Cars miss the EV spark
Why mass passenger car makers are going slow on electric vehicles
Mass carmakers are likely to wait and watch rather than rush into driving pure electric cars. The reason: In the absence of a specific policy push and incentives, which has been the case of the two-wheeler segment, launching models at a price point that is within the bounds of an average car buyer is still some distance away.
Tata Motors is a notable exception. The Tata Group company has taken upon itself to “seed the market” by introducing two consecutive EV models. On Tuesday it launched the e-tigor. Priced at ~11.99 lakh and ~12.99 lakh, Tata Motors has positioned the model as the most affordable e-car that claims to tick all the boxes, including range, battery power, safety, aspiration and riding comfort. Tata Motors was emboldened by the success of the e-nexon, the model that went on sale in the first quarter of FY21.
Most of the other mass carmakers — Maruti Suzuki, Hyundai Motor India, Kia Motors India, Mahindra & Mahindra and India subsidiaries of Volkswagen, Renault and Nissan and others — are convinced that it is no longer about if but when they plan to introduce their EV models. They are, however, still choosing to wait it out. By 2025 — by the time others test the market, wait for the EV ecosystem to evolve, cost and price parity to work out — Tata Motors would have 10 EV models in its arsenal.
What explains the variance in the stance of Tata Motors and the rest in this market?
“The EV ecosystem is immature and does not allow for a robust growth in electric vehicles demand. The launch of electric vehicles by some original equipment manufacturers is an attempt to create an early presence, and take advantage of demand from the government fleet. Some of these launches are also to address the requirements for meeting the advance fuel efficiency and carbon emission targets,” says Ravi Bhatia, director and president at JATO Dynamics, an automotive business intelligence consultancy.
Arun Malhotra, former managing director, Nissan India and an industry veteran, said, “Most companies have chosen to wait and watch as getting the price value equation right is extremely critical.” They are unlikely to achieve it in the near to medium term as the entire incentive push by the government is directed at two-wheelers and commercial vehicles, he added.
The cost parity between electric vehicles and vehicles with internal combustion engines is a couple of years away, he added. Apart from Tata Motors, M&M is the only other manufacturer that has announced plans and lined up capex for EVS. But the company is not rushing in either and will jump on the EV bandwagon with aggression only in 2023 with the E-XUV300, followed by the “born electric” platforms.
In a sharp contrast to the fanfare surrounding EVS, Maruti, which controls more than half of India’s passenger vehicle market, is conspicuous by its absence. It will not be entering the space in the short term, Maruti chairman R C Bhargava said at the auto industry’s annual convention last week.
The Maruti veteran had echoed similar sentiments at the company’s annual general meeting on August 24. The high price of an e-car coupled with the underdeveloped charging infrastructure makes them non-conducive, said Bhargava. “EV penetration will only happen in India when conditions are conducive for consumers to buy EVS.” In the short term, Maruti plans to focus on CNG and hybrid variants. According to him, the government should lower the GST rates on CNG cars much the same way as it has done for EVS. Suzuki Motor Corp, Maruti’s parent company, in an investor presentation said India-specific EVS might be ready by 2025.
Korean carmaker Hyundai, which has chosen a technology-agnostic approach to zero emission, has also made public statements about introducing a made-in-india affordable EV but has yet to indicate timelines for an introduction.
Though global prices of the lithium-ion battery packs have seen a sharp reduction, high battery costs remain the most significant
Though EV penetration in the passenger vehicle segment in India is negligible, it has been growing on the back of launch of imported models by global carmakers
deterrent for EVS. The lithium ion battery pack accounts for 25-30 per cent of the cost of an EV. Things could change because global prices of battery packs have fallen to $137 per kwh in 2020 from $1191 per kwh in 2010. Historically, when the volumes of the deployed lithium-ion pack doubles, prices decline by 80 per cent, said Ali Izadi, head of Asia Pacific Research, Bloombergnef, South Korea, at the Society of Indian Automobile Manufacturers’ 61st Annual Convention last week.
“If the trend continues, we are looking at the pack prices going down below $100 by 2024 and below $60/kwh by 2030,” Izadi said, pointing out that while getting to the $70 per kwh is already achievable, going further down will need a major technological breakthrough.
In India, Bloombergnef forecast that EVS will account for half of passenger vehicle sales by 2040. The forecast is based purely on improving economics and does not factor in the government policy, which can have a major impact either way, Bloombergnef clarified.
Though EV penetration in the passenger vehicle segment in India is negligible, it has been growing on the back of launch of imported models by global carmakers including Hyundai, Mercedes, Audi and Tata Motors (see chart). An exemption on road tax and a 5 per cent GST have prompted these companies to launch their EV offerings despite a high import duty. But apart from Tata Motors, the prices of others such as Mercedes and Audi, at upwards of ~1 crore, have done little to move the needle. In other words, those looking for a choice when it comes to buying affordable electric cars will have to wait for another two to five years.