India File

2-wheeler electrification: challenges and opportunities

Parvatha Vardhini C | Updated on July 15, 2019

On May 14, NITI Aayog announced that only electric three-wheelers should be produced after March 31, 2023. All two-wheelers below 150 cc produced after March 31, 2025, should be electric. The batteries should be lithium ion or any other ‘advanced chemistry battery’.

To this end, the so-called FAME II (Faster Adoption and Manufacturing of Electric Vehicles) policy was announced for a period of three years with effect from April 2019. The total amount allocated over this period is ₹10,000 crore, most of which is to be disbursed as a ‘demand incentive’. This amount will be released, among other things, on the basis of indigenisation milestones met by the industry, as spelt out in the FAME II guidelines with respect to various components. Indigenisation is expected to be complete for components such as windscreen wiper and wheel rim. Crucial components, such as DC charging inlet, DC converter, electronic throttle, vehicle control unit, on board charger and traction motor, have been given a time frame of up to two years — which seems rather short.

To spur indigenisation and demand, the Budget has mooted reduction in the GST rate for EVs from 12 per cent to 5 per cent; deduction under Section 80 EEB for up to ₹1.5 lakh for interest on loan taken for EV; nil customs duty for the import of lithium ion cell; and investment-linked exemption under Section 35 AD for setting up mega manufacturing plants for lithium storage batteries.

At a nascent stage

The FAME demand incentive effectively works out to ₹10,000 per kWh for a standard EV two-wheeler with a 2 kWh battery. It’s another matter that a scooter such as the Ather 450, which offers a top speed of 80 km and a range of 55-75 km, costs ₹1.2 lakh after the subsidy. The EV ecosystem is still in a very nascent stage. For one, while the sale of e-two-wheelers in the country is rising, the numbers are still modest. Data from the Society for Manufacture of Electric Vehicles shows that 1.26 lakh e-two-wheelers were sold in 2018-19. While this is more than double the number sold in 2017-18, it is no match for the 21 million internal combustion engine (ICE) two-wheelers sold in the country in 2018-19. And, 90 per cent of this 21 million are vehicles with engine capacity below 150 cc — the segment the government is targeting for early conversion to electric by 2025.

Secondly, of the 21 million ICE two-wheelers, only about 75.8 lakh vehicles or 35 per cent are scooters/mopeds, with the rest being motorcycles (bikes).

But the current set of e-two-wheelers in the market are almost entirely scooters. More importantly, most of them are low-speed electric scooters with a range of about 25 km/hour. Even here, companies/start-ups such as Ather Energy, Ampere, Hero Electric, Electrotherm and Okinawa have been the first movers rather than the market leaders such as Hero or Bajaj Auto. Thus, the situation is turning adverse for Hero MotoCorp, Bajaj Auto, TVS Motors and Honda — the major two-wheeler players in the below 150 cc segment today — who don’t have an electric bike yet.

Assuming that a battery costs at least half the electric vehicle, and is imported, the import bill as of today is about ₹630 crore. This is expected to rise exponentially if indigenisation does not proceed apace.

Says Kapil Shelke, CEO and founder of Tork Motors (which makes EV motorcycles): “One of the major components for EV is the vehicle battery and shares a cost of 50-70 per cent of the complete EV. As time advances the batteries will also be modernised to churn more power for a competitive price. We see a lot of advancement today in terms of battery technology.”

There is also the question of which charging infrastructure to adopt. There has to be a standardised technology in place, whether it is Chinese, Korean, US or European. The chaos that broke about with mobile phones, when chargers could not be standardised for products of a company, needs to be avoided.

The argument that net emissions effect of EVs will be negative, in view of the rise in electricity consumption, has been contested.

According to a paper ‘Technoeconomic Assessment of Deep Electrification of Passenger Vehicles in India’ by Nikit Abhyankar, Anand Gopal, Colin Sheppard, Won Young Park and Amol Phadke of the Lawrence Berkeley National Laboratory, “Even if none of the decarbonisation measures in the BAU (business as usual) plan materialise and the grid in 2030 remains as coal heavy as it was in 2015, BEVs still reduce per-kilometre CO2 emissions by 20-30 per cent.”

The paper contends: “By 2030, BEVs (battery operated vehicles) can reduce total crude oil consumption by 360 million barrels/year (15 per cent of total). Assuming a conservative crude oil price of $40/barrel, this translates to reducing oil imports by $7 billion/year by 2030 (about ₹50,000 crore/year).”

With inputs from Radheshyam Jadhav and A Srinivas

Published on July 15, 2019

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