EV: Tech Clash

FROM THE CORNER of their eye, Rajeev Chaba and his team are keeping a tab on the time. The president and MD of MG Motor India is flying out to Vadodara to the company’s manufacturing facility in Halol — which it inherited from the now-defunct India operations of General Motors. The automaker is looking to bolster production, and according to Chaba, the project should be finished within the next two months. “We inherited a manufacturing capacity of 75,000 units annually, we are looking to scale it up to 120,000,” he adds.

The iconic British brand — now under Chinese owners — is a distant second in India’s increasing, albeit still fledgling, market for electric passenger vehicles. According to data released by the Federation of Automobile Dealers Association (FADA), MG sold 2,045 electric passenger vehicles in FY22 — an 11.5% market share — against 22.4% in FY21. Homegrown Tata Motors has virtually monopolised the nascent yet burgeoning market — retailing 15,198 vehicles in the same period, a market share of 85.4%.

The inroads made by Tata Motors — in what it believes was the first step of a three-pronged EV strategy — is a success worth rejoicing. “From record sales to upping our market share game, last fiscal has been nothing but magical for us. We also continued to super charge our growth in the EV space with annual EV sales going up by 353% in FY22 vs FY21,” Shailesh Chandra, MD, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, said at the unveiling of its CURVV electric SUV concept in April.

Tata’s success is also, in part, due to the absence of other players in the domestic market. “The market for electric passenger vehicles will continue to grow at a rapid pace, but electrification will only happen over the medium term, when more OEMs will come out with newer models,” explains Rohan Kanwar Gupta, vice president and sector head, corporate ratings, ICRA. In fact, EVs only make up for about 1% of the country’s passenger vehicle market, in what has been widely acknowledged as a supply-side problem, instead of being a demand-side issue. Even commerce and industry minister Piyush Goyal said at a conclave in March, “Consumers are ready. They want more options.”

“Within two years, the cost of electric scooters, cars and auto-rickshaws will be the same as their petrol counterparts. Prices of lithium-ion batteries are coming down. We are developing this chemistry of zinc-ion, aluminium-ion, and sodium-ion batteries. If you are spending ₹100 on petrol, you will spend ₹10 for using electric vehicles,” Nitin Gadkari, Minister of Road Transport and Highways, said in the Lok Sabha in March.

The First-mover Advantage

MG was among the earliest manufacturers to introduce a pure electric passenger vehicle — the MG ZS EV, in January 2020. It received over 2,800 bookings in 27 days, which, according to the company, outpaced the total number of EV cars sold in India in 2019. “We launched the ZS EV when the market was less than 2,000 cars. Many questioned our wisdom at that time,” says Chaba.

Two years later, the carmaker has made detractors eat their words, as ZS EV’s success led to the introduction of a facelift — with what it claims to be the largest in-segment battery capacity of 50.3 kWh, offering a certified range of 461 km on a single charge. The company received over 1,500 bookings for the new vehicle just within March. “Right now, we have reached a capacity of supplying 300-400 per month,” says Chaba. A sub-₹15 lakh EV is also in the works. “We should be able to sell 6,000 EVs this year,” adds Chaba. MG Motor India’s EV sales grew to 232 vehicles in June, virtually flattish from 247 in May.

Notwithstanding, people have ostensibly gravitated to the relatively cheaper offerings from Tata Motors, “What has worked for us is that we believed that EVs could be made a mainstream choice over a period of time,” says Chandra. Tata Motors is the first among the trio — there’s also Mahindra and Mahindra and Maruti Suzuki — to tap the EV market, deploying significant capital. In October 2021, it received a ₹7,500-crore investment from TPG Rise Climate and Abu Dhabi-based ADQ. “Over the next five years, the company will create a portfolio of 10 EVs and in association with Tata Power, catalyse the creation of a widespread charging infrastructure to facilitate rapid EV adoption in India,” chairman N. Chandrasekaran had said at that time.

