4 Reasons Electric Four-wheelers Have Not Taken Off Yet in India According to a report, commercial E4Ws have achieved just 12% of their respective FAME II unit targets
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Electric mobility has experienced significant growth in the last few years, driven by improved charging infrastructure, increased awareness about sustainability, an increase in oil prices, technological advancements, innovations by startups, OEMs' participation, and government incentives and policies, among others. So far, 21 Indian states have come up with their own EV policies to give a boost to electric vehicles (EVs) in their respective states.
However, despite these favorable factors, the transition to electric powertrains in the four-wheelers sector has been relatively slower. According to the CEEW-CEF report, supported by Bloomberg Philanthropies, more EVs were sold in the country in the first six months of FY 2022-23 than in the previous financial year. However, commercial E4Ws have achieved just 12 per cent of their respective FAME II unit targets.
In fact, even though there were reports of many E2Ws fire accidents, the incidents dampened their growth only marginally and for a shorter duration. They are once again back on track. Despite that and the problems around the FAME-II subsidy, E2W registrations crossed the 1 Lakh mark for the first time in May, according to Vahan portal. Former NITI Aayog CEO Amitabh Kant also often only reiterated how India should target 100% E2Ws and E3Ws sales in the next five years.
"There was a surge in the adoption of E4Ws in 2021, driven by soaring fuel prices and the growing desire for personal mobility amid the pandemic. But traditional ICE cars continue to dominate the market. The market for 4W EVs is still in its early stages, with only a handful of models available to choose from," said Mayank Jain, CEO New Auto, CarDekho Group.
Recent Vahan data also said that the total vehicle registration in the E2W category jumped 57% to 1,04,771 units in May from 86,259 in April and Ola Electric continued to lead the index, followed by TVS Motor and Ather Energy.
The cost factor
The upfront investment in an E4W is less financially appealing for consumers, particularly in price-sensitive markets. "The cost of battery packs, which constitute a significant portion of the vehicle's price, remains relatively high as EV technology continues to evolve. Moreover, the larger size and weight of 4Ws necessitate a greater battery capacity for reasonable range and performance, leading to higher costs," said Anup Patil, co-founder and CEO, Intangles.
Thus, in the 4W space, the price parity between an electric and ICE engine is enormous, significantly increasing the total cost of ownership (TCO) of a E4W. Generally, EVs for four-wheelers are sold at a premium of up to 50% more than their internal combustion engine (ICE) counterparts, making them less affordable for consumers. If the vehicle is not running more than 100 km daily, a high TCO does not make sense for the vehicle owner.
"The TCO comparison shows that E2Ws are 50% cheaper over the life of the vehicle compared to IC vehicles, indicating a strong case for their mass adoption. In the case of four-wheelers, EVs are currently around 20% cheaper in terms of TCO when considering a distance of 1.5 lakh km over the vehicle's lifespan. Moreover, as the size of the vehicle increases, the price delta between EVs and IC vehicles also grows," said Shreyas Shibulal, founder and director, Micelio Mobility.
For instance, an E2W can reach the breakeven point with its IC counterpart at approximately 15,000 kilometers. In contrast, a four-wheeler EV would require around 1 lakh kilometers to reach the breakeven point in terms of cost. "Although the overall cost of ownership across 5-7 yrs remains significantly profitable in EV in both cases, higher upfront cost becomes detrimental which is likely to see a significant drop due to ongoing innovations in battery tech," said Sunil Shekhawat, CEO, Sanchiconnect.
Charging infrastructure and range anxiety
Additionally, the charging infrastructure for 4Ws is not as developed as that for 3Ws and 2Ws. The majority of EVs are charged at home or in public charging stations, and the availability of such infrastructure plays a crucial role in influencing consumer behavior. "However, setting up widespread charging networks for 4Ws requires significant investment and planning, unlike 3Ws and 2Ws, which can be more easily accommodated due to their smaller size and lower energy requirements," said Patil.
The range anxiety factor also affects consumers differently in the 4W segment, wherein the use cases are often longer commutes, intercity travel, and transporting goods. And, this demands a higher range and more advanced charging infrastructure. "Potential buyers of E4Ws often prioritize the range capability of their vehicles. Although advancements in battery technology have greatly improved the range of EVs, the expectations and usage patterns of 4W users may differ from those of 3W and 2W users," he added.
Source: IEA report
Four-wheelers are also used for more extended travels, both within and outside the city. If not every day, consumers like to go on road trips in their cars once in a while. But, for longer travels, E4Ws would require a larger more powerful battery to provide sufficient range. "Improvements in the range are ongoing but this could be a limiting factor for the consumers. In contrast to this, E2Ws and E3Ws have smaller batteries and they are used commonly for shorter distances. Hence the current technology is suitable," said Lalit Singh, co-founder and CEO, TelioEV, EV charging management solutions provider company.
B2B over B2C
Different dynamics play out in the commercial EV segment as compared to ICEs. B2B (business-to-business) sees more adoption as compared to B2C (business-to-consumers)in EVs. "We see significantly higher adoption of E4Ws in the B2B segment than that in the passenger segment, as commercial vehicles typically run more than 100 km per day, justifying the high TCO for the owner. The adoption of E2W & E3W is also higher in the B2B landscape, as their operational costs are significantly lesser than those of ICE counterparts," said Shoeb Ali, co-founder and managing partner, Transition VC.
However, within B2B, E2Ws & E3Ws have many use cases as compared to E4Ws making the adoption higher. For instance, they dominate the last-mile delivery and e-commerce segments in India. "With the rapid growth in e-commerce, adoption of EVs in 2W & 3W B2B segments will continue to soar," Ali added.
Batteries and chargers
Other factors for the slower adoption of E4Ws can also be attributed to the lack of standardization for batteries and chargers, which creates uncertainty and inconvenience for consumers. "Sub-component system technologies such as the battery packs, motor controls and electronics in 4W are complex, unlike those in 2Ws & 3Ws. In addition, they also require a tremendous amount of R&D & capex in manufacturing. Hence, very few startups in India have attempted to build E4Ws. It is the incumbent 4W OEMs that have launched or are in the process of launching the products in the market, however, are slow as they might cannibalize their existing ICE products," said Ali.
Moreover, a lot of focus has been given to E2Ws and E3Ws in terms of innovation over E4Ws because of the challenge of TCO in E4Ws. "We have seen product level innovation across the 2W & 3W EV categories mainly along with simpler charging capabilities and access for the above 2 categories v/s their 4W counterpart," said Karan Mittal, partner, Ev 2 ventures.
Lack of subsidies
Experts also opine that there is also a lack of FAME subsidies for 4W vehicles. For instance, FAME subsidies for 4W passenger cars are applicable only if the vehicle costs are less than INR 15 Lakh, and it is challenging to build and manufacture EVs at this price point due to high battery costs. The FAME subsidies, however, cover the 2W & 3W segments, making the EV prices competitive as compared to the prices of ICE vehicles in these segments.
As battery costs decrease, charging infrastructure expands, and automakers continue to innovate, the disparity between EV adoption in 4Ws and the success seen in the 3W and 2W sectors is expected to diminish. "Electric mobility is a transformative trend, and as more consumers recognize its benefits, the transition to electric four-wheelers will gain momentum, contributing to a cleaner and more sustainable transportation ecosystem for all," sums up Patil.