To boost India’s cost-conscious motorists and in keeping with the green hype, automakers released a range of glitzy EVs this month at the country’s biggest auto show, India Auto Expo, with promising announcements from domestic and foreign manufacturers such as the Chinese BYD Co. and Kia Corp. The problem is that owning one of these newly released four-wheeled EVs is an exciting prospect for buyers heading to showrooms – but once they get there, the economics are a bit trickier.
India’s electric success has been limited to the two-wheeler or 2W market. And it won’t be easy to replicate for larger vehicles. That’s because the economics of 2W electricity are working well in the country: power packs are smaller and therefore cheaper, a growing trend towards battery swapping has allayed range anxiety, and charging is increasingly available. Meanwhile, owning an electric motorcycle has become an affordable proposition as gasoline prices no longer affect the daily household bill. Those savings will go a long way. Additional government incentives are also helping.
The rise of 2W electricity is comparable to that of compressed natural gas cars in India. Cost savings and regulation have pushed drivers to use these vehicles. The favorable economy means people are willing to wait to fill up – it’s not uncommon to see long lines of cars lined up to refill their tanks. People won’t complain about the delays if it’s better for their budget.
However, the economy is exactly why four-wheel electric cars are likely to have a bumpy ride in India. Despite a myriad of options available to consumers – especially now – electric cars are too expensive for what they offer drivers. Energy systems cannot support charging networks even if companies are incentivized to put infrastructure in place and we end up with enough stations. Electricity supply is inconsistent in many parts of the country and charging larger batteries requires higher capacity and voltage. The existential EV issues of range and fear of running out of battery remain, especially given the distances across India and the notoriously bad traffic. Stack that against the price of buying an electric car, and few have the luxury of going electric.
Until it becomes more economically viable for the average Indian, the idea of imminent mass adoption is wishful thinking. Meanwhile, costs are also rising for most manufacturers. Battery power is hard to come by and unreliable as of today. Anecdotally, the quality of power packs entering India is also low.
That poses a problem for Prime Minister Narendra Modi’s government, which has ferociously pushed its greening mission along with all the big companies that got involved. At the Auto Expo, companies like Ashok Leyland Ltd. and Tata Motors Ltd. all kinds of alternative fuel vehicles on display – hydrogen, ethanol, flexible fuels (that run on ethanol blends), electric, compressed natural gas, you name it.
There’s a more realistic solution: go hybrid. Before we dismiss it as a passing idea, it’s worth remembering that this is what we need: a means to an end. They can help reduce emissions so that Delhi and other parts of India can emerge from under the cloud of smog that threatens the health of millions of citizens. Buyers have the opportunity to test out the electric side while releasing fewer emissions and getting through their day without worrying about charging. Meanwhile, hybrids also use a fifth to a quarter of the batteries needed for EVs, meaning they’re less affected by the rising price of power packs (which account for nearly 50% of the cost in EVs). The car eventually becomes cheaper and more economical. Add larger subsidies and they can become an attractive value proposition for Indians. Policies in the US and China already indirectly encourage the purchase of these vehicles.
So it’s no wonder that the savvy BYD, one of China’s top-selling automakers, announced it would have 40% of the Indian EV market by the end of the decade. However, it has not yet committed to setting up massive production operations, preferring to gauge demand first. The company assembles cars from imported semi-knock-down kits and will continue to import batteries it produces in China. Toyota Motor Corp., the world’s largest automaker and ardent proponent of hybrids, launched a second model in India late last year – a cleaner version of the already popular Innova.
Of course, the problem with hybrids usually lies in how drivers use them. Studies have shown that they end up running less on electric and more on fuel. Honestly, but as energy costs and emissions take center stage, they offer a better option than gas guzzlers.
Further incentivizing players like BYD to bring in their hybrid offerings first could jump-start India’s path to lower emissions. Manufacturers may also want to start introducing realistic solutions that work for the energy transition, not just for the future.
For Indians, electrification will happen – at the right price. This technology is a step in that direction.
More from Bloomberg’s opinion:
• Sparks will fly in the electric car trade war: Lionel Laurent
• We are only half way to electric cars: Anjani Trivedi
• Our climate future can be decided in a stalemate: David Fickling
This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.
Anjani Trivedi is a Bloomberg Opinion columnist. She covers industrial sectors including policies and companies in the machinery, automotive, electric vehicle and battery industries in Asia Pacific. Previously, she was a columnist for the Wall Street Journal’s Heard on the Street and a finance and markets reporter for the paper. Before that, she was an investment banker in New York and London
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