Electric vehicles: analyzing the feasibility of electric vehicles in India

Abstract

India is regarded as the 4th largest automotive market in the world, with annual sales clocking twenty-one million two-wheelers, three million passenger vehicles, and one million commercial vehicles in 2019 (Exhibit 1). The sector contributes 7.1% to the country’s GDP & 49% to the manufacturing GDP of India. Now, the Indian automotive industry is at the cusp of a paradigm shift from fossil fuel powered vehicles to zero emission electric vehicles due to depleting air quality in major cities and rising global conscience to curtail greenhouse gas emissions. The country has already announced an ambitious policy shift to an electric fleet by 2030 and now providing a few subsidies to make it happen. Under this context, studying electric vehicles becomes extremely important if one needs to understand about the new age transportation and how the business is preparing for this revolution. In the report, we aimed to analyze the feasibility of electric vehicles in India for different private, public, and commercial vehicles from financial and environment perspective and devise policy recommendations to create an active ecosystem of EVs in India. The methodology we follow is to see whether electric vehicles are economically viable, with and without policy framework. The Indian consumer is price sensitive when it comes to big-ticket purchases. Since electric vehicles are a relatively new technology, they have high upfront costs. However, they have much lower running and maintenance costs vis-à-vis their ICEV counterparts. Thus, looking at the total cost of ownership over the lifetime of the asset makes it worthwhile to purchase electric vehicles for private ownership as well as for shared mobility solutions for the end consumer. Since battery cost forms ~50% of overall TCO for an electric passenger vehicle, affordability remains a challenge for successful electrification in this segment despite significantly lower fuel and maintenance costs. Corporates and governments are trying to solve this problem of high battery cost together which is also interesting to see. Finally, to facilitate our learnings and experiments with this project, we also built a financial model which details the calculation of total cost of ownership for 2Ws, 3Ws, 4Ws (passenger & taxis) as well as public buses by considering the present value of all possible costs of owning the vehicles such as upfront cost, running cost, maintenance cost, and insurance.