EV: The next luxury car
EVs will account for a fifth of sales in the luxury car segment in the next five years
AFTER MOVING TO INDIA from my previous role as the Chief Financial Officer for Beijing Mercedes-Benz Sales Service, I was very confident of the prospects of electric vehicles (EV) in India. Back then, there was quite a bit of scepticism for EVs in India ranging from customer acceptance, world-class product availability, concerns regarding driving range, lack of a developed charging infrastructure to support quick charging, and also safety concerns regarding batteries in the event of a collision. Now, we have seen advancements in battery technology, introduction of new products, and development of the overall EV ecosystem. These factors, together with government policies, have led to more countries successfully adopting EVs as the future mobility solution. The world has embraced the reality that EVs can be developed to replace fossil fuel-powered internal combustion engine (ICE)-based vehicles. The rapid transition towards emobility has happened at a faster pace than I expected, and we are on the verge of switching to electric.
Today, Indian consumers are more aware and increasingly adopting EVs; I believe there are three things that drive this demand: government policy, availability of the right product at the right price point and customer acceptance. The first is the government’s focus on policy and infrastructure. Multiple efforts have been taken in that direction from reduction of GST on EVs, creating an ecosystem for setting up of charging infrastructure and multiple state governments waiving off road tax on EVs to ease initial ownership experience, among others. There is a clear willingness to define our future and that is most encouraging to see.
In the automotive world, launching an attractive product is of utmost importance to have consumers’ attention and create aspiration. In that regard, I can clearly see the effort from OEMs across segments who are leveraging technology and investing in bringing new products in the market and delighting consumers. While the two-wheeler segment is leading the EV adoption, it is the four-wheelers that will lead the aspiration for EVs in general and the luxury segment in particular.
Talking specifically of the luxury segment, EV customers can be categorised into two groups. The first is the traditional customer who is adding the vehicle to an existing car collection. However, in our segment we are witnessing more interest from first-time luxury car buyers in the age bracket of 40 years and younger, many of whom are self-made professionals and entrepreneurs, and are opting for a luxury EV as their very first luxury car.
With this trend of customer acceptability and increased top-class product introductions from different OEMs, I expect electric vehicles will account for a fifth of sales in the luxury car segment in the next five years. The sales for our EQC model, which pioneered luxury EVs in India, have been encouraging since its India debut and we continue to receive an overwhelming number of enquiries from even existing Mercedes-Benz owners. This year we are going to redefine the luxury EV segment completely with the launch of the Mercedes-Benz EQS in Q4 of 2022. This long-range luxury EV with a WLTP range of 770 km, will cater to the growing base of aspirational and aware customers in the Indian market.
Considering that most EV models available today are completely built-up units (CBUs), any localisation will only serve to reduce the pricing point and make luxury EVs even more appealing to existing ICE luxury vehicle owners or prospective customers. With our 28 years of experience in India, we have learnt to operate within the existing policy framework and we now see the opportunity for local production of EVs. The decision to start the local production of the EQS is our effort to accelerate adoption of luxury EVs. Any locally assembled unit invites lower import duty of up to 30 per cent when compared to 100 per cent basic customs duty on CBU; therefore, we can expect an attractive price point for higher volumes.
While India looks at a promising future of electric mobility, we must also be cognisant about addressing the challenges that customers may face. Developing an extensive and accessible EV charging network, both in urban centres and across the vast highway network, is key to ensuring that more consumers switch over from ICE to EVs. The continued push and commitment by both the central and state governments for creating a favourable environment and a level playing field for all players to accelerate the EV transformation in India is welcome.