The EVolution Story

A lot has been going on rounds across the globe over the revolution which is likely to come in the automobile industry. There has been a lot many questions too being asked by various stakeholders in the value chain. The question thus arises, are these all too futuristic? or is it a necessity. For a country like India which has its own dynamics, will this change be a welcome change? Do we have options to still hold back? If we make the shift then what happens to the current competency, manpower and existing fleet? Well, questions are many, unfortunately answers are few. But lets see the world around us today, gone are the days where everything could be predicted, given space to grow and then make decision. Today its a VUCA world which gives you limited resources and the most limited resource in offer is TIME. In today's world of constantly changing and developing technologies, whats most important is to remain agile and remain adaptive to changes.

Change has been the new Normal today, technologies are getting modified/ are changing everyday. Lets take mobile phones for example. Within a week of a new mobile phone being launched an update is released in the market. Within a month of the new phone launch, companies start giving teasers of the next model. But, is this all gimmick? or is this necessary? the answer as we all know is YES! Everyone here is focused on how they can maintain the competitive edge in the market and prevent a UBERization. As its rightly said, you are only the leader till you understand and appreciate change, the moment you stop, you seize to be a leader.

Lets take a step back and appreciate the problem in hand. Lets talk of India. We are one of the world leaders in automobile sector, specially 2 wheelers which constitute roughly of 80% of vehicle sales in the country. We sell 25 million vehicles annually, this shows the magnitude of the industry we are in talks of changing. Its not only about the vehicles but its also about the entire eco-system which gives birth to these vehicles. So, what is the need to change therefore? Why cant we stick to ICEs? The reasons are many, lets point out the top two reasons:

• Oil import - Volatility of prices
• Pollution and our commitment at COP22 - Decarbonization of the Grid

We don't need to look far, the condition that Delhi is going through today is proof enough and a reason important enough to vouch for the change. Infact the change is inevitable, its no longer an option for us, the world is already changing. The question of the hour is how ready are we to embrace the change. The world today has 4 million EVs running as on date and 1 million of this 4 million got added in just the last one year. This shows that the new era in mobility is already there knocking at our door.

Lets talk of China, which accounts for 40% of the Global EV market. China stands second to US in market share of EVs. It boosts of 90% of the E-Bus segment as on date. Major cities like Shenzhen has converted 100% of their existing bus fleet to E-Buses. In 2017, China alone sold 777,000 EVs. Government, plays a big role in this transition. The China Government mandates all automobile companies to produce a certain percentage of their vehicles as EV post 2019. In Canada, 20% of parking slots are reserved for EVs to promote EV adoption. But the most impressing story is that of Norway which stands 3rd in world in terms of market penetration of EVs followed by Japan. These are examples how a transition is possible if there is a firm vision and road-map set by Government.

Now, lets talk about the India story. The FAME India (Faster Adoption and Manufacture of (Hybrid and) Electric Vehicles) Scheme was launched by the Ministry of Heavy Industries and Public Enterprises in 2015 to incentivize the production and promotion of eco-friendly vehicles including electric vehicles and hybrid vehicles. FAME India is a part of the National Electric Mobility Mission Plan. Main thrust of FAME was to encourage electric vehicles by providing subsidies. Vehicles in most segments – two wheelers, three wheelers, electric and hybrid cars and electric buses obtained the subsidy benefit of the scheme. The Scheme has now been extended till March 2019. Talks of launching FAME II (total subsidy and incentives of $784 million over 5 years) are also in progress and the same is scheduled to release in 2019. All these comes as a impetus to the GoIs vision of having 30% of its fleet as electric by 2030. The Government has also approved Green number plates for EVs to get them recognized. Recently the Government also communicated that individuals and companies will not need a license to set up a public charging stations for EVs and the tariffs will not exceed average cost of supply plus 15%. The guideline also clarified that existing fuel retail stations can be doubled up as charging stations if they offer adequate firewall to ensure safety. Many states have come out with EV policies like Maharasthra, Telengana, Delhi. Delhi has set the vision of 25% EVs by 2030. So, this clearly shows the intent of the Government to support this transition.

So what are the challenges in this transition:

"During 2017-18, 25 million new vehicles hit the Indian roads, but less than 0.3% (around 56,000) of them were Electric Vehicles"... As per the NEMMP 2020 plan, 6 to 7 million EVs should be entering the Indian road by 2020

