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India sets target to go all electrical by 2030; Over-reaching or ambitious, only time will tell

Author: JK Jain/Monday, September 25, 2017/Categories: Auto & Ancillary

India sets target to go all electrical by 2030; Over-reaching or ambitious, only time will tell

In another path breaking policy stance by the Narendra Modi led government, India has set itself an enormous target of going electrical by the year 2030 in the passenger car market and zero emission by 2040. From April 1 2017, the government had made the transition from BS III compliant engines to BS IV and set the ball rolling for the shift to the ambitious BS VI compliant by 2020 skipping the BS V stage all together, a move that no country has made so far.  Going by this graph the NDA government seems to leave no stone unturned in their bid to reduce the alarming levels of pollution in the country (four of the top 10 cities in the world belong to India) as they ‘quite literally’ are charging ahead with what could be referred to as the most drastic but powerful set of policies yet as far as the Indian automobile industry is concerned. 

Recently, the Indian auto industry found itself on the receiving end of what was supposedly intended as a “green warning” by the transport minister Nitin Gadkari who was addressing at the SIAM conference cautioning the companies to start building electric and alternative fuel vehicles or risk being overtaken by policy changes. The government intends to put a ban on petrol and diesel cars and end automobiles powered by fossil fuels by the year 2030 and this was his way of inviting them to be ‘on board’ with the new technology.

After the initial shock and dismay that the industry was seen conveying, it quickly transitioned into them taking the remarks with a pinch of salt, as a market of golden opportunity that is virtually untapped at present has suddenly opened up. The electric vehicles market in India is huge with only 5,000 electric cars on our roads at present in a market that accounts for around 25 lakh passenger car sales annually. India is also set to surpass Germany and take its place as the third fastest growing market by 2020 that only increases the absorption and demand levels of the country going forward. The government think-tank Niti Aayog in a recent report had estimated that accelerated adoption of electric and shared vehicles could save USD 60 billion in diesel and petrol costs by 2030.

Some experts believe that this shift being put in place is over reaching and that it is next to impossible to have all road vehicles turn electrical by 2030. Norway, that has the highest rate of electrical vehicles penetration in the world of nearly 29% market share has set a target to completely phase out fossil fuels powered cars by 2025 and only allowing sales of 100% electric or plug-in hybrid cars. France and UK have also recently set targets for themselves of shifting to electrical / hybrid automobiles by 2040. In such a time when electrical penetration is almost negligible, having only electric cars in India by 2030 seems only a dream.

However, Amitabh Kant, Chief Executive Officer of NITI Aayog, makes another fair point that the car penetration itself in India is extremely low which stands at 20 vehicles per 1000 people when compared to other developing countries like 85 per 1,000 citizens in China and 800 vehicles per 1,000 citizens in the US. This makes it easier for India to make the transition better than any other country before this ratio increases as cars have now become affordable as well as a necessity.

THE BIG PUSH TO GO ALL ELECTRICAL

The Government has set the ball rolling and has already invited global bids through the Energy Efficiency Services Limited (EESL), a joint venture of PSUs of the Ministry of Power, for 10,000 electric sedans that will run up to 150 km on a single charge, for use by government ministries in the next six to eight months.

A substantial tax incentive has also been put in place for EVs of 12% GST and no cess versus 43% for luxury vehicles and hybrid vehicles, encouraging the players to bid for this tender. This could be a litmus test of the enthusiasm for EV manufacture. 

Adding to the above, the government is set to invite bids for 50,000 electric three-wheelers (by the end of 2017) and 10,000 battery-powered buses (in 2018).  Following this announcement, electric three-wheeler manufacturer Kinetic Green has entered into a strategic partnership with shared electric mobility company SmartE to introduce 10,000 electric three-wheelers across the country within the next 18 months. 