Chandra believes the company was able to find the right balance between price, performance and range — a formula the group believes has hit the sweet spot — with Nexon, its first EV model. “We just did not go for a ‘me too’ product, of what we were seeing globally. We looked for barriers, myths and mindset consumers had in favour or against EVs,” says Chandra. The first-mover advantage will help the company when there is more competition, he adds. “It is an exploding market; the growth rates will be intense... We will leverage because we would have the strongest association and a sense of reliability in the minds of our customers. We will be ahead of competition because of the number of choices we are going to offer.” Besides the CURVV concept, the company has also revealed the AVINYA concept — its third-generation architecture of a pure-electric vehicle, alongside the Nexon EV Max — an iteration of the Nexon EV with a longer range.

“Tata has done well in understanding the market. The gains it has made will benefit it in future,” says Gupta of ICRA. He is, however, sceptical about the first-mover advantage. “Theoretically, it feels the company should retain the first-mover advantage, but it all depends on how the future holds out,” he adds.

Leveraging the ‘Tesla’ Void

Moving across segments — from mass-market cars to high-end, luxury vehicles, German automaker Mercedes-Benz is also making meaningful strides in gaining an edge in India. The German carmaker launched the EQC in October 2020 — a coupe like SUV which the company claimed pioneered the luxury EV segment. It is also likely to launch the EQS, an all-electric saloon car, later this year, which will also be the first locally assembled luxury EV at its plant in Chakan, Maharashtra. “What brought us to introduce more models, and to even start in the early stages was the interest from consumers we saw for the last two years,” says Martin Schwenk, MD and CEO, Mercedes-Benz India.

The EQS is the cornerstone of Mercedes-Benz India’s EV strategy. Besides, the company is also looking to capitalise on Tesla’s uncertain future in India. The Elon Musk-led company’s plans to enter India are in limbo over tax issues. Tesla is now believed to have put its plans to sell EVs in the country on hold, leaving the door wide open for competition to make inroads into the mind of the high net-worth Indian consumer. Mercedes aspires to fill this gap and be at the forefront with local assembly. “The start of local production of the EQS will be pivotal in driving the penetration of luxury EVs in the market,” says Schwenk. “We have been in India for more than 27 years. We have a lot of experience in doing business here.”

Hybrid: Bridging the Gap

The EV story has captured the imagination of a country which is dependent on antediluvian technologies — coal-fired power plants for generating electricity, for instance. However, despite EVs being packaged as the drivetrain for the future, not everyone in the industry thinks that the market is going to move towards only EV. This posited idea was lent credence when Honda Cars India Ltd (HCIL) unveiled the hybrid version of its best-selling sedan, the City, in May.

Till that point, India had only seen mild-hybrid technology in mass-produced vehicles, notably by Maruti Suzuki and Mahindra. The full hybrids available in India were steeply priced (with the launch of the Honda City eHV, upwards of ₹20 lakh) — gatekeeping the technology from wider adoption. Kunal Behl, vice president, marketing and sales, HCIL, had said at the launch that India requires a rapid shift to a greener technology that can be adopted by the masses. The City e:HEV has received an encouraging response, with the waiting period running up to six months. “The tremendous response received on the unveiling of the model reflects the acceptance of the strong hybrid technology in the mainstream segment,” says Takuya Tsumura, president and CEO, HCIL.

Japanese carmaker Toyota — which claims to have innovated the self-charging hybrid technology 25 years ago, and first introduced the technology in India with the Camry and the Prius (which albeit had few takers, with its complex technology meaning that the price ranged north of ₹40 lakh) — broke cover of its Urban Cruiser Hyryder, the mid-size SUV with a strong hybrid powertrain, a segment first. Toyota claims the Hyryder has an electric-only range of 25 kms, and on Indian conditions, the powertrain can cover 40% of the distance, and be on pure EV mode at 60% of the time. It also boasts a fuel efficiency of 24-25 kms/litre under test conditions. Honda and Toyota’s preference of hybrid technologies over battery electric vehicles (BEVs) is seen as a telltale sign that Japanese automakers believe that the latter is too expensive to own for mainstream car buyers in emerging markets like India.

