Is Indian infra ready for EV future?

Electric vehicles have become the new buzzword for the automotive industry. Though the numbers of electric-powered cars are still very small compared to the overall production, the graph is rising rapidly. It looks as if the future is going to see big changes in this sector. Some luxury carmakers like Audi have already declared that their new launches will now be all EVs. Other more affordable cars are being produced by numerous manufacturers including Tata Motors, MG Motors and Mahindras.

Tatas is currently the market leader for passenger cars but is also producing trucks, buses and defense vehicles. One of its main advantages is said to be the ability to access resources from R&D centres in several countries. Maruti Suzuki, however, is currently offering several hybrid cars which have the option of using either petrol or electric power.

This shift in emphasis from the conventional fossil fuel-powered car to the electric vehicle has come about due to various factors. The first, of course, is the drive towards clean energy and the need to reduce carbon emissions as a national goal. But second, and probably more important for consumers, is the need to cut fuel costs, given the soaring prices of both petrol and diesel in recent times. The operational costs of EVs are dramatically lower. On the other hand, the capital investment in buying an EV is much more than for a normal vehicle.

The focus on EVs has come just as the country's passenger car industry finally seems to have emerged out of the Covid-era doldrums. Sales have nearly matched pre-pandemic levels of 2019 in the first quarter of the current fiscal (2022-23). The structure of the market has also undergone significant changes. From a price-sensitive market that gave primacy to small entry level vehicles, there has been a shift towards the more expensive and sturdy on-road SUVs (sports utility vehicles) which are now dominating sales.

This particular industry is normally considered a bellwether for growth in the economy owing to its widespread nature, the large number of ancillary industries as well as the enormous employment potential. It was therefore a matter of concern during the pandemic when sales dipped drastically. Output began to pick up last year but disruption in supply chains owing to global movement curbs linked to the Covid virus led to shortages of semiconductors. This has been a worldwide problem of car manufacturers. The net result has been that even though demand picked up since the end of 2021, the actual availability has been much lower leading to long waiting periods for consumers.

The situation has eased recently with semiconductor supplies. Even so, sales have crossed eight lakh units in the April-June period, the best since the first quarter of the pre-pandemic year, 2019-20. June sales have shown the strongest growth with a rise of 26 per cent compared to the same month last year.

As far as electric vehicles are concerned, sales of all types of vehicles rose to 4.29 lakhs in 2021-22 compared to 1.34 lakhs in the previous year. Of this, the share of e-cars was 17,802 units. The lure is the low running costs while the initial capital investment is now reduced considerably with prices of batteries having fallen up to 70 per cent. The price of an electric vehicle is thus going to be comparable soon to fossil fuel based cars. With the growing environmental consciousness and the need to jettison fossil fuels, the expectation is that the demand for electric vehicles will grow exponentially around the world. The International Energy Agency has projected that there will be 70 million electric vehicles by 2025. The bigger problem, however, will be the infrastructure needed in terms of charging stations for such cars. Unless this is available, it will not be possible for electric vehicles to be driven across the length and breadth of the country. Recognising this lacuna, the Power Ministry has set a target to set up one charging infrastructure per 25 kilometres on highway. But it has left it to cities or state transport hubs to develop specific targets and plans for their urban areas.

The Ministry has also planned that for semi-public charging, infrastructure will be provided at 20 per cent of all parking capacity at the premises. These proposals are based on a Niti Aayog report on policies and standards for state and local agencies to establish an EV charging network.

The report had also spoken of the prospects for battery swapping which was mentioned in the 2022-23 budget by Finance Minister Nirmala Sitharaman. The advantage of the battery swapping facility, according to the report, will be that the problem of battery charging in EVs can ultimately be eliminated. As a consequence, the Road Transport Ministry has already approved the sale and registration of battery-less EVs which is expected to improve the prospect of battery replacement solutions.

For those of us who are new to all these concepts, this is clearly a brave new world in the automobile industry. The changes in the Indian passenger car front, however, are only reflective of the altered global scenario. The international EV market was estimated at around 160 billion dollars in 2020 and is projected to cross 800 billion dollars by 2030. The biggest market for EVs is China while Europe has also picked up with 17 per cent of new car sales in 2021 being for EVs.

The passenger car industry is thus metamorphosing in many ways. On the plus side, the outlook is bright with sales having picked up considerably over the past few months. Much will depend, however, on supply of chips and on global supply chains continuing to operate normally without any disruption. As far as electric vehicles are concerned, however, the growing interest will only continue if adequate external infrastructure is built up to meet the needs of this sector.