Vital to the success of electric vehicles is adequate charging infrastructure in the area where they operate. EESL has also floated tenders for 3,000 alternating current (AC) charging points and 1,000 direct current (DC) ones.  Around 400 chargers will be provided in the first phase at different locations in Delhi-NCR. They will be deployed by NTPC and Power Grid depending on the demand.

PLAYERS IN THE ELECTRICAL VEHICLE MARKET IN INDIA

Automakers

1. Mahindra & Mahindra is the only electric car maker in India at present. Their well known electrical compact variant Reva has been on sale in India for near to two decades now, but they have never really caught on mainly due to limited range of such vehicles on a single charge, the absence of sufficient charging points and the time taken for charging. Currently, Mahindra is the only company in the country manufacturing electrically powered sedans. Mahindra e2oPlus and the eVerito, are the only electric car options available in the passenger market. The Verito costs Rs 12-13 lakh and the vehicles sought by EESL are likely to be in the same price range. M&M is investing Rs 600 crore in electric vehicles and is expected to have a wide range of electric vehicle offerings. The firm is planning to collaborate with major power suppliers such as Tata Power. The automaker has just launched its first electric three-wheeler as well, that has gone on sale from September 9. Called e-Alfa Mini, it is powered by a 120Ah battery and aimed at intra-city movement. On a full charge, it can travel for up to 85 km at its top speed of 25 kmph.

2. Tata Motors recently announced its plans to go electrical and that the company is already exploring the possibility of building electric cars on its existing platform. Tata Motors-owned Jaguar Land Rover said each of its new cars starting from 2020 will have an electric or hybrid power option thereby reducing dependence on traditional petrol and diesel engines. The company is in the process of launching electric versions of Tiago and Nano that are expected to be showcased in the upcoming auto expo in early February, but a 2018 launch could be unlikely. Electric Tata buses are already under trials and are tested by some state transport undertakings.

3. Hyundai Motor, South Korea’s largest carmaker, is considering the assembly of electric vehicles in India as early as 2019 and has dropped hybrid car plans for the market. The Korean company, which is India’s second biggest carmaker, has said that an all-electric car is part of the 8 new model line-up it has for India by 2020. The car, however, will be developed outside India suiting global specifications.

4. Maruti Suzuki only recently said that the parent company Suzuki Motor Corporation is setting up an Rs 1,200 crore lithium-ion battery plant in Gujarat in association with Denso and Toshiba Corporation. However, details on the electric car have not been divulged as the company is said to look into the demand composition of the customers and accordingly formulate strategies.

5. Nissan Motors recently showcased the all-new Leaf in Tokyo which it hopes to get to India in 2018. The Japanese automobile major launched its new Leaf electric vehicle (EV) on September 6, which will go on sale in Japan from October 2 and in Canada and the US from January next year.  Leaf is the world’s largest-selling fully electric car capable of providing a driving range of 400kms.

6. Ashok Leyland has already forayed into the electrical bus segment in the end of last year when it launched the first India made electric bus ‘Circuit’. The initial investment was around Rs 22 crore. The company had earmarked as much as Rs 500 crore for the product to be done in phases. The company also plans to foray into the battery business through collaboration with SUN mobility.

7. JBM Auto’s executive director recently said that the company has been focusing on high-end material and spending a lot of money on research and developments (R&D) and developing new materials focusing on light-weight electric vehicles, which is one of the most important factors. The buses would be ranging between Rs 2.5 crore and Rs 3 crore but the operating cost of these buses is much lower.

8. JSW Group is in talks with China’s Zhejiang Geely Holding Group Co. for a partnership to make electric vehicles. The proposed equal joint venture with a planned investment of around $1 billion will look at manufacturing premium electric vehicles, batteries and also setting up charging infrastructure. Recently the Sajjan Jindal led company announced an investment of Rs 4000 crore to manufacture EV and indicated that interactions with new technology providers in this space has already begun.

B. Electrical Vehicle ancillary

The government is giving a strong impetus to developing battery capacity and make the country a battery production hub. Presently, more than 80% of world’s battery supply needs are met by China.

