Economy

EV penetration in India could be delayed due to Covid-19, passenger vehicles to be worst affected: Ind-Ra

Our Bureau Mumbai | Updated on October 23, 2020 Published on October 23, 2020

Comparing electric versus gasoline diesel car. Electric car charging at charger stand vs. fossil car refuelling petrol gas station   -  Getty Images/iStockphoto

However, growth of electric scooters, buses and three wheelers is likely to be faster in the medium term (3-5 years)

The Covid-19 pandemic is expected to delay the penetration of electric vehicles in India, with passenger vehicles to be the worst affected, said India Ratings and Research on Friday. Low affordability and the government’s priorities on reviving the otherwise suffering auto industry could shift the focus away from EVs in the interim, it said.

Though EV penetration is likely to be faster in scooters, buses and three wheelers in the medium term (3-5 years), PVs may take longer as they are costlier than conventional vehicles vehicles and OEMs may also refrain from incurring high capex, said the Ind-Ra report.

Ind-Ra also believes that underlying challenges in the adoption of EVs such as higher battery cost and reliance on imports would prevail in the medium term, and robust government policies would remain key for the development of EVs in the country.

Electric buses impacted

Growth in EV buses may take a back seat as orders for city buses are largely from state transport undertakings, and State governments are already grappling with a falling GDP. Two wheelers - especially scooters - could see an upside due to the lower price differential and wide choices available to consumers, it said.

Also, two-wheelers have benefitted from rural demand and the shift to personal mobility, this segment could be the least impacted with regard to electrification, it explained.

Ind-Ra believes electrification to be faster in scooters and 3-wheelers as economic viability is comparable to petrol fuelled vehicle as well as providing easier home charging options. Scooters are also used as dual vehicles in many households, increasing the inclination for an EV.

Scooters, a viable option

For instance, while the on-road price of an Ather 450 is around 33 per cent higher than Honda Activa, the running cost per kilometre of an EV is fairly lower at 20-25 per cent, thus making economic sense for a consumer, it pointed out.

Also read: Electric two-wheeler market picks up in September

While for PVs, it cited the example of the on-road price of a Hyundai Kona Electric, which is more than double the cost of a Hyundai Creta, making it fairly expensive for the consumer. Also, the inter-city usage of a PV necessitates a sound charging infrastructure across cities, it said. Hence, electrification is likely to remain low in PVs in the medium term due to the higher cost of an EV model than an ICE model, it said.

Cost component

Battery remains the most critical component of an EV due to both cost viability (30-40 per cent of cost) and technological expertise, said Ind-Ra. “The battery prices have dropped by around 85 per cent over FY10-FY20 globally and are likely to decline further with better economies of scale. However, prices for Indian markets are higher than global average due to lower volumes,” it said.

Also read: Give the old vehicle a green break

Ind-Ra believes that robust government support is imperative for the EV sector, as could be seen globally, for achieving the target of 30 per cent electrification by 2030. For example, China (over 50 per cent of the global electric fleet) witnessed a subsidy programme of over $60 billion during 2009-2019, it said. The Indian subsidy programme of ₹100 billion is much smaller than China’s, it pointed out.

“Moreover, the incentives are capped at 20 per cent of the vehicle cost in India compared to 30-50 per cent in the initial years in China, and 35 per cent in the United Kingdom. Thus, it becomes essential for the government to lay down more comprehensive policies, enhance incentives and ensure robust implementation of existing policies to increase EV adoption,” Ind-Ra said.

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Published on October 23, 2020
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