Electric Vehicles News: Despite recent fires, EVs is a Rs 3 lakh crore opportunity in India – EQ Mag Pro

Rise in fuel prices will make EVs more attractive.

Electric vehicle adoption is slowly growing in India and ratings agency CRISIL feels EVs present an opportunity of almost Rs 3 lakh crore over the next five years through 2025-26.

The opportunities include potential revenue of about Rs 1.5 lakh crore across vehicle segments for original equipment manufacturers (OEMs) as well as component manufacturers and Rs 90,000 crore in the form of disbursements for vehicle financiers, with shared mobility and insurance accounting for the balance, said CRISIL.

Demand for EVs is growing in the country; electric two-wheelers are the key drivers. Latest data points to a three-fold rise in total sales in the financial year ended March 2022, albeit on a low base. According to Federation of Auto Dealers Association, in the last financial year, total EV retail sales touched 4.29 lakh units, compared to around 1.35 lakh units in 2020-21.

Over the next few years, demand for EVs is expected to grow further, given high fuel prices and rising cost of internal combustion engine (ICE) vehicles. Government support for EVs through various schemes is also playing a huge role in driving EV adoption, noted CRISIL.

Fuel prices have risen sharply on the back of a surge in crude oil prices in the backdrop of the Russian invasion of Ukraine; petrol for instance has hit Rs 120 a litre in Mumbai.

Continued rise in fuel prices will only make EVs more attractive. CRISIL’s analysis of cost of ownership indicates that electric two-wheelers and three-wheelers have already attained parity with ICE vehicles last year, even when they are run just 6,000 km and 20,000 km respectively. Due to this parity of ownership cost, even without subsidies electric two-wheelers and three-wheelers will be in demand by 2026, said CRISIL executives.

“Considering the improving cost parity and the government’s focus on electrification of vehicles, we should not be surprised if EV penetration reaches 15 per cent in two-wheelers, 25-30 per cent in three-wheelers, and 5 per cent in cars and buses by fiscal 2026 in terms of vehicle sales,” said Hemal Thakkar, director CRISIL.

While sales are only expected to head upwards, the overall base, especially in passenger vehicles, is still expected to remain small compared to their ICE counterparts even after five years, due to various issues like high up front buying cost, range anxiety, uncertainty around re-sale and service as well as limited charging infrastructure.

Several incidents reported recently about electric two-wheelers catching fire will also dent appetite in the near-term, say CRISIL executives.

“From an immediate perspective, there could be a perception that could be developed that whether these vehicles are safe are not,” said Thakkar.

In the last few days, electric two-wheelers of different manufacturers, including Ola Electric, Okinawa, Pure EV and Jitendra Electric, catching fire have been reported from various cities. The union government on its part has already appointed a team to probe these incidents of fire. CRISIL executives say a proper probe will only ascertain the major reason behind these incidents.

These instances of vehicles catching fire may have a near-term negative impact, but there is unlikely to be a long-term effect, felt Thakkar.

These incidents though could well drive people towards the established two-wheeler players, who have long commanded a trust.

“With these increasing incidents of fire, especially with respect to startups etc., we will definitely see the mindset of the customer being more in favour of traditional original equipment manufacturers (OEMs) like say Hero or a Honda or TVS or Bajaj, because they have developed the trustworthiness in the market,” said Thakkar.

Given that manufacturing electric vehicles, especially two-wheelers, requires few parts compared with their ICE counterparts, many companies have jumped into this space in recent years. But, over the next few years, this industry is expected to consolidate.

“This is the initial phase, where people are taking advantage of opportunities there in the market and there will be increasing proliferation of electric two and three wheelers. As the market matures, companies who will have lower volumes, managing the scale of operations and service is going to be very challenging. Hence, we see there will be definite consolidation in the industry. Over the next four-five years, you will see it happening at a much faster pace,” said Thakkar.

As EV sales rise over the next few years, several new business models like battery-as-a-service, public charging stations, shared mobility and last-mile distribution of goods by way of micro-rental of electric vehicles is likely to emerge, feels CRISIL.

Source: PTI