To galvanize India’s cost-conscious drivers and in line with the green hype, automakers released a slate of attractive electric vehicles this month at the country’s largest auto show, India’s Auto Show, with promising announcements from domestic and foreign manufacturers such as China’s BYD and Kia. Corp.’s problem. In that owning one of these newly released all-wheel-drive electric vehicles is an exciting prospect for showroom-bound buyers—but once there, the economics gets trickier.
Electric success in India has been limited to its two-wheeler, or 2W, market. Nor will it be easy to replicate with larger vehicles. That’s because the economics of 2W electrics are doing so well in the country: power packs are smaller and, therefore, cheaper, the growing trend toward battery swaps has reduced concern about range and charging is becoming increasingly available. Meanwhile, owning an electric motorcycle has become an affordable proposition, because Gas prices It no longer affects the daily household bill. These savings go a long way. Additional government incentives help, too.
The rise of 2W electricity is like the rise of CNG cars in India. Cost savings and regulation prompted drivers to adopt these vehicles. A favorable economy means that people are willing to wait to fill up – it’s not uncommon to see long lines of cars queuing up to replenish their tanks. People wouldn’t complain about delays if it was better for their budgets.
However, economics is exactly why four-wheel electric vehicles are likely to go down a bumpy road in India. Even though there are a host of options for consumers – especially now – electric cars are too expensive for what they offer drivers. Power systems can’t support charging grids, even if companies are incentivized to build the infrastructure and we end up with enough stations. Electricity supply is unsteady in many parts of the country, and charging larger batteries requires higher capacity and voltage. The electric vehicle’s existential problems in range and concern about running out of charge continue, especially given the distances across India and its notorious traffic. Compound that for the purchase price of an EV, and there’s little with the luxury of driving an electric vehicle.
Until the idea of imminent mass adoption becomes more economically viable for the average Indian, the idea of imminent mass adoption is wishful thinking. Meanwhile, the costs for most manufacturers are also going up. Battery supplies are hard to come by and, even today, unreliable. Anecdotally, the quality of power packs coming to India is also low.
And that poses a problem for Prime Minister Narendra Modi’s government, which has pushed furiously on his greening mission, along with all the major companies that have taken part in the ride. At the Motor Show the likes of Ashok Leyland Ltd. and Tata Motors Ltd. All kinds of alternative fuel vehicles on offer – hydrogen, ethanol, flex-fuel (which runs on an ethanol blend), electric, compressed natural gas, you name it.
There is a more realistic solution: use a hybrid. Before dismissing it as a tentative idea, it’s worth remembering that this is what we need – a means to an end. It can help cut emissions so that Delhi and other parts of India can come out from under the cloud of smog that threatens the health of millions of citizens. Buyers have the option to test the electric side with lower emissions and get on with their day without worrying about charging. Meanwhile, hybrid cars also use a fifth to a quarter of the batteries needed for electric cars, which means they are less affected by higher prices for power packs (which account for nearly 50% of the cost of electricity). The car becomes cheaper and more efficient. By increasing subsidies, it can become an attractive value proposition for Indians. Policies in the US and China are already indirectly incentivizing the purchase of these vehicles.
It’s no wonder, then, that BYD, one of China’s best-selling automakers, has announced its intention to capture 40% of the electric vehicle market in India by the end of this decade. However, it has not committed to mass production runs yet, preferring to measure demand first. The company assembles the cars from imported semi-assembled assemblies and will continue to import batteries it makes in China. Toyota Motor Corp., the world’s largest automaker and a firm believer in hybrid cars, launched a second model in India late last year – a cleaner version of the already popular Innova.
Certainly, the problem with hybrid cars tends to be about how drivers use them. Studies have shown that they end up being driven less on electricity and more on fuel. Fair, but as energy costs and emissions come front and center, it offers a better choice than gas consumers.
Incentivizing players like BYD to introduce their hybrid offerings first could help launch India’s path to emissions reductions. Manufacturers may also want to start offering real-world solutions that work for the energy transition, not just the future.
For Indians, electricity will happen—at the right price. This technology is a step in that direction.
More from Bloomberg Opinion:
• Sparks will fly in the electric car business war: Lionel Laurent
• We’re only halfway there for electric cars: Anjani Trivedi
• Our climate future may be decided in Gridlock: David Fickling
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Anjani Trivedi is a columnist for Bloomberg. It covers industry areas including policies and companies in the machinery, automotive, electric vehicle and battery sectors across the Asia Pacific region. Previously, she was a columnist for the Wall Street Journal’s Heard on the Street and financial and markets correspondent for the paper. Prior to that, she was an investment banker in New York and London
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