That would prove to be a game-changer for the domestic auto industry.
How the EV segment would perform in the initial years would majorly depend on the price points of these vehicles.
The average cost of a small car in India today stands at $6,00-8,000 (ex-showroom), while the median cost of a car comes to $10,000. A long-range EV (380km) is expected to cost about $21,500 while a moderate-range one (190km) could cost $16,000 by 2025, UBS said in a forecast this past August.
That takes the battery cost at $130/Kwh. At Friday’s rupee-dollar exchange rate, $16,000 equals roughly Rs 10.40 lakh, the price point at which entry-level SUVs are selling in the domestic market currently.
UBS analysts argued that even though battery costs are falling, a long-range electric vehicle (EV) could still remain too expensive for mainstream adoption, without major government subsidies.
India needs local battery cell manufacturing and electronics value chain and charging infrastructure. For that, the government would need to invest significantly to drive industry growth, said the UBS report.
The government’s fiscal space is limited currently. The disruption from EVs is not priced in India so far, the analysts said.
Bank of America-Merrill Lynch (BofA-ML) in a report forecasts electric vehicles to have a 12 per cent market share in the light vehicles segment globally by 2025. It expects the penetration to rise to 34 per cent by 2030 and 90 per cent by 2050.
Among US OEMs, GM’s ability to integrate autonomous EVs into a ridehailing/shared fleet looks differentiated. Ford is focused on using existing platforms for EVs, while FCA lags behind in terms of EV offerings. Tesla’s auto focus is solely on pure EVs (new Model 3 launch in 2017), it said.
India aims to achieve a target of all-electric vehicles by 2030.
Regulatory actions against fossil fuel vehicles are likely to support EVs over the next few years, Nomura India said, noting that the Suzuki-Toyota pact should give a headstart to Suzuki over other OEMs in India.
The two companies together are likely to have enough volumes in India and for exports for high utilisation, which will bring down the overall cost per vehicle. Other OEMs dependent on imported components may find it difficult to compete on costs, it said.
Suzuki intends to build the entire value chain in India, which would require a lot of investment. It is likely to pay off in the medium term, Nomura India said.
The company earlier this year announced setting up of a lithium-ion battery manufacturing JV with Toshiba (40 per cent share) and Denso (10 per cent share). The JV is expected to supply batteries for hybrid and all-electric cars by 2020.
Mahindra & Mahindra (M&M) is also gearing up for manufacturing all key components for electric vehicles on its own, media reports suggest.
M&M was an early entrant in this segment after the automobiles-to-financial services conglomerate acquired a majority stake in REVA Electric Car in 2010. Mahindra later rebranded the company as Mahindra REVA Electric Vehicle.
For M&M, building on the first mover advantage and cab aggregator tie-ups is a must. The company expects battery cell prices to drop to $130/Kwh in the next 2-3 years from $230/Kwh at present.
Bajaj Auto has plans to launch e-rickshaws to 2018 from 2020. Hero MotoCorp, on the other hand, has invested up to Rs 205 crore in electric automotive startup Ather Energy with a 26-30 per cent stake.
Analysts believe original equipment makers (OEM) such as Maruti Suzuki, M&M, Ashok Leyland and Bajaj Auto may gain in the long term as they develop EV platforms. Battery makers Exide Industries and Amara Raja are also expected to gain as they look deeper into lead-acid and lithium ion batteries.
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