Going electric is the new buzzword in the transport sector around the globe, especially in developed countries, where high per capita income allows adoption of electric vehicles with higher upfront costs as compared to their fossil based cousins. Developed democracies with high level of industrial development, higher willingness to pay by the consumers and greater urge to act against the climate change is driving adoption of clean energy vehicles. China on the other hand is force feeding electric mobility (and we don’t have a problem with that ;)) through regulations and large government investments in public transport. So where does India sit in all this hustle and bustle?
India is the largest democracy of the world, and the country has all that inertia associated with being large and being a democracy.
Things of concern to the large population take time to shape. However, during last few years the country is trying to lose that extra bureaucratic fat, and to some extent it has been successful. Launch of Faster Adoption and Manufacturing of Electric vehicles (FAME) in April, 2015 is a watershed moment in India’s electric vehicle journey. Since then, there have been numerous decisions (except
some rollbacks) which have kept the sector busy during the last five years. Automobile landscape in India is changing and now we see a few EVs plying on roads, at least in large metropolitan cities.
EV adoption in India is led by Government procurement and corporate taxi services, while the direct sale to personal vehicle space has seen a miniscule growth. One of prominent reason for the lagging personal vehicle space is lack of charging infrastructure and limited
battery capacity in affordable vehicle segment. While this shows a constraint in large scale adoption of electric vehicles, it also highlights an opportunity to change the way have built our transportation systems and habits. Various estimates show that individual car owners are probably using their vehicle for just five to seven percent of the its lifetime. This implies that fundamentally our ownership model hasn’t been working so well. Therefore, we believe there is an opportunity here to leverage this new found knowledge and our reduced reluctance to share things. And most importantly pay just for what we use!
Providing electric vehicles on pay-as-you-use and short term lease has inherent advantages such as (1) Upfront cost of EVs is high but life cycle cost low as compared to fossil fuel counterparts; (2) battery replacement is a huge cost, however if distributed proportionately over period of use, it is in the best interest of the customer; (3) access to charging infrastructure is provided by the lessor company; and (4) hassle free access to vehicle i.e. no worries about maintenance.
Now coming back to the primary premise of this blog, why do we think that EVs will occupy our road sooner than later? Having talked about the opportunity at hand, a few start-ups have already queued up to build their business around the change we are talking about. Corporate transport providers and large taxi aggregators are also moving towards electrification of their fleet. Municipal Corporations in many cities in India have already placed orders for electric buses. In personal car segment, manufacturers are moving towards lease based models which is a significant departure from the century old direct sale model. These initiatives have brought an individual user closer to electric vehicles and reduced the anxiety one might have to make the big switch.
What we need at this time is carefully crafted business models to increase user’s confidence. While the government targets to electrify 30% fleet by 2030, with right financial instruments and innovative business models this could well be achieved before the set timeline. We believe its technology and business innovations which we take us there, not the emotional Climate debate (we are sorry, but that’s how things work in the real world). We are pretty confident that we are standing on the cusp of next big revolution in the Indian automobile and transport sector.