AI Insights

To what extent can Electric Vehicles help in the clean energy transition

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This post has been authored by Manisha Rikkula, the Research Analyst Intern at Arthashastra Intelligence.

India has committed to achieving net-zero emissions by 2070. Also, by 2030, it is expected to source 500 GW capacity from non-fossil energy. According to a report, by 2030, the electric vehicle market is anticipated to be worth USD 152.21 billion. From 2021 to 2030, the market is estimated to grow at a CAGR of 94.4 percent. This is where electric vehicles offer an opportunity to shift to clean energy sources.

As per the Federation of Automobile Dealers Associations (FADA), Two-wheelers EVs are the highest selling in India’s EV market since they are less expensive and are used for short-distance travel.

The electric two-wheeler (EV-2W) vehicles have dominated the electric vehicle segment in India and are anticipated to value at USD 116.80 billion by 2030. The EV-3W comes next to it. EV-2W segment has registered a YoY growth of 4.64% in 2021, it was at 8.31% in 2020.  The sales of electric vehicles 2 Wheelers have increased by three-fold it was at 41046 in 2021 and has reached 231338 in 2022. The overall rise in electric vehicle sales has registered a growth of 2.18% in the financial year 2021 from 1.5% in 2020

Figure 1

Reasons for rising in sales:

  • EV sales increased this year because of the government\’s strong push and the expanding footprint of charging infrastructure.
  • This was compounded by the steady increase in the price of car fuels such as gasoline and diesel.
  • With services like battery swapping and battery-as-a-service (BaaS) gaining traction, the segment\’s sales could continue to rise.
  • The Russia Ukraine conflict has caused an interruption of coal supply, which is unlikely to be entirely compensated by other suppliers. The scarcity has driven up spot electricity costs on the India Energy Exchange, resulting in higher prices. Moreover, the war also led to rising fuel prices. This made consumers shit demand for EVs.
  • The Faster Adoption and Manufacturing of Electric Vehicles (FAME) initiative was developed as part of the National Electric Mobility Mission Plan (NEMMP) 2020 to promote the development of both the HV and EV sectors, as well as their manufacturing eco-systems. Various capital subsidies offered as part of these policies aided in the faster production of automobiles.

Concerns:

Indian electric Vehicles are still in nascent stages and need the following to be addressed.

  • The pandemic\’s impact on India\’s electric vehicle (EV) market was minimal. In India, new electric passenger car registrations climbed by 109 percent year over year in 2020, but the key battery technology is still sourced from abroad. The epidemic caused a large drop in total passenger and commercial vehicle sales, while electric car sales in India were unaffected. Therefore, the investments in core battery technologies help in the better developing EV market.
  • The initial purchase price of electric vehicles tends to be higher than that of gasoline-fired and hybrid vehicles, despite the maintenance cost over the lifetime of the vehicle being lower for EVs. The price-sensitive consumers are attracted to the initial low prices.
  • The electric car penetration is slow as compared to the EV-3W, and EV-2W segments. Higher price tags compared to gasoline or diesel cars are the reason. Rapid investments in the latest technology adoptions help to better manufacture designs with efficient price quotes.
  • Another deterrent is insufficient charging infrastructure, especially on highways.
  • Recent fires in e-scooters Li-ion batteries can affect the consumer preferences toward EVs negatively.  The lithium-ion battery is a high energy density as compared to other batteries. They exhibit thermal runaway property. A greater amount of care must be exhibited in charging and maintaining optimum temperature. Negligence in charging the vehicle may have caused the fire. Reductions in these Incidents play a crucial role in demand expansion.

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