Range anxiety is limiting sales of new-energy vehicles, but without the drivers few investors are willing to pay up for infrastructure investment. Can the government and a group of EV manufacturers change that?
(AF) The batteries may be running flat on India’s electric vehicle (EV) ambitions even before they’ve been charged.
Mercedes Benz, BMW, Jaguar and a host of local companies are ready to launch their own EVs onto India’s roads. Tesla is foraying into the country and Amazon.com’s Indian unit has deployed close to 100 E-delivery vans while Walmart-owned Flipkart has started deploying electric two-, three- and four-wheelers.
Yet, as new models roll out in line with the country’s ambitious target of achieving 100% adoption of “electric mobility” in the next decade, India’s EV sector is facing a conundrum; the intent is there, but the infrastructure isn’t.
Fearful that their journeys in one of the world’s largest national land masses will end abruptly, analysts say consumers are shunning the vehicles because there aren’t enough charging facilities.
“The electric car is a good idea and a pleasure to drive, but I can only use it for short city drives and am scared of taking the car out for longer,” a Delhi-based owner of a local brand of e-car tells Asia Financial.
Without cars on the roads, few companies are prepared to take the risk of investing in the millions of charging points the world’s second-most populous country needs.
“It is a chicken-and-egg situation; although charging infrastructure is critical for the success of electric vehicles, largely Indian buyers still suffer from range anxiety and hesitate to jump into buying EVs because there aren’t enough charging points, which in turn is hindering the creation of charging infrastructure fast enough,” Naveen Munjal, managing director of Hero Electric, told ATF.
A McKinsey report has estimated that India will need five million public charging points at an investment of $6 billion by 2030. New Delhi, with a population of 31 million people, has about only 70 active charging stations, with another 100 in the pipeline. But it’s estimated the capital city will require around 300,000 fast-chargers by 2030, assuming 30% EV penetration.
While India’s budget last year made provisions to set up 2,600 public-charging stations in cities and another 1,700 along highways within 12 months, even that relatively modest target has been missed due to the pandemic.
According to a report compiled by the Department of Heavy Industries, the total number of charging stations installed by the government was fewer than 3,200 by April.
In comparison, China built 284,000 outlets in 2020, including 112,000 in December alone – more than the entire US public charging network – according to data published by BloombergNEF.
Already hosting the most charging stations in the world — more than 1.2 million in 2019 — China is adding around 600,000 more following an infrastructure stimulus package announced in March that has earmarked $1.4bn for them.
Taking a punt
Analysts say private capital will be critical for the mass adoption of EVs. But India has attracted little so far; what there is has come from EV manufacturers themselves.
Ather Energy designs, constructs and sells “high-performance” smart electric scooters, with reported annual production capacity of 110,000 two-wheelers. It’s taken a punt on charging points, setting up Ather Grid, a network of fast-charging points in which it has invested $86.5m.
“Publicly available infrastructure today is not happening because setting it up is not profitable, primarily because there aren’t enough electric vehicles on the road,” Nilay Chandra, director for marketing and charging infrastructure at Ather tells AF.
“While we see some action in the two-wheeler charging infrastructure space, India is taking baby steps in putting up charging infrastructure for the four-wheelers and e-commercial vehicles.”
Hero Electric is India’s largest electric two-wheeler maker, and Munjal claims it has already installed more than 650 charging stations and plans to increase that to 20,000 by 2025.
But the venture is a loss leader.
”It’s a marketing expense for us because it gives customers confidence” he explains. “The main focus is to address range anxiety; nobody is going to pay much money for charging their vehicles and we know our stations aren’t going to be revenue generators for a while.”
Ather Energy follows a similar strategy.
“We do not charge users yet, but we make EVs and we have realised that the race is not about getting a higher share of the market; it’s about making users comfortable about adopting EVs as quickly as possible,” says Chandra.
“When that happens EV charging stations will become revenue centres automatically.”
Ather says it operates 130 charging stations in 10 cities and that will double through more stations in 15 cities in 2022.
The segment though, like India’s EV industry, is riding high on government support.
