Business

High prices, lack of sops to check EV expansion

High prices and absence of a strong financial stimulus from the government to encourage buyers will check the expansion of electric vehicles (EVs) in PV and CV segments in India in the medium term, as per an ICRA Ratings report.

“At present, FAME II incentive for electric PVs is restricted to the commercial taxi segment only which also highlights the government’s awareness that the attractiveness of EVs for personal car buyers will remain distant in the near-to-medium term,” as per the report.

This apart,EV vendor systems need substantial investments to keep costs under check and reduce dependence on imported electronic systems. ICRA said battery swapping will face strong resistance from automobile OEMs due to a possible impact on their product differentiation capabilities as well as pricing flexibility.

“Its acceptance, therefore, will be limited to certain less complex automotive sub segments like the three-wheelers,” ICRA said.

Further, given the importance of battery hardware and software in the overall performance of an EV, battery swapping will face strong resistance in technologically-complex products such as cars or two-wheelers, it added.

“The price sensitivity nature of the Indian market implies the EVs need to be priced competitively which, in turn, demands ‘economies of scale,’ said Ashish Modani, vice-president and co-head, ICRA.

“At present, EV prices are much higher than their ICE counterparts. This, coupled with a limited public charging infrastructure, has resulted in minimal EV penetration,” he added.

“We expect the automotive sub-segments such as three-wheelers, two-wheelers, especially scooters), intra-city buses and small commercial vehicles (SCVs) to emerge as early adopters due to the comparable total cost of ownership with their ICE counterparts. However, EV penetration is likely to remain low in the passenger vehicle and heavy truck segments,” he said.

Mr. Modani said over the next five years, EVs will account for 8-10% of the new vehicle sales in two-wheelers and intra-city buses, whereas its share will remain about 3-5% in the PV segment. However, the three-wheeler segment may witness rapid transition with sizeable EV penetration by 2025.

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Printable version | Oct 28, 2020 4:16:12 PM | https://www.thehindu.com/business/high-prices-lack-of-sops-to-check-ev-expansion/article32662982.ece

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