India's EV Growth - EVolution or rEVolution? - the conclusion - India Renewable Energy Consulting

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This post is part of a series titled “EVolution or rEVolution? Strategizing for EV Growth in India” from EV Next Perspectives. See all posts for this series from here. See the previous post EV Next’s Strategy Recommendation for India’s EV Growth – Summary & Analysis

EVolution or rEVolution?

EV Next had provided a detailed overview and analyses of India’s EV sector and had also provided recommendations on the strategies to be followed on key dimensions to accelerate EV adoption. This post provides brief conclusions on how such strategies could pan out. Specifically:

What will the recommended strategies result in?
Will EVs in India see an evolutionary or revolutionary growth?

It’s EVolution Until 2025

Under this recommended strategy, during 2018-2025:

Some segments of the road transport in top 10 cities would have been electrified to a reasonable extent.
Availability of EV charging infrastructure increases significantly in top 10 urban areas and becomes a more established system for a much wider roll-out.
The effectiveness of various tools & avenues – financial incentives, battery swapping, new business models such as mobility as a service etc. – to drive EV growth will be far more clear

In addition, during this period

EV costs continue decreasing owing mainly to decreases in battery costs. By 2025, one can even expect cost parity between electric and conventional vehicles for many categories of vehicles including cars
Battery performance keeps increasing owing to mainly technological progress. One can expect ranges of batteries per charge to be double of what they are currently.
Fast charging technology becomes better and more affordable – Ultra-fast charging becomes feasible as costs of such fast charging comes down significantly. The charging times also decrease to half of what they are right now.
Trends in Li-ion batteries become clear. This will be both from a technology perspective (which variants of Li-ion will become dominant) and supply chain perspective (capacities and countries of leading companies). It can be even hoped that by this time period, uncertainties in battery raw material supplies (Lithium from Bolivia, Cobalt from Congo, or perhaps alternative materials) would have been sorted out.
More visibility for fuel cells – By 2025, we also expect much higher clarity on the viability of fuel cells as a competing technology to batteries for electric vehicles

Let’s reflect on the above highlights for a few moments. It does not show an explosive increase in EV growth in India. It does not also show revolutionary technology disruptions.

What it shows is a gradual but focused increase in electric vehicle penetration in India, which is aligned to a gradual but sustained technology improvements and cost decreases.

The phase 2018 – 2025 can hence be considered the EVolution phase. While there will certainly be sustained growth during this phase, as the recommended strategy leverages both PULL and PUSH, the growth will be gradual and not explosive.

rEVolution Starts after 2025

With the fundamentals such as EV cost and performance reaching acceptable levels, and with India’s learnings from the electric mobility efforts during the EVolution phase reaching a satisfactory level too, 2025 is the year when India can look at shifting gears.

This is the time when the rollout for a much larger electrification of the transport system can be thought of – be they in terms of types of vehicles or in terms of geography, or be they even in terms of building indigenous capability for batteries or alternatives such as fuel cells.

By 2025, the country’s auto sector would also have had time to recalibrate their strategies and set up manufacturing facilities for electric vehicles of all types, including perhaps hybrids. Such a strong and diverse manufacturing base is needed for exceptional growth post 2025.

Other support elements, such as effective battery recycling or reuse mechanisms, would also have stabilized by 2025. For instance, there are already instances worldwide where used Li-ion batteries have been put to use as storage devices for solar power plants or in backup power systems. These early efforts will mature and stabilize by 2025.

During the EVolution Phase, from an insignificant proportion right now, EVs would have reached high-single digit percentages in sales for select growth segments such as two and three wheelers, and city buses. The four wheeler segment however is likely to witness only a small contribution from EVs by 2025.

Starting 2025, all product segments can start witnessing very high CAGRs, and culminate with even cars reaching respectable percentages of sales by 2030, by which time products such as 2 and 3 wheelers could have reached much higher percentages of overall vehicle sales.