According to the agreement signed between Suzuki Motor Corp (SMC) and Toyota Motor Corp in 2019, in India, Toyota will share the hybrid technology with Suzuki through local procurement. Hybrid vehicles make up for 24% of Suzuki’s sales worldwide, and the company would be vying to replicate the success story in India as well. At the India-Japan Economic Forum, held in March, Suzuki signed an MoU with the Gujarat government to invest ₹10,440 crore on local manufacturing of electric vehicles and BEV batteries. The investment includes ₹3,100 crore for increasing the EV manufacturing capacity at Suzuki’s Gujarat facility. The company will also invest ₹7,300 crore to construct an EV battery manufacturing unit adjacent to the facility. These two investments are slated to be completed by 2025 and 2026, respectively. “Suzuki’s future mission is to achieve carbon neutrality with small cars,” Toshihiro Suzuki, representative director and president, SMC, had said during the signing of the MoU.

The move is seen by many as a turnaround by India’s largest maker of passenger vehicles — which had stayed away from the EV bandwagon, even as Tata Motors forayed heavily into it. “India is very different from Europe and other western nations, including the US. If we just adopt whatever strategies they are following, I don’t think we will be doing justice to what we need to do in India,” R.C. Bhargava, chairman, Maruti Suzuki, had said in an address to an industry conclave in February. He also maintained that despite every perceivable policy reform, EV adoption in India is only 0.5%. “We have to consider whether the EV strategy is serving its purpose.”

Bhargava’s words resonate with Maruti Suzuki’s attempts to flirt with green alternatives to electric mobility. The company has bet big on CNG, and according to Shashank Srivastava, senior executive director (sales and marketing), aims to sell 4-6 lakh CNG units in FY22, depending upon the supply situation of essential components. “CNG has a lower running cost vis-à-vis petrol. We have cornered an 80% market share in the CNG passenger vehicle segment — with nine out of 15 vehicles in our portfolio powered by a CNG drivetrain. Currently, we have an order backlog of 125,000 vehicles, and our priority is to serve those customers first. Once the supply chain improves, and we have enough production capacity, then we can look at introducing more models in CNG,” he adds. The company has plans to foray into EVs by 2025. “Passenger EVs in India currently face two big barriers — the cost of acquisition, which depends on the cost of batteries, and secondly is charging infrastructure, and not only the availability of chargers, but the speed at which the vehicles can be charged,” says Srivastava.

Maruti Suzuki will not place all its eggs in one basket, and Hisashi Takeuchi, its newly appointed MD and CEO, says that the company is going to adopt a drivetrain-agnostic approach. “Maruti Suzuki plans to bring multiple technologies in its journey to decarbonisation like CNG, flex fuel, strong hybrid and EV... The support lent by the government to EVs is good. However, I feel the government will support other decarbonising technologies as well, as long as it’s good and contribute to a better India,” he adds, explaining that the electrification process cannot happen overnight. “Currently, EVs have a penetration rate of 5%, maybe next year it will be 6%. By 2025, it could be 10-15%.” This means that the rest will be non-EVs, and according to Takeuchi, the target should be to make these vehicles more environment-friendly.

The third of the trio, Mahindra, made the earliest forays into EVs with the acquisition of the Reva brand — which sold the eponymous Reva cars, heralded as India’s earliest EVs, but sold less than 5,000 units worldwide. It was also the first manufacturer to proliferate electric vehicles — the e2o and the e-Verito, in the previous decade (which still sell to this day). Recently, it revealed the first glimpse of its global “Born Electric” vision in February. An electric iteration of the XUV300 is also slated to launch in January 2023. MD Anish Shah has said at the current rate, 50% of passenger vehicles sold in India will be EVs by 2030. The company has earmarked ₹3,000 crore for electric vehicles. It expects to launch eight EVs by 2027. Recently, it raised ₹1,925 crore for its new subsidiary from UK-based British International Investment (BII) — which will focus on the development of electric passenger vehicles. The new subsidiary, EV Co, will create and market an electric SUV portfolio, and the assets of Mahindra’s electric vehicle business will be transferred to this newly-formed entity.

