Road Ahead For Startups In E-Mobility

While we have started the movement towards EV adoption in the country, the road ahead is long

With the objective of transforming the country into a greener space to live, the Government of India is pushing for the migration of internal combustion electric vehicles. The target set by the government is to bring in 100 percent electric cars on the Indian roads by 2030. While the target may seem ambitious,it is not impossible if appropriate encouragement to the players in this domain is maintained and space created for new players to enter the segment. There are numerous incentives extended by the government to ensure that even the small players in this field do not face difficulty. However, the startups are shaky to take a plunge, and the existing ones are looking for handholding.

The problem is not restricted to one aspect, but they need guidance on multiple fronts to make a greener contribution to the country’s economic growth.   First is the testing scenario where they have to take permission for each model that they are going to introduce, which puts a huge financial burden on them if there are many models. The policies of FAME have often been criticized, and there is a need to address the problem earnestly. Simplification of requirements is the need of the hour, and it has to start from the permission stage. Though investment in EV startups is increasing – from $147 million in 2018 to $376 million in 2019 -- a lot still needs to be done to build a healthy environment for more players to come in.

Many of the policies for EVs are linked to Indian manufacturing and setting up a plant is turning out to be a difficult task for startups. In the absence of Indian options, they are relying on foreign companies, which is also contributing to a higher cost of EVS. The cost-sensitive Indian market is not digesting the higher prices and thus acting as a deterrent for the EV startups. Typically, the cost of an electric car is above Rs 13 lakh which is way above the cost of a fossil fuel-based vehicles; similarly, the cost of electric two-wheelers is also discouraging users from going ahead with the adoption. In fact, the cost factor is stopping the EV startups from introducing good e-bikes in the market that will cost upwards of Rs 1 lakh, which is again expensive for the buyers who are used to buying lesser expensive bikes.

Apart from the cost issue, the problem of charging infrastructure acts as another inhibiting factor for adoption of EVs. A typical EV whether 2 or 4 wheeler, will have much lesser range compared to equivalent vehicle based on IC engine. To encourage the adoption there has to be vast charging infrastructure throughout the country which as of now doesn’t exist. While FAME-2 policy is moving in the direction of charging infrastructure promotion, many contours of the policy act against the entry of smaller operators with 2-3 charge points, which will be absolutely necessary if EV adoption is to be encouraged. Think of it as STD booths in the 1990s – the country had the telecom revolution because of those STD booths at every nook and corner and the booths also provided livelihood to a large number of people. A similar kind of approach is required for creating the required charging infrastructure also.

The corporates and PE investors have a significant role to play in establishing the manufacturing capabilities of EV-related components in India and create an environment conducive enough for bringing down the costs. Also, the role of catalysts has to be increased, who can ensure that the startups reach out to the right investors. These catalysts or bodies also have to ensure that technological transformation and enhancement is in the right direction.

According to the Society of Manufacturers of Electric Vehicles (SMEV), the sales stood at 1,26,000 for electric two-wheelers and 3,600 for electric four-wheelers in FY19, as compared to FY18, where 54,800 electric two-wheelers and 1,200 electric four-wheelers were sold. The potential is enormous as we can just compare the required numbers to the IC engine-based vehicles on the road in the country. It also means that multiple companies, including the startups, have to work it out to make the country greener.

In short, while we have started the movement towards EV adoption in the country, the road ahead is long. All the players like technology startups, corporates, PE investors, the government have to play their role in the electric mobility revolution. The telecom revolution set the country on the path of huge connectivity which subsequently led to many connectivity/data related services also being created. EV revolution has much larger potential but needs the right actions by all the stakeholders.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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