority has also signed an MoU with Yulu to supply e-bikes to Metro commuters at various metro stations within the city. The company is still in a nascent state and has managed to garner $54 Mn in venture funding from investors like Bajaj Auto, Binny Bansal, and 3one4 Capital.
DOT, a Gurugram based EV logistics startup, supplies Electronic vehicles to major e-commerce and food-tech players like Walmart, Amazon, Grofers, Blue Dart, DHL, Lenskart, Swiggy, and McDonald’s.
How the virus infected the industry?
The pandemic brought the fourth largest market to a screeching halt as operations were suspended due to government guidelines. China is one of the largest suppliers of EV components. Due to lockdown supply chains have been disrupted leaving a negative short-term impact delaying the adoption.
Another key risk is the falling crude oil prices. As social distancing norms and lockdown has forced people indoors the demand for crude oil has plunged. But this concern is much more valid in the shorter run. Oil prices in India are on a rise contrary to global prices which translates to higher running costs for traditional vehicles. In a price-sensitive market like India, this will encourage the shift towards Electronic Vehicles.
Significance and opportunities in an emerging market
A move to e-mobility can facilitate governments to go with international emissions targets (e.g., the Paris Climate Agreement). E-mobility can cut back the general energy needed by electrical vehicles and inside the transportation sector normally.
Benefits: Electrical vehicle makers (particularly in automotive) are always in the hunt to remain one step ahead of another. This often significantly results in immense numbers of innovations like improved energy potency, higher performance levels, and lighter vehicles, etc. To continue its widespread growth, the electrified vehicle should overcome vital challenges like battery autonomy, recharging networks, and its worth.
Challenges: Batteries area unit is one of the key challenges in automobile electrification. The problem lies within the raw materials from which the batteries area unit is made: carbon, lithium, and cobalt. Regions like Europe lack their sources of those minerals which are additionally dominated by China. Another challenge being the limited recharge points
Regulatory tailwinds to bring down cost and convenience hurdles
Considering the rise in congestion and the compelling need to reduce emissions, the governments have taken some decisive actions to encourage electric vehicle adoption. Countries like Germany and France have announced their plans to elevate the subsidies for electric vehicles. In an effort to boost electric mobility, the Chinese government has extended subsidies for electric vehicles until 2022 and created exemptions from purchase taxes.
China’s Ministry of Industry and Information Technology aims to augment the top line of electric vehicle sales, and has set a target for EVs to represent 25% of new vehicle sales by 2025. Tesla, BYD, NIO, and Xpeng are amongst the major players in the EV market in China.
Many states in India are racing ahead through policy groundwork. Initiatives and campaigns like the National Electric Mobility Mission Plan 2020, Scheme for Faster Adoption and Manufacturing of (Hybrid and) electric vehicles in India (FAME India), as well as EV@30 campaign, are boosting the adoption of EVs.
Is the market open to adopting EV?
Yes, people are willing to make the sensible switch to EVs, provided there is a required infrastructure in place, policies that govern and support research development, charging infrastructure, and skill development initiatives need to be undertaken. The provision of fiscal and non-fiscal incentives is often made, so as to increase the viability of EVs in the long run. These favorable policies are already having an impact on purchasing behavior and leading to more electric vehicle sales. Total electric vehicle registrations in Europe rose 127% YoY in July. Market forecast assumes electric vehicles achieve cost parity with gas-powered vehicles in 2025.
Does the performance justify the cost?
Electric scooters are evidently more costly than their petrol counterparts and affordability comes at the price of shorter range, slower speed, and inadequate service. However, an electric scooter will offer the same mileage as a petrol scooter at 15% of the cost of one liter of fuel, making it very pocket-friendly over the long-term. Relevance depends on the usage, they are a good option for short daily use, but they make little sense for long-distance rides with a limited number of charging stations.
The long-term route to Electric Mobility
Will the Electric Mobility market see continued growth worldwide? In addition to evaluating short-term changes, we should also understand long-term trends for EVs. Will regional differences continue to persist? If the current tailwinds for EVs in China and Europe continue, electric mobility could emerge from the COVID-19 crisis in an even stronger position than what was estimated pre-covid. In fact, regulations and incentives will likely propel EV market share in China to roughly 35–50 % and in Europe to 35% — 45%.
This article has been co-authored by Ayush Dugar and Yogesh Lakhotia, who is in the Research and Insight team at Torre Capital.
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