1. Range Anxiety: At present the EVs on road can run upto 80 to 100kms on a single full charge. Saying this, the range does deteriorate with traffic and multiple start and stops, which is common in any urban road. This creates an obstacle in the customers mind who does not want to travel on road with that anxiety in mind, specially when there are very few chargers deployed. The total number of chargers as on date is very minimal to adhere to this demand. Thus people prefer EVs as a second vehicle for small intra-city trips.
2. Performance Anxiety: There has been reports that show that the performance of EVs drop at higher speeds which is a big obstacle for customers to shift from ICE to EVs. Reports of sedden fast discharge of batteries has also been seen. Technologists do understand that these are glitches which will be addressed to with updates, but the fear of this can be long lasting in customers mind.
3. Charging Time and Infrastructure: Charging time is another major concern. Today there are 430,000 EV chargers installed worldwide, but 320,000 of them are slow chargers which takes upto 8 hours to charge a vehicle. Even the fastest charger available in commercial market today takes 30 minutes to charge. The question is, are customers ready to wait for that long!!! leaving aside the waiting tie to get the plug alone to charge. But what about infrastructure? are we ready to cater the demand? Surveys shows there is requirement of 1 charger every 9 sq km and in highways one charging station every 25kms. All these chargers should be multi chargers so that they can cater to all kind of EVs. This infrastructure is yet to come up to support EVs. T present India has just 500 charging stations against 61,000 petrol/ diesel retail outlets. Its the chicken and the egg story in play now between the OEMs and Charging equipment manufacturers.
4. Price: As on date the cost of an EV when compared to its peer ICE is almost 2 to 3 times more. Even for public transportation, an E-Bus costs around INR 2 crore whereas its counterpart ICE costs around INR 50 lacs. Cost parity is expected to be reached by 2023. At present 30% of the total price of a EV comes from its battery. Though battery prices have been decreasing exponentially over the last few years (70% decrease from 2011 to 1018) but still to match its ICE counterpart, it will take time. Also, remember that the battery needs to be replaced every 3 to 5 years depending upon its usage. (At present the cost break-up of a EV is : 55-70% - battery, 5-10% - BMS, 10-15% - Power electronics and 5-15% - Charging). There has been initiatives being taken here, like taking the battery off the EV. There has been tax incentives, GST benefits on offer to promote EVs. GST on luxury EVs has also been reduced from 43% to 12%, and that of batteries from 28% to 12%. These are boosts which makes the industry believe that cost parity will be achieved soon. Also what needs to be realized is the fact that the operating expense of a EV is way less that its ICE counterpart.
5. Policy Uncertainty: There has been a number of initiatives being taken by the Government to push the mission, but there is a lot of grey areas in the efforts being taken which is making investors uncomfortable. Non coherent bidding parameters is also a big reason. Each tender being issued has different requirements and specifications. If efforts are taken to standardize these specs and parameters there will be much more confidence and uniformity in the system. The standard of chargers that India will be following also needs clarity (3 standards in world: CCS, GBT, CHAdeMO, most polular being CCS but GBT is also getting popular because of the chinese market which follows the GBT standard). For India it may have to follow a mix of CCS along with GBT model.
6. Impact on the Grid: This constraint is more for the utilities. If predictions are to be believed, by 2030 an additional energy requirement of 82 TWh is predicted, which is 3.3% of the total generation. The peak demand change is expected to be around 5.6% (considering 144 million EVs by 2030). The load patterns will also change as more and more vehicles gets connected o the grid. There will be dynamic load changes and ramping rates will also be huge. Majority charging will take place at home (85%) and office charging areas. What remains a concern is overloading of lines and transformers to cater to this demand. Huge CAPEX infusion is required to strengthen the grid. It is expected that the transformers will have to be in loaded condition all throughout which will affect their life. Maximum of the users will charge their vehicle at night which at present is the lean hour of demand for electricity thus the demand will also increase in night. To handle this 'Time of Use' concept needs to be implemented so that charging is encouraged at a particular time of the day. Also concepts like smart charging has potential to reduce ramping rates by almost 6GW/hour. Integration of renewables has to take a center-stage, else the story will remain the same. We will just replace fuel oil consumption with coal, if we rely on conventional power to power our vehicles in future.

Way Forward:

Focus on 3 critical words are essential: FAST, CONVENIENT and SAFE. Charging time of 30 minutes is still too long to make a mind shift from ICE to EV. Technological innovations like V2X (vehicle to everything), wireless charging, rapid charging (<2mins), plug and charge, mass implemetation of IoT, Smart charging, Time of Use implementation and going forward dynamic pricing model. For utilities this is a huge opportunity to step in and take the early mover advantage. A 8% increase in demand by 2030 is an platform which can give rise to huge GWs of renewables which help the environment too. This in turn helps the Government to meet its ambitious target of 175 GW of renewables by 2022, 100% electrification by 2019, 37% CO2 reduction by 2030 and reduction of harmful emissions like SOx and NOx from thermal power plants.

There has been efforts carried out here and there but what is required is a standardization of processes, making the same business easy and agile. Policy clarity, clear vision and leadership are something which will act as catalysts in this move. The China market is growing fast but it will reach maturity by 2025, so India has a lot of opportunities to be the global leader going forward. A disruption in battery technology is still awaited, Li-Ion may not be the sustainable solution going forward. Intelligent mobility is another concept that needs focus. Indices indicate that post 2030, intelligent mobility will drive the EV market. Shared mobility is an equally promising sector. This can play a big role in de-congesting the roads and serve in reducing pollution to a great extent. Fleet aggregators like OLA, UBER can join the brigade, this will not only increase EV sales but also reduce the overall cost of ownership with innovative business models. Even a realistic penetration of around 15% EVs on Indian roads in the next 5 years holds up immense opportunities.

Government pushes in the form of incentives, subsidies, road tax waiver, preferred access, parking benefits, corporate commitments, emission credits are also key drivers to make EV the normal going forward. A nation like India can save 64% energy by 2030 by shifting to electric mobility. The India market projects 4% penetration of EVs by 2022 in the market and will constitute 13% of the market by 2040. Public transport needs a similar push too, at present we just have 12.5 buses per 1 lac population against 100 buses/ 1 lac population. This have been a neglected sector for long and thus puts up a very strong opportunity.

So, the question is no longer whether we have an option, its about how prepared are we to welcome this transition which is coming up. Its all about we capitalizing on this change and making our tomorrow a much better, sustainable and green tomorrow.