Electric Car Revolution: Present Landscape, Disruption & Adoption Challenges

Electric Car

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 is a broad topic and can not be covered in a single article, so we are breaking it into three article series. In this article, which is the first one of the series, we will try to understand where do we stand in terms of electric car adoption in India, challenges around it and who will be the early adopters.

Today’s Landscape

Do you know that electric vehicles are there from a decade but they were not popular due to technology limitations. Mahindra & Mahindra (M&M) has been selling ‘Reva’ since a number of years but there were limited buyers. Trend has changed in recent years, thanks to ongoing research in this field which is improving electric cars as they start to compete with gasoline cars in terms of power & cost. Tesla being the leader in this space has been aggressively innovating. It has launched powerful all electric luxury cars (Model S as sedan and the Model X as SUV) which can compete and exceed in a few parameters with modern Internal Combustion Engine (ICE) based cars. Environmental concern (Delhi air pollution) has also helped to push this discussion further on top of stack. With the arrival of Uber & Ola, sales prospects for new gasoline cars has been diminishing. Entire auto industry is set for a powerful disruptive change. Perhaps the time for “Electric Car” idea has come. However, there are serious challenges in adoption which needs to be fixed before it can be adopted by the masses. Looking at the current situation, we feel electric car disruption is still at least 5-10 years away from India. For investors who have started to load stocks related to electric cars will be disappointed as there is still a lot of time to go and the whole story is not yet unfolded.

Challenges to Adoption

Despite so much push & talk around electric cars, the sale of existing electric cars in India like ‘Reva’ is not going anywhere. In fact production is running in losses and M&M exports majority of cars to Europe where electric car adoption has gathered pace. There are many challenges when it comes to electric car adoption in India such as:

  1. Limited range: Presently, electric cars can go maximum up to 150 to 200 kilometers on a single charge which is a major limitation for intercity commute. If you compare that with diesel cars, for example Honda City which comes with 40 liters tank and average mileage of 20 kmpl, you get a range of 800 kilometers on a full tank which is quite good for intercity return commute of up to 400 kilometers. This will restrict adoption of electric cars only to intracity commutes.
  2. Lack of charging infrastructure: Like petrol stations, there is a need for charging stations at every 100 kilometers or so. Currently, there is no infrastructure which can support this charging away from home. NTPC has applied for pan India license for setting up charging infrastructure in India. Reliance Industries is also exploring option of adding electric charging outlets along with its LNG stations. So in the future, we can expect more charging stations in India.
  3. Charging time & battery standardization: Average charging time for Reva electric is normally 5-6 hours on normal plug & 1 hour with fast charger. With that charge, Reva can go up to 100-120 kilometers. For Tesla which is the most advanced, it takes up to 9.5 hours for a full charge but Tesla range is up to 482 kilometers with its high performance battery kit. Clearly, 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 other solution 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.
  4. Powering car air conditioning: Currently, running an air conditioner on a battery-powered vehicle is one of the biggest technical challenge since it sucks a lot of power from battery which can compromise car’s range. In India, where temperatures can rise up to 45-50 degree Celsius, it needs powerful air conditioning along with other car entertainment services without compromising car’s speed and range. Usually, it works well when battery is fully charged but as soon as battery charge dips or car is static (stuck in traffic), the air conditioning system becomes a major drag on the battery systems. It is possible that your car runs out of charge without covering much distance (if struck in traffic for long). These are real possibilities in India’s metros where extreme temperatures & slow traffic speeds are common. This will impact electric car adoption to intracity commute as well. There is a need for more innovation to support air conditioning in battery powered vehicles.

What does future holds

Research on electric cars and their suitability in every condition is going on in full steam. Lot of private equity money is propelling this innovation and it is only a matter of time till a powerful but reasonably priced all-electric vehicle will enter main stream commute. Having said that, given the challenges, it may take another 5 to 10 years for it to become a success. Government of India has set up an ambitious target of all electric vehicles by 2030. It has given instructions to all auto manufacturers to start adopting it for two-wheeler, three-wheeler, cars & buses. Due to big government push, first adopters will be government agencies like state transport departments to ride on this wave. Himanchal state roadways has already set in motion its plans to replace all buses plying into eco-sensitive Himalayan regions to all electric. In the next wave, adoption will spread to intracity commute like autos & taxis. Government is mulling idea to mandate all electric vehicle registration under Uber & Ola in the future. These waves will demonstrate the capabilities of electric vehicle to general public and by that time, there will be sufficient infrastructure to support this ecosystem. We expect general public to be last adopters of electric vehicles and once they decide to switch, it will be the final nail in combustible engines’ coffin.

In the next article, we will talk about various sectors that may benefit or loose out due to this disruption. Till then stay tuned!!

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