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Well, there has been a lot of buzz on electric vehicles emerging as preferred vehicles of choice in future. People are curious to know which stocks are going to benefit from this trend and which one will die in wake of these disruptions. It makes sense to analyse these elements from a fundamentalist perspective rather than jump to conclude.
For the moment, lets forget the value add’s of electric cars & how it impacts significantly to a cut in Oil import budget. Analyses can spell success by sticking to reality, that is in front of you about the subject, rather to cloud your thoughts around benefits of the subject.
- Reality 1: While the Central government has made statements about its favourable sentiments towards EVs, nothing has been put down in policy. Even the 2030 deadline to make each new vehicle in India go electric was a statement, not a policy that carmakers could take as a surety. This makes it difficult for manufacturers (domestic or foreign) to follow through and declare the investment needed to develop and manufacture electric cars in India. The alternative is to import cars, but since no exemptions are in place, an imported electric car can easily cost more than twice as much as it would overseas, defeating the purpose of making electric cars mainstream.
- Reality 2: Electricity Production Infrastructure – Well, you don’t have to necessarily go to Rural India to check consistency of electricity, you can flip across any major city in India – you’ll find that load shedding is a daily occurrence. This can vary from power cuts lasting for half an hour to four hours or a lot more. Another major issue would be ‘Single phase’ issues with Power distribution that is haunting all of India with frequent load distribution factors across grids especially in the metros. Inconsistent electricity supply and power surges can seriously damage expensive hardware, including the battery pack which is the main component in a electric vehicle.So to get about consistency in distribution of electricity – is certainly a challenge in itself with a need for greater infrastructure over haul, that comes with a hefty price attached to investments.
- Reality 3: Limited range – Presently, electric cars can go maximum up to 150 to 200 Kms on a single charge which is a major limitation for intercity commute. Even Tesla has faced these challenges in its Model S – where the maximum range achieved was around 170 kms (110 Miles) which saw them use as little energy as possible by maintaining a constant speed at around 45 km/hr, using low rolling-resistance tyres and trying not to use the brakes. Off course, high performance battery kit which can yield better performance is a time tested reality with Tesla, but affordability is certainly an answered question till date. At present, even fast charging options on luxury cars like the Mercedes-Benz EQC and Audi e-tron need a minimum of 30-40 minutes to charge the batteries up to 80 per cent.
Well, this isn’t an issue for those who can afford these vehicles, such technologies are expensive and cannot be recreated in budget car segments i.e. the sub-Rs 10 lakh space. Remember, most of India’s car sales come from this price segment, so manufacturers have to strike a tricky balance of making EVs usable and affordable at the same time.
- Reality 4: Dealer Reluctance: Yes, this is a unique situation that not many people are aware of. Dealers themselves aren’t convinced on the idea of electric vehicles which presents a challenge for carmakers. Why? A car dealer doesn’t make the real money on car sales, but on the expenses that surround the car itself – accessories, insurance, service expenses and others.And that last bit is where a problem comes in. Electric vehicles are very cheap to run. They don’t have as many moving parts and don’t have requirements like engine oil, injector clean ups, or tuning. Wear and tear components like brake pads and tyres will still need replacement, but electric powertrains are far less complicated and far more efficiently designed than their internal combustion engine-equipped counterparts. Given the drop in service costs, dealers will need to expect an alternative revenue source, if at all they get sold to the Idea of electric vehicles.
Looking Into The Future :
To make EVs affordable, the batteries will have to be produced in India and be extensively tested to cope with Indian weather conditions. Only then will there be some scope for affordability. At the moment, battery manufacturing companies like BYD, Tesla and Panasonic aren’t based in India, so the supply is almost entirely dependent on import. This is not the ideal situation as it puts us back into the position we are in with petrol and diesel, leaving India vulnerable to international market fluctuations. However, Suzuki has entered a joint venture with Toshiba and Denso to make lithium ion batteries in Gujarat, which could motivate others to set up base in India.
Bigger Issue to be addressed – No one will wait for battery charging if the person is on the move. Even one hour will seem quite a lot if you are only stopping for a battery recharge. The solution to this can be ‘Battery Standardization’. With standard battery for all-electric cars, it can be designed for a quick replacement. So at any charging station, you can get your car battery replaced instead of recharging. You will be billed based on amount of charge available in the replacement battery kit. Something similar to LPG gas cylinders where we get cylinders replaced once they are exhausted. As of now, every manufacturer has its own set of design & specifications for battery which can be a hindrance for the whole industry.
Source: Outlook India, AceEquityinvestor & observation of general market trends.
Now i shall reserve my thoughts on my next article which would be around – Design aspects of the electric car – Interiors & Exteriors, Making of Lithium Ion Battery in India & what kind of companies stand to benefit from the move. Look forward to your feedback.
– Article by Suman Adithya Rao (SEBI Certified Research Analyst, Management Graduate in Entrepreneurship & Small Business Management)
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