Electric cars charge up tycoons, Energy News, ET EnergyWorld -

Electric cars charge up tycoons, Energy News, ET EnergyWorld


By Una Galani

India Insight: Electric cars charge up tycoonsMUMBAI: It is a surreal experience to test-drive an upmarket electric car on the dusty pot-holed roads of Mumbai. Alongside the odd cow and autorickshaws spewing out toxic fumes, Tata Motors’ Nexon EV is a discombobulating mark of modernity. The novelty won’t last long: With bigshots from Reliance to Tesla to Uber rival Ola charged up about the opportunity, India is gearing up to enter the fast lane of battery-powered vehicles.

The owner of Jaguar Land Rover is leading a pack of disruptors. Its 72% share of India’s nascent clean-energy passenger-vehicle sales is impressive considering its last big innovation over a decade ago was a flop. The Nano, billed as the world’s most affordable car, was shunned by consumers for looking too cheap. Overall, Tata Motors ranks a distant third behind Maruti Suzuki and Hyundai Motor in its share of the roughly 2.8 million internal combustion engine cars sold annually to consumers.

Tata had some help with the Nexon EV: The British marque’s engineers critiqued design. At the top end it comes with white leather seats and sunroof. The basic model sells for almost 1.4 million rupees ($18,733). That’s roughly 40% more than the non-battery variety which has a better driving range, and 70% higher than the average price of a car sold in India. Nonetheless, Tata is logging about 700 monthly orders for the Nexon EV and sales are growing 40% quarter-on-quarter; these would be higher if not for the global chip shortage.

Chairman Natarajan Chandrasekaran is making sustainable mobility a top mission for the 150-year-old hotels-to-salt conglomerate as the government looks for ways to reduce air pollution and India’s huge oil import bill. Sister companies from Tata Power to Tata Chemicals are pitching in, rolling out charging infrastructure in big cities and more.

Maruti, seller of half of the country’s passenger vehicles, is waiting for prices to fall before pushing hard. But Tata’s traction is encouraging other tycoons to step into the world’s soon-to-be third-largest car market. After upending telecommunications, Mukesh Ambani is whipping up excitement with an outline for his $170 billion oil-to-retail Reliance Industries to make batteries, and Elon Musk’s Tesla is scouting for showrooms.

IMMINENT DISRUPTION

For all the global obsession with cars, India mostly moves on two wheels and that’s where its electrification drive will speed along. India sold over 17.4 million scooters and motorcycles in the year to March 2020, according to the Society of Indian Automobile Manufacturers, six times more than four-wheeled personal vehicles.

Two-wheelers account for most of the electric vehicles India is selling, and three-wheel rickshaws are found everywhere from the northern city of Lucknow to Benares on the banks of the river Ganges. Many of these look as old and tired as their conventional peers, but it underscores the readiness of even India’s poorer consumers to drive electric vehicles if the price is right.

The total cost of ownership for an e-scooter can be about 20% cheaper than its internal combustion engine peer, Sonal Gupta of UBS estimates. The government’s relentless taxing of fuel is driving interest too: International Brent crude prices are 4% lower than at the start of January 2020, yet petrol prices in Mumbai jumped by a fifth over the same period. With more choice and aggressive pricing, new entrants could speed adoption.

Ola Electric is a great example. Its so-called FutureFactory, covering an area the size of 150 Olympic swimming pools, is powered by some 3,000 robots in the Southern state of Tamil Nadu and will be capable of churning out 10 million electric two-wheelers a year. The SoftBank-backed company will have vehicles rolling off the factory line in June and at peak capacity may account for some 15% of global capacity. Consumers will be able to remove the battery and charge it in their apartments. Co-founder and Chief Executive Bhavish Aggarwal wants to export the wares to Europe, Latin America and Southeast Asia, and aims to make electric cars within two to three years – having last week unveiled a fully autonomous flying car.

It is a stunning bet for a startup that hasn’t sold a single automobile, and it is a threat to the world’s largest manufacturer of two-wheelers, Mumbai-listed Hero MotoCorp , formerly a joint-venture partner to Honda Motor . Ola’s quest for scale and vertical integration, including a plan to make its own batteries, is reminiscent of $70 billion Chinese electric car upstart BYD .

CHARGING UP

Ola, Tata and others are racing to grab a share of generous production-linked incentives offered by Prime Minister Narendra Modi’s government which wants to develop India into a hub for global manufacturing. In other sectors, like mobile handsets, the scheme has drawn in Samsung and Apple supplier Foxconn.

Automakers and manufacturers of advance chemistry cell batteries are eligible for benefits worth some $10 billion over five years. Japan’s Toshiba, Denso and Suzuki Motor could profit, too, through a lithium-ion battery assembly and manufacturing plant they are jointly setting up in Gujarat. They will eventually supply batteries to Maruti Suzuki, which generated 32% of its foreign parent’s net sales in the year to March 2020.

Things could go faster, though. Industry bodies complain that a separate subsidy scheme worth some 100 billion rupees ($1.4 billion) outlined by Modi’s government two years ago has achieved barely 10% of its target because it’s too narrowly focused. For example, the per-car incentive which can be worth up to 300,000 rupees – roughly $4,000 – targets commercial vehicles rather than ones for personal use. If it was open to all kinds of passenger vehicles, it would bring the Nexon EV to price parity with a diesel car, based on the price to get it out of the showroom onto the road. Tata Motors’ sales underscore the need for an overhaul: The top commercial-vehicle producer is selling more electric personal vehicles today than fleet ones.

India barely registers in most global discussions on electric vehicles. With powerful tycoons and officials leading efforts to drive adoption, cut costs, and export to the world, though, it’s not too hard to imagine the country setting new global standards for mobility as it has in payments and telecommunications. As much as I was sold on the Nexon EV’s merits after my test-drive, when the salesman started on his pitch I made my excuses and hopped out the car.

(The author is a Breakingviews columnist. The opinions expressed are her own.)

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