On the other hand, Mercedes’ inroads have also made another German carmaker to consider ramping up its EV strategy. Audi India currently offers its e-tron portfolio of five electric cars in India (launched in 2021), though they cost in excess of ₹1 crore because of high-import duties. “Electric vehicles are an idea whose time has come. The response we have got so far has been fantastic. Most of our buyers are a younger demographic and ready to take the plunge into the next technology available,” says Balbir Singh Dhillon, head, Audi India.

The company is also globally aligning itself to be fully electric by 2033, and post 2026, all its new launches would be electric. “If we sell in India, we will also have to assemble in India. We are constantly evaluating that avenue and the moment we have a positive business case, where it justifies the investments required, we would advance in that direction,” adds Dhillon.

Audi recently announced that the company will be launching 20 electric vehicles by 2025. “Some of the models are being evaluated by us and could be brought to India — whether a sedan, or a SUV. The design language for electric mobility in the future is getting very interesting rather than just being sedans or SUVs,” says Dhillon.

Blistering Pace

“The electric mobility story in India is still evolving. It’s not a five or even a 10-year-old story. Most manufacturers are at the outset of their electric portfolio, except maybe for a few who started early. The buzz has started only in the last two years,” explains Dhillon. “The segment will double itself in the next two or three years, because of the lower base of EV volumes,” adds Gupta of ICRA.

The government is placing its bets on electric mobility to pivot India towards its efforts to become carbon neutral by 2070. There have been a slew of policy reforms to accelerate the switch to electric mobility in the past year. The Department of Heavy Industry (DHI) revised the Faster Adoption and Manufacturing of Electric Vehicles Phase II (FAME II) demand incentives for electric 2-wheelers (e-2W) from ₹10,000 per kWh to ₹15,000 per kWh. FAME II has already seen the sanctioning of 92,000 EVs, 6,000 e-buses and nearly 3,000 charging stations. The incentive cap increased from 20% to 40% of the capital cost of the e-2W. The government also approved a Production-Linked Incentive (PLI) scheme worth ₹18,100 crore for investments in advanced chemistry cell battery manufacturing, and a scheme worth ₹26,058 crore for automotive manufacturing, including EVs. These reforms function in conjunction with reduced GST rates for EVs announced in July 2019 — wherein it was reduced from 12% to 5%.

According to data from registration portal Vahan 4.0, the number of electric vehicles (classified as battery-operated vehicles) in India, as of July 11, is 13,39,074. There are 2,826 public charging stations currently operational in India, road transport and highways minister Nitin Gadkari said in the Rajya Sabha recently. The number of people opting for electric mobility is also increasing — 3,089 electric passenger vehicles were retailed in June, a near-five-fold growth vis-à-vis June 2021, where a mere 766 vehicles were retailed. Sequentially, it has grown at 9% from last month. Around 17,802 electric passenger vehicles were sold in FY22 against 4,984 in FY21.

According to Gupta, the tipping point of EVs will not come before the deterrents that exist currently are overcome. “The range anxiety that consumers currently face will go away with time — when the charging infrastructure improves. The overall cost of the battery cells would come down, and vehicles would be more reliable. The economics and total cost ownership would work favourably, as it has happened in case of two-wheelers,” explains Gupta. Moreover, there’s not enough data to increase consumer confidence. “The consumer does not know what sort of degradation will plague the battery after three-to-four years. We need at least two or three more years to see how the current EVs pan out in the longer run,” he adds.

It is because of these deterrents that automakers are looking at creating an ecosystem instead of just selling vehicles. “Along with Tata Power, we provide charging solutions to customers and in certain cases in the fleet segment, if a banker is not ready to support due to EV being a new technology, we have Tata Finance,” explains Chandra of Tata Motors. Luxury carmakers such as Mercedes-Benz also provide charging solutions at home.

In order to realise India’s pledges of net-zero emissions by 2070, reducing total projected carbon emissions by one billion tonnes, and reducing the carbon intensity of the economy to less than 45%, plying non-fossil-fuel-powered vehicles on roads will play a significant role. It may or may not be EVs, but what EVs are doing in India is fuelling the buzz and curiosity behind what the future holds.