But it must be done gradually by giving the industry time to develop competitive products and the country to set up charging infrastructure
A vast majority of Indians depend on two-wheelers to fulfil their mobility needs. As per the 2011 census, 37 per cent people in India using motorised modes to commute to work relied on two-wheelers compared to 33 per cent for buses and eight per cent for private cars. These numbers on use of two-wheelers would have gone up by now, given that their sales have been going through the roof. In 2017, India became the largest two-wheeler market, leaving behind China and in 2018-19 a whopping 21.1 million items were sold in the country, constituting 80 per cent of total domestic automobile sales. The Government has been encouraging the adoption of Electric Vehicle (EV) technology; and the Budget also announced a bouquet of incentives for them. The NITI Aayog proposed a ban on internal combustion engine (ICE)-powered two-wheelers (below 150cc) and three-wheelers by 2023-24. While a shift towards cleaner technology is inevitable, the key to transitioning to EVs will be to develop a plan palatable to consumers, industry and policymakers alike.
The current electric two-wheeler (E2W) users are technology and environment enthusiasts who use them for leisure. However, ICE two-wheeler use is associated with low and middle-income individuals. ICE technology-users point to the lack of charging infrastructure, high battery cost and unreliable battery life for not opting for E2Ws. Currently, the base price differential of ICE two-wheelers and similar-performing E2Ws is almost three times. Despite current policy incentives that help in reducing this gap to two or 1.5 times, this is still a barrier for E2W uptake. Analysis shows that home and work charging will remain the most popular modes of recharging E2Ws. Public charging stations are a feasible option for personal use, while battery-swapping stations are expected to find adoption only for high utilisation commercial applications. While the impact of EVs on power demand may not be substantial, managing peak hour loads will be critical to support their use.
As the upfront cost of E2Ws remains prohibitive, the opportunity lies in the fact that their operational cost is nominal. In fact, the Total Cost of Ownership (TCO) for some high vehicle utilisation applications like parcel/food deliveries is lower than ICE two-wheelers from the start. Easy financing options with low down payment can easily accelerate the adoption of E2Ws for commercial applications. For personal use, high upfront cost and battery replacement make the E2Ws financially unattractive. However, attractive business models or financing options covering both battery replacement and upfront cost can make E2Ws attractive for personal use too.
Lack of high-performance EVs is a key challenge. One of the few EV products that can compete with Honda Activa is the Ather 450, available only in Bengaluru and Chennai. Currently, Ather Energy has an installed capacity of 20,000-25,000 units but this is expected to expand to 500,000 units by 2020. Even then, it will form a small proportion of the 20 million-plus two-wheeler market. The technology adoption curve shows that typically technology mainstreaming follows an S-shaped trajectory with adoption growing faster over time. Also, the time taken for mainstreaming and mass adoption of technologies has been shrinking over time. While it took around 35 years for refrigerators to become mainstream, cell phones took just 15 years. EV penetration in India lies where cellphone adoption was in 1995 and it might easily take another decade for EVs to go mainstream.
Given the existing financial viability, E2Ws should be promoted for high-utilisation commercial applications through easy financing with low down payment requirement. As financial viability is established for commercial operations, the Government should issue E2Ws procurement mandates for commercial operations later. India would be shifting to BSVI vehicles from 2020. Automobile-makers, auto-part makers and oil refineries have made huge investments for this transition. A time period of three-four years should be provided to them to recover investments through the sale of BSVI vehicles. Majority of the announced and existing E2Ws models in India can compete with vehicles in less than the 125cc segment only, whereas the customers are more inclined towards the 125-250cc segment in motorcycles. More time will also allow two-wheeler manufacturers to develop competitive products, expand E2W production and allow time for supply chains to evolve to support after sales service and skeletal public charging infrastructure. Cities should take strong action to encourage the use of zero emission vehicles (ZEVs) and location-specific mandates should be developed. During this time, India should push for 100 per cent E2Ws adoption for commercial applications and for personal use. Eventually, highly-competitive E2Ws would be available in the domestic market and there will be a disruptive adoption of this technology. Transitioning to EVs is inevitable but it must be done gradually by giving the industry time to develop competitive products and the country to set up charging infrastructure, EV supply chains and business models.
(Prakash is a Distinguished Fellow and Kumar is Area Convenor , Centre for Sustainable Mobility, TERI)