Policy makers have charted a clear plan for India’s EV ambitions through the Faster Adoption and Manufacturing of Electric (and hybrid) – FAME (I and II) – programme, which seeks to encourage EV adoption with tax breaks, stricter emission laws and other policy support.
Goods and services tax (GST) for EVs has been reduced to 12%; for internal combustion vehicles, it starts at 18% and climbs to 43% for luxury vehicles.
And the country now also allows anyone to set up and operate charging stations and treat EV charging as a service.
Officials have set aside $135m for creating infrastructure in phases, with the first focusing on megacities like Mumbai, New Delhi, Bangalore, Chennai and Kolkata, as well as national highways and corridors.
Subsequent phases will focus on going deeper into cities, state capitals and smart cities – the group of 60 or so hubs including Chandigarh and Ahmedabad that have built-in 5G connectivity.
FAME also encourages the interlinking of renewable energy through the use of smart grids.
India recently approved a production-linked incentive (PLI) scheme worth 181bn rupees ($2.47bn) to boost domestic production of batteries with advanced energy storage capacities. This too could boost the business case for setting up charging stations, say experts.
However, implementation of the FAME programme has been beset by “chaos”, cautions Varun Chaturvedi MD and CEO of Volttic, a charging technology solutions provider.
“No one follows standards in terms of battery sizes, charging rate, or technology,” Chaturvedi tells AF. “Policymakers so far, have not outlined these specifications.”
Space shortages, rising real estate costs, high power tariffs and a lack of affordable renewable energy are stalling the sector’s growth, say sources.
“When you set up a charging station you do not know if you are going to be able to make a business out of it,” says Mujal.
Vehicle manufacturers nevertheless see a bright future for EVs and the business of servicing them.
According to an independent study by CEEW Centre for Energy Finance (CEEW-CEF), the EV market in India could potentially be a $206bn opportunity by 2030 if India maintains steady progress towards meeting its 2030 target.
This would also require a cumulative investment of more than $180 billion in vehicle production and charging infrastructure, CEEW-CEF projected.
A report by India Energy Storage Alliance (IESA) projects that the Indian EV market will grow at a compounded annual growth rate of 36% until 2026. The EV battery market is also projected to grow at a CAGR of 30% during the period.
Another forecast released by the government in recent days said the electric two- and three-wheeler segment will drive India’s shift to electric mobility and by 2025 as many as four million such vehicles could be sold each year, growing to almost 10 million by 2030.
Of these, electric three-wheeler vehicles and auto rickshaws used exclusively in India could account for approximately four million units alone in 2030.
Recently, Ola Electric, a subsidiary of the unicorn Indian ride-hailing start-up Ola, announced that it would set up the world’s largest electric scooter plant in Hosur, at a cost of $330m. It’s aim is to initially produce two million units a year, and by next year 10 million – or 15% of the world’s e-scooters.
There are other gains to be made from an EV transition. NITI Aayog estimates that EV sales will save India around $60bn in reduced oil imports. The country aims to reduce its total oil imports by 10% by 2022.
To help that level of sales and adoption, the government also said last week that a committee had been set up to accelerate the development of “a global breakthrough in affordable EV charging infrastructure,” according to a government statement.
The committee comprises key stakeholders including EV manufacturers, auto and electronic component suppliers, power utilities and communication service providers. It’s aim is to develop specifications, prototype products and undertake testing and validation of the proposed standards.
In its first act, the committee plans in the next two months to release the details of units with Indian Standards for low-cost AC charging. It also wants the charging point to be cheaper – with prices targeted at starting as low as $50 per unit. They will also be smartphone-operable.
The charge points can be set up anywhere with a 220V 15A single-phase powerline, the statement said, without clarifying whether the government is thinking of producing them as well.
They will transform car parks at railway stations, shopping malls, hospitals, office complexes, apartments and even smaller shops into EV charging points.
The opportunities this sort of innovation implies is not lost on India’s manufacturers.
“Just because there aren’t enough EVs on Indian roads, it doesn’t mean that creating a business model out of charging stations doesn’t make sense,” says Chandra of Ather Energy. “Revenue models will emerge as EV numbers grow.”
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Editing by Mark McCord