Opinion | An entire ecosystem needed for EVs in India | Mint
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Business News/ Opinion / Online-views/  Opinion | An entire ecosystem needed for EVs in India

Opinion | An entire ecosystem needed for EVs in India

Electric vehicle adoption can definitely be boosted, but in a ruthless and inertial battlefield like India, it can only be catalysed, not gamed

Graphic: Santosh Sharma/MintPremium
Graphic: Santosh Sharma/Mint

India’s automotive industry is in a growth stage—automobile production and sales in India will both have higher growth rates over the next decade than in most other auto hubs. However, with each additional combustion-engine-based vehicle we manufacture and use, we will be adding carbon dioxide and other pollutants, using additional fuel, and putting excessive load on our already saturated city infrastructure and traffic. Ostensibly, electric vehicles (EVs) are less polluting, better on total-cost-of-ownership (TCO), expected to rapidly become cost-competitive, and more suitable for commercial business models. These attributes make them seem like an obvious lever for future growth.

While it is fair to expect EVs to support sustainability goals, it is imperative to understand that EVs are effective only in a conducive ecosystem, driven by models of sustainable generation and consumption. From a generation perspective, an EV is as clean as the electricity it uses. India is highly dependent on thermal sources, which account for about 65% of current capacity. As EV adoption increases, so should the contribution of renewables. The inherent variability of solar and wind systems mandates use of batteries connected to the grid to optimize capacity, renewable contribution, and supply robustness. There is also opportunity for exploring synergies between EV and grid batteries through this EV-renewables symbiosis. On the consumption side in a transportation context, let us focus on passenger vehicle ownership, which is evidently the final frontier for EV adoption. Pollution from transportation comes from a myriad of factors, including emissions, dust levels and congestion with the number of vehicles, their occupancy, and the stress they put on infrastructure. Not only do we need to have greener cars plying our cities but also fewer cars.

EVs have a distinct advantage over combustion vehicles in reducing vehicle ownership levels. Think about various models of aggregation (ride-sharing, ride-hailing or subscription) driven by companies such as Uber, Ola and ZoomCar. Consumers realize that an owned car is idle approximately 90% of the time. A shared vehicle runs around 12 hours a day and caters to multiple passengers and, thus, in the best case, does the effective work of five personally owned vehicles. EVs save money over combustion vehicles on every kilometre they run through lower operating costs. Furthermore, fleet-optimization algorithms can pare route variability and incorporate charging times into drive-cycles to maintain profits. Hence, as aggregate models use more EVs, we save on emissions by being greener and also having fewer cars on the road.

It is clear, then, that for EVs to contribute effectively, we need commensurate efforts in developing an entire ecosystem. Two previously separate value chains of the automotive and power sectors will now become interlinked. In this novel stakeholder map, end consumer profiles range from personal owners to even city transportation utilities—all with different needs, limitations and adoption strategies. The recurring theme in fledgling ecosystems such as this is that the pie is not big enough for intense competition and, thus, stakeholders first need to focus on creating the pie. This is important to fully utilize the benefits of scale, ensure there is uniformity in consumer uptake across factions and, finally, sustain interest from the investment community in a dependable growth option. Disproportionate impetus in nascent stages tends to either create future entry barriers or show declining viability after the fad passes. In either case, the market suffers and fails to reach its full potential.

Companies need to be cautious and hedge risks by not going all-out on investing in all competencies and geographies. A natural way to operationalize this strategy is to establish partnerships. This will be an important characteristic of this space in the coming years and the process has already started. Some flagship examples include Suzuki and Toyota partnering for the Indian market, Sun Mobility and Ashok Leyland partnering for swapping-based electric buses, and Mahindra and Ola collaborating for a mass mobility platform. All these permutations of partnerships are testament to the advent of experimentation in an operationally inchoate space.

Along with partnerships, new business models will also be tested across the board. Consider the example of charging infrastructure—it can be residential (charging in your parking), commercial (charging at work, in malls), and institutional (the way petrol pumps operate currently). Within each of these setups, we could have fast DC charging, slow AC charging, and battery-swapping. Stations can be set up by an original equipment manufacturer (OEM), an operator, a parking owner, a fleet owner or even a captive user. For monetization, one could charge by the hour, by units of electricity, a flat rate, a subsidized rate (if it say increases foot fall in a store), or any combination of these. Beyond charging infrastructure, there could be multiple models of using EVs as owned vehicles, on lease with structures of gross cost-to-customers (GCC) or even pay-as-you-go.

Conversations with key players ranging from power distribution companies and OEMs to financers make it clear that the industry will try an endless number of models. Like any other product, which iteratively reaches its market-ready form, solutions will need to be consumer-centric, commercially viable and technologically feasible. Hence, it is critical that in the policies that the government proposes, the core aim is to be supportive and not inadvertently restrictive. The belief should be in incentivizing outcomes and not approaches so as to be more result-oriented. All involved parties unequivocally agree that cost, range anxiety and infrastructure robustness are critical bottlenecks. They limit adoption and, especially in India, consumers are not going to buy into a pyrrhic dream. Market mechanisms will solve teething problems, but only in good time. EV adoption can definitely be boosted, but in a ruthless and inertial battlefield like India, it can only be catalysed, not gamed.

This article is a part of a collaboration between Mint and the International Innovation Corps.

Rahul Chawla is a project associate at the International Innovation Corps, University of Chicago.

Comments are welcome at theirview@livemint.com

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Published: 20 Aug 2018, 10:10 PM IST
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