Electric vehicle adoption in India faces concerning factors such as quality, imports, environment and cost.
Electric Vehicles (EVs) are facing a moment of reckoning in the Indian market, despite their initial successes. First, frequent instances of electric two-wheelers catching fire, have affected their reliability and raised serious questions about their safety. Second, doubts about how green electric vehicles really are, refuse to go away; thirdly, the huge import content especially in using Chinese batteries are raising issues of dependency on an enemy country for such a critical product; and finally, the total-cost-of-ownership (TOC) of electric vehicles, is still not a bullet-proof business case, to sway an individual away from an internal combustion engine (ICE) vehicle to an EV.
Are electric vehicles really green?
Of course, an electric vehicle has no tailpipe emissions that pollute the environment, but there is a lingering question about burning fossil fuel to produce electricity that is used to charge the vehicle. According to the United States Environmental Protection Agency, “even accounting for electricity emissions, research shows that an electric vehicle is typically responsible for lower levels of greenhouse gases (GHGs) than an average new gasoline car.”
Most electric vehicles sold today tend to produce significantly fewer planet-warming emissions than cars fueled with gasoline. But a lot depends on how much coal is being burned to charge up those plug-in vehicles. And electric grids still need to get much, much cleaner before EVs are truly emissions-free.
As of January 2022, India has a total thermal installed capacity of 235 GW of which 51.6% of the thermal power is obtained from coal and the rest from Lignite, Diesel, and Gas. Although electric vehicles certainly give the cities a cleaner environment, the pollution shifts from the cities to the power plants in the rural areas.
Importing batteries instead of oil
Lithium-Ion batteries comprise the largest cost component in an electric vehicle, and the entire volume of battery requirements is imported, primarily from China, which is the largest Li-Ion battery manufacturer in the world. Batteries make up around 40-50% of the cost of an EV and importing them makes the electric vehicle considerably costlier than conventional ICE vehicles. The Indian government estimates that looking at the EV plans of various automobile companies, the country will need a minimum of 10 GWh of Lithium-ion cells by 2022, about 60 GWh by 2025 and 120 GWh by 2030.
The market for electric vehicle batteries is expected to increase to $300 billion by 2030 including a secondary market of more than 2.5 million e-rickshaws. As such, there is a lot of activity on lithium-ion batteries in India to feed the burgeoning growth of EVs on Indian roads. It would appear that instead of oil, India is importing batteries. In fact, there is very little economic gain in shifting to electric vehicles from internal combustion engines, unless we can resolve these challenges.
In 2019-20, India imported about Rs 8,500 crore worth of Li-ion batteries. The same was the case in 2018-19. This is a six-fold rise from the 2014-15 period. India almost entirely depends on global (especially Chinese) resources and technology for this energy transition.
Metal mining creates environmental issues
Demand from the electric vehicle industry for key metals is on a swift upward trajectory. Copper, nickel, and lithium are some of the key metals required for EV battery production. As a result, demand growth for nickel from electric vehicles is expected to increase 14 times between 2019-2030. Lithium and copper are expected to experience a growth in demand of 9-10x. This will mean an increase in mining activity which once again is not exactly environment friendly.
Like many other batteries, the lithium-ion cells that power most electric vehicles rely on raw materials — like cobalt, lithium and rare earth elements — that have been linked to grave environmental and human rights concerns. Cobalt has been especially problematic. Mining cobalt produces hazardous tailings and slags that can leach into the environment, and studies have found high exposure in nearby communities, especially among children, to cobalt and other metals. Extracting the metals from their ores also requires a process called smelting, which can emit sulfur oxide and other harmful air pollution. For EVs to become truly green, there are several roadblocks to be manoeuvred.
The total cost of ownership is still not favourable
Despite the apparent environmental benefits of electric vehicles, at an individual level, the purchase decision of an EV in India depends on the initial investment and the TOC over the life of the vehicle. At this moment the total-cost-of-ownership (TOC) of an electric vehicle spread over four years does not as yet give a clear advantage, given the rather high on-the-road price of even the least expensive EV in the country. Let’s look at the numbers.
The ex-showroom price of Tata Tigor EV is between Rs.12.49 – 13.64 Lakh in New Delhi. Add another Rs 1.5 lakhs on insurance, taxes and miscellaneous items, the on-the-road price works out close to Rs 15 lakhs. The charging cost of electric vehicles at around Rs 400-500 which gives around a 300 km range. This will vary depending on the electricity rate of the state or the city’s utility company. On average an EV charging cost works out to around Rs 1.5 to Rs 2 per km – a clear edge over ICE operational costs.
Then comes the EMI on the car loan as a major component of the TOC. At an average interest of 8.6% interest, the EMI on a loan of Rs 15,00,000 for four years would work out to around Rs 37,000. Even the costs of spares are not in any way inexpensive.
Therefore, the cost of driving a Tata Tigor, assuming the entire amount has been funded by a bank loan, works out close to Rs 40,000 per month. A decent-sized petrol sedan, like a Ciaz, is available at Rs 11,00,000 on the road which itself gives a Rs 4,00,000 advantage straightway over the Tigor EV. Even if the operational cost works out to Rs 12,000 per month on fuel, it’s still better economics to go for a petrol vehicle now.
Reducing energy imports – the key issue
The other factor that weighs against an electric vehicle at this juncture, is the absence of charging infrastructure to support the vehicle on long out-of-the city runs. At the back of your mind there is also a nagging worry about finding mechanics, and spares, should things go wrong. All these would need to change in the next couple of years and then the entire scenario would be quite different.
It is clear that India cannot depend on fossil fuels for powering its growth. The future will have to be nuclear energy, with solar and wind energy as interim solutions. The real problem for India is not battery imports, or whether to go for electric vehicles or not over ICEs, it is how it will meet the energy needs of a growing economy, and reduce its import dependencies on oil or batteries.
Also Read: Electric vehicles: How clean is “green”?
(Abhijit Roy is a technology explainer and business journalist. He has worked with Strait Times of Singapore, Business Today, Economic Times and The Telegraph. Also worked with PwC, IBM, Wipro, Ericsson.)
(Disclaimer: The views expressed in the article above are those of the author’s and do not necessarily represent or reflect the views of Autofintechs.com. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.)