It can thus be said that the real rEVolution in India will start post 2025.

So, going back to the question posed in the very beginning: Do EVs have the potential for an EVolution or rEVolution in India?

The answer is, as you would have guessed: it is not EVolution or rEVolution, it is EVolution AND rEVolution, with the latter following the former.

Implications for Indian Industry

What does this EVolution + rEVolution scenario mean for the various Indian industry stakeholders?

There’s significant excitement and uncertainty for the Indian industry stakeholders, specifically the auto industry companies, when it comes to electric vehicle business opportunities.

For many auto ancillary companies supplying components for the IC engine, EVs are of critical, even existential importance – as electric vehicles will completely do away with all these components! For these companies, strategizing for EVs is a must-do activity. (Of the $43 billion market revenues of the Indian auto component industry, 50% comes from components for the Internal Combustion Engine!)

For many others in the Indian auto sector, as well as those in related industrial sectors such as electrical, electronics and renewable energy, the growth opportunities in this sector are exciting.

For all the above sectors however, uncertainties in policies, market needs, technology and economics make strategizing for this sector a challenging activity. EAI has been interacting with a wide diversity of industry stakeholders in the past 12 months, and we can confirm this overwhelming sense of uncertainty, which is making most of the industry hesitant to take investment decisions.

A clarity on growth strategy is likely to bring a parallel clarity to these segments on the business opportunities they can strategize for during the EVolution phase.

Business Opportunities during the EVolution Phase

The projected growth strategy will enable the following types of business opportunities to Indian industry:

Significant opportunities in 2 and 3 wheelers for OEMs, component providers and dealers/distributors.
In batteries, significant opportunities exist for lead acid battery makers in the country, as lead acid batteries will hold considerable sway during this phase owing to their lower upfront cost.
In the case of Li-ion batteries, the real opportunity during this segment will be for the assemblers of Li-ion cells into battery packs.
We do not foresee significant commercialization of Li-ion cell manufacturing during this phase, but R&D efforts will see a significant acceleration, and thus the Li-ion battery research sector will see opportunities flourish.
Outside of batteries, component opportunities will extend to the battery management systems and powertrain – motors and power electronics.
Business opportunities in charging will be concentrated in the top 10 cities until 2025, possibly only in the top 5 cities until about 2022. Sectors that can leverage these opportunities include petrol stations, malls/super markets, restaurants, hotels etc.
With new business models such as mobility as service and lease models, many finance companies will have new market opportunities for their core offerings.
Growth of the battery swapping model will lead to select opportunities for both electrical companies and logistics companies.
Solar power companies will have gradual but sustained business opportunities in the use distributed solar at EV charging stations. While these will be mainly concentrated in the top cities to start with, such opportunities for highways and other towns and cities will start cropping up closer to 2025.
International opportunities for Indian auto ancillary companies will be in motors and BMS. These are domains in which Indian companies already have established industry credentials – there are many reputed electrical motor makers in the country and India has well-known, credible software skills for embedded software-based management systems.
Inorganic growth opportunities – A trend has already begun where large Indian incumbents (especially from the auto sector) have begun hedging their bets – by investing both internally for EVs and investing in other companies, especially startups. A prominent example is of course that of Hero Electric’s investment in Ather Energy. Our interactions with auto companies showed how a good many of them were keen to identify such inorganic growth avenues.
International collaboration opportunities – Significant opportunities exist for international collaborations for growth, in domains such as battery research, power electronics, BMS and EV charging stations. Such collaborations have the potential to make Indian companies take a quick leap in technology and/or a quick expansion into an international market.

This post is part of a series titled “EVolution or rEVolution? Strategizing for EV Growth in India” from EV Next Perspectives. See all posts for this series from here.

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This post is part of a series titled “EVolution or rEVolution? Strategizing for EV Growth in India” from EV Next Perspectives. See all posts for this series from here.