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Naveen Munjal – On Your Mark, Get Set – 2, 3 and 4

Investment Outlook , Published Feb 17, 2019

Naveen Munjal

Naveen Munjal

Managing Director at Hero Eco.

The fastest adoption and conversion of conventional
vehicles to that of electric is initially expected to be
in the two-wheeler and three-wheeler segments.

Overview

By 2022-23, the balance of price-performance
equation is expected to shift in
favour of lithium-ion batteries, thereby,
making mass adoption of EVs a reality
around the world. However, it calls for a
single coherent long-term policy that
would lay out a roadmap for building a
robust EV ecosystem revolving around
charging stations, manufacturers and consumer
incentives.

India is quickly adopting Electric Vehicles
(EV) and in the next couple of decades, it
will become more popular than Internal
Combustion Engine Vehicles (ICEV). The
Indian EV market is projected to grow at a
rapid rate of more than 37% annually over
the next five years (FY‘18-FY’23). Sniffing an
opportunity, automotive manufacturers
have already started increasing the allocation
of their resources towards research and
development of EVs.

Our Government plans to convert the entire
fleet of ICE vehicles to that of electric by
2030 through its eco-automotive policy –
FAME-II (Faster Adoption and Manufacture
of Hybrid and Electric Vehicles).

However, going fully electric is not going to
be a cakewalk without the full support of the
government, auto consortiums and other
concerned authorities. It requires not just
the private sector participation but also a
massive public awareness program. Some
consumers are sitting on the fence due to
lack of knowledge about EV as well as
myths surrounding its usage. Educating the
general public should therefore be the main
agenda of our Government as well as that
of the manufacturers which could benefit
the entire ecosystem.

It’s all win-win

Cost saving, efficiency and comfort have
been the major drivers for choosing an EV.
The efficiency of BLDC (Brushless Direct
Current) motors that are used in EVs is about
70% as compared to a lower 25% for that of
ICE motor. Add to that the zero emissions
and elimination of technical issues like
knocking and ignition lag; EVs are a complete
package to vouch for. Moreover, poor traffic
conditions in our country make EVs the ideal
candidate. The owners feel a sense of pride in
their eco-friendly choice of travel.

Moreover, going fully electric has the
potential to save $370-445* billion by 2030
for the exchequer in the form of lower import
of crude oil.

*Calculated from the given data

Economics v/s efficiency

However, there are some challenges. An
average cost of a new car in the US and
Europe is around $35,000. In India, it is
much lower at about $8,000, thereby
making the conversion to electric much
more difficult. Mass conversion to EVs in
India is expected when the battery prices
drop substantially, thereby, making them
more pocket-friendly rather than just being
cost efficient.

The cost of lithium-ion batteries have gone
down from $1000/kWh in 2010 to $225/k-
Wh in 2018 – thanks to proliferation of EVs.
It continues to drop substantially year on
year.

Big trigger

By 2022-23, the balance of price-performance
equation is expected to shift in
favour of lithium-ion batteries, thereby
making mass adoption of EVs a reality
around the world.

The decrease in battery prices as well as the
emergence of tech start-ups in the field of
manufacturing and rentals have given a big
boost to the automobile industry. Tech
players like Ola and Uber are already planning
to venture into the EV rental space.
Startups in the field of car rental services
are aggressively exploring fleet ownership,
especially in the crowded cities.

The first movers

The first movers

India is the world’s third largest market for
automobiles; it sold about 25 million ICE
vehicles in 2017. Of these, more than 80 per
cent (about 20 million) were two-wheelers.
The two-wheeler segment is expected to
lead the EV market in India followed by that
of public transport; the latter is getting a
major push from the Government. The fastest
adoption and conversion from ICE to
electric is initially expected to be in the
two-wheeler and three-wheeler segments.

The primary focus of EV manufacturers over
the next 5 years is to widen the range of
products on offer while giving a good
value-for-money proposition to consumers.
They are already in the process of developing
a high-speed electric scooter as well as
an electric motorcycle prototype at pocket-
friendly prices.

Moreover, going fully
electric has the potential
to save $ 370-445* billion
by 2030 for the exchequer
in the form of lower
import of crude oil.

Stable policy

Moreover, the emergence of 8-10 KVA lithium-
ion batteries which shall be light weight,
efficient as well as powerful is going to revolutionise
the EV space in the future. Adoption
of solar-powered charging stations will
become rampant as private players jump on
to the EV bandwagon. However, it calls for a
single coherent long-term policy that would
lay out a roadmap for building a robust EV
ecosystem revolving around charging
stations, manufacturers and consumer
incentives. Are the policy makers listening?

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