The Electric Dream

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I often dream of a future when I would walk down the streets in India and wouldn't know when a car passed by; nor would the pungent exhaust fumes break my reverie under the clear blue skies. How wonderful would it be to see a night sky laden with stars again. It seems distant today, but not impossible; hard but not unachievable.

What will it take to realize the electric dream?

1. Be smart, automakers

We have a thriving Auto and Auto-components Industry in India, contributing 7.1% to the GDP and employing nearly 30 mn people. But it's being challenged, not just from unexpected players (JSW Energy announced $ 600 mn investment in electric car unit in Gujarat) but also by itself.

One of the reasons often quoted against Battery Electric Vehicles (BEVs) is the cost differential between a traditional car and an equivalent BEV. Bloomberg reports that BEVs will achieve price parity with IC engine cars by 2025. Without questioning the veracity of this statement, let's see how we can produce few BEVs.

Goods and Services Tax (GST) rate on BEVs is 12% and on the high-end SUVs is 50%- that’s 38% lying on the table right there. In addition, the ratio of battery cost/total vehicle cost is bound to be lower for high GST cars (for the oomph element of the high-end cars). Putting these two together, it might even be possible to produce an Electric SUV cheaper than a corresponding diesel version. Add to it the customer experience of an electric car and it seems like a product ready to be sold like hot cakes. (No wonder Mahindra's next line-up of BEVs includes SUVs and Crossovers)

2. Make in India

The Honourable Prime Minister, Shri Narendra Modi's call to Make in India has 2 aspects: 1) Domestic consumption be produced domestically 2) India be used as a hub for exports. The second typically follows the first. To achieve indigenous component production, it is critical to seed the ecosystem to a certain threshold.

(i) Demand creation with long-term visibility: Energy Efficiency Services Limited (EESL) tender to procure 10,000 cars was a momentous first step. While it does a world of good in creating a demonstration and the buzz, it could have done more to promote domestic component manufacturing. Remember, a car is just a sum of its parts. Similarly, some states have also started to come out with their sporadic e-Bus tenders. Instead of these distributed efforts, a long-term pooled demand coupled could provide an impetus to domestic manufacturing.

(ii) Promote component manufacturing: Faster Adoption and Manufacturing of (Hybrid) & Electric Vehicles (FAME-India) scheme has been providing financial incentives to BEV Original Equipment Manufacturers (OEMs). The scheme is due to expire on March 2018 and possibly FAME-2 will replace it. This presents an opportunity to re-evaluate whether OEMs are the relevant recipients of a FAME-like scheme. Presently, no one is manufacturing Li-ion cells in India (even other components like motor, power electronics, etc. are being imported; Suzuki though announced an investment to come online in 2020). OEMs import components, assemble them into cars, sell it and avail FAME subsidy. What does it do for domestic component manufacturing? However, if the component manufacturing is incentivised instead of OEMs, it could sow seeds of indigenous manufacturing.

3. 'Electricity is everywhere'

Electricity is everywhere, at least in urban India where the early adoption of EVs will happen. Combine this with the facts that personal cars are parked for about 95% of the time, fast chargers can cost anywhere between 30,000 to 50,000 $ and have higher impact on grid; battery swapping increases capital cost (there is talk about technical and logistical challenges too), and we can't afford any extraneous investment - slow home-based charging seems a very attractive solution for personal city driving. However, we don’t have space in our homes! What we possibly need is a street charging solution.

Electric Mobility is a no-brainer for our country, which imports 82% of its oil and air pollution is a menace. As Victor Hugo once said, "Nothing is more powerful than an idea whose time has come". We believe the time for BEVs is now. Do you?