404 Not Found: Two questions that EV brands in India have no answers for

Battery Electric Vehicles (BEVs) are gaining traction in India. The market for BEVs is expected to generate over $100 billion of revenue by 2030. Yet, there are two big questions that many EV brands are unable or unwilling to answer.

1) Battery Degradation:

BEVs run on rechargeable batteries. Thus, battery performance and lifespan significantly impact the vehicle's efficiency and cost-effectiveness. Over time, these batteries lose their capacity and efficiency due to battery degradation.

The optimal operating temperatures of Lithium-ion batteries is 25°C to 30°C. Deviations from this range can adversely affect battery life. This is especially critical in the Indian context. Our tropical climate and our high temperatures can accelerate degradation. Moreover, batteries generate heat during charging and discharging. The absence of a proper cooling system in the BEV may lead to faster battery degradation.

Another key aspect is the quality of charging infrastructure. Rapid charging causes more degradation of batteries. Well-designed battery management systems (BMS) can limit this. However, many first-time BEV makers may lack the capability in designing, testing and deploying an efficient BMS.

Battery degradation can also result from the quality of the electrical charging infrastructure. Power supply stability is critical in ensuring battery life. Fluctuations in power supply can lead to inefficient charging and potentially damage the battery. Manufacturers often seek to cut costs on the free charger bundled with the vehicle. Also, several newer charger manufacturers lack enough experience and expertise. So, poor-quality chargers abound in the Indian BEV ecosystem.

A degraded battery may mean a steady fall in the real-world vehicle range. Such vehicles will eventually need a battery replacement. Battery costs account for 40% or more of the EV's original acquisition cost. Even assuming it makes economic sense to spend the amount for an all-new battery after say 5 to 7 years, what is the assurance that a replacement battery will be available? Many EV brands in India struggle to provide routine spares and accessories for models currently on sale. What is the confidence that they will be able to supply a replacement battery years down the line? Who knows?

I recently replaced the battery on my robot vacuum cleaner. Finding a battery vendor itself involved considerable effort. The replacement battery cost almost the original purchase price. Early BEV adopters may soon find themselves going this familiar route looking for a new battery.

Even owners of an erstwhile globally popular product like the Nissan Leaf EV are going through these pangs. Only now are some open-source vendors offering reasonably priced battery replacement alternatives to the usurious price gouging by the OEM source.

2) Resale Value:

EV enthusiasts love to go through the favourable Total Cost of Ownership (TCO) calculations put out by the EV brands... Favourable until one asks for the one key data missing in the calculation – the resale value. It is a rare TCO calculation of EV Vs. ICE that shows the resale value. The resale value is one big datapoint that determines whether a vehicle TCO is favourable or unfavourable. Willfully omitted? Perhaps not - truthfully no one really knows the resale value of any BEV with any degree of confidence because it is difficult to calculate the resale values of BEVs. Multiple factors muddle BEV resale values include -

? Fluctuating central and state government incentives for new EVs: While government incentives reduce the upfront cost, it also lowers the resale value.

? Rapid obsolescence: The rapid upgradation of technology and proliferation of promising new battery chemistries contribute to poor resale values. As new models with improved range and features are released, older models depreciate quickly.

? Poor demand: Despite rising interest in BEVs in India there is very little demand for used EVs due to uncertain battery lifespan. Lack of assured availability and cost of replacement batteries also negatively impact demand

BEVs have already acquired an unsavoury reputation for poor resale values. BEVs depreciate significantly higher than ICEs. A 5-year-old BEV may typically have less than 20% of purchase value. In comparison, an ICE can fetch up to 40% of the purchase price. The chart below shows the EV value depreciation in U.S., arguably a developed market. Any guesses whether the data for India, if available, will be more or less favourable for EVs?

The older generation Reva EVs are the only Indian BEVs of a longish known provenance. They usually fetch less than the price of a decent used motorcycle, in the rare case they find a buyer. The Internet is full of pictures of old EVs rotting away in open lots all across China.

Some BEV brands offer a buyback assurance to fleet customers. These buybacks are usually covered by actuarial arrangements with an insurance company. So all the costs are already baked into the deal. Thus the buyback value offered never reflects the true picture of what the vehicle will actually be worth in the open market at the time of buyback. Even if an individual customer is offered buyback, the offer is clad in lots of restrictive fine print. When the time comes, the manufacturer shall surely find a convenient escape clause to renege on the buyback.

Summing up, the author is not making a case for avoiding EVs. Far from it, if you are opting for an EV, please make an informed decision. Avoid deciding in a green-tinged haze without a clear understanding of potential pain areas. So how do EV brands get themselves out of this Gordian knot that they have tied themselves into? We shall discuss the solutions next week, so watch this space.