1. Exide Industries known for large scale production of acid batteries is set to enter into the lithium-ion batteries production which is the single most important component in the EV’s. According to the company's annual report, Exide has signed a technology co-operation agreement for the design and manufacture of lithium-ion family of products with Chawei Group, a renowned company of China. Exide's capex plan for the year is Rs 1,100 crore.

2. Tata Power installed its first electric vehicle charging station at Tata Power receiving station at Vikhroli, Mumbai. The company plans to set up charging stations at various locations in Mumbai and is already in discussions with various stakeholders. Typical costs for setting up a charging station will be about Rs 8-10 lakh for a fast-charging station and about Rs 3-5 lakh for a slow charging (normal) station. It will take a vehicle like the Mahindra e2o around seven hours from zero battery to full charge on the slow charge point. It will take an hour and a half from zero battery to full charge on the fast charge point.

3. HBL Power is into the manufacturing of lead acid batteries, nickel cadmium and specialised defense batteries. Equipped to foray into the lithium ion space with regard to expertise the company could tap into this opportunity going forward.

4. Graphite India and HEG Graphite anode is used in lithium ion batteries and as per an independent study by Benchmark Mineral Intelligence, the demand for graphite (carbon) used as anode material in lithium ion batteries is set to increase by over 200% in the next three years as global cell production surges on the back of maturing pure electric vehicle demand and the inception of the utility storage market. 

5. MOIL, Hindustan Copper Metals like cobalt, manganese, aluminum, and nickel are also used in lithium Ion batteries and the production of these would in turn increase the demand for the metals as major raw materials.

6. Nalco, Hindlaco and Vedl Electrical Vehicles would require high quality and durable aluminum bodies to recreate the power that is today fuelled by fossil fuels. Going ahead demand would only increase once the automobile industry begins the full fledged manufacturing of EV’s.

7. Cummins India is investing in research on electric mobility solutions for India and said that the company sees huge potential and this challenge must be embraced adding that the company is open to acquisitions and partnerships as it would help get access to the technology faster. Going by Anant Talaulicar MD,  Cummins India, commercial vehicle makers in India have asked Cummins to look into electric mobility solutions and only once they make a proposal will the company commit to capital investments.

At present, M&M does have the lead and it is most likely that the company will try to capitalise on the same. The first win for the company would be if did bag the 10,000 EV contract from the government as this would ramp up their production and give more visibility to their product that could lead to further demand. The company has also launched a three wheeler that again puts it ahead of its peers in this space. Going forward, we will also see new players like the JSW group entering the automobile segment as the EV technology opens up opportunity for non-automobile companies to foray into this space that would help in competitive pricing of products which would support future demand. Market leader Maruti that holds the largest market share in the country in the passenger segment of over 52% has taken the initial step and is setting up a lithium ion battery plant in Gujarat. A strategic move by the auto major as this would ensure continuous, quality and affordable battery which is the single most important and expensive component of an electrical vehicle. However, the company must shift gears quickly to the new technology as the competition is about to get intense and we will see changes of disruptive in nature that could change the current market share dynamics of the company in the next 5-10 years.

From the above presented developments, it is evident that India has laid the required foundation and is joining the rest of the world spearheading its way into promotion, manufacturing and finally completely making the transition to the electrical vehicle technology that is likely to  replace the fossil fuel powered engines used today. The time line set for this change however is debatable and does seem unachievable today,  considering the lack of infrastructure, along with the research & development that must be done to suit Indian roads and conditions in the field is immense at the current juncture and we have only now began this long journey.  However, in the automobile industry 10 years is considered as long term, as tagged by the Japanese car maker Nisan and significant changes are possible especially when the government is willing to formulate policies that support this change and accelerate it with superior leadership and clarity of vision. Whether this target set for a country of 1.2 billion people is overreaching or ambitious, only time will tell. However, it is definitely a step in the right direction and the automobile industry in the country is set for a metamorphosis that can be immensely profitable in times to come. 

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