Bigger Batteries and longer range – Why Premium EVs will spark electrification in India ?

In this article, I bring together the justification why premium cars with bigger batteries resulting in longer range will seed the Indian electric vehicle (eV) market. In the last article (originally published in early 2021), I covered the existing tax incentives that position premium eVs for success in India with the example of the Tata Harrier SUV. Tata unveiled the Harrier eV at Auto Expo 2023, validating the economic viability of larger battery premium eVs. A bigger 80kWhr battery and 500+km range make the Harrier eV a no-brainer over their diesel variants as they recoup the difference in upfront cost within a few months. More importantly, these larger batteries will seed sufficient demand for domestically manufactured battery cells; thus, justifying Tesla style Gigafactories. This article covers the opportunity for manufacturers to build bigger battery eVs and how that benefits consumers. We talk about how the eV adoption challenges can be converted to opportunities.

Customer centricity afforded by bigger batteries

What would a no-compromise eV look like to the customer? One that eliminates range anxiety (>500km on a full charge) without breaking the bank. After all the tax rebates and cash incentives go away, the electric vehicle needs to be preferred by customers over their internal combustion engine (ICE) alternatives. This can only happen if eVs are practical for everyday errands/commutes, they are more fun to drive, and cost less to own. The environmentally friendly aspect of eVs should just be a cherry on the cake if we are to expect eventual mass adoption.

There are many obvious positives with moving to eVs:

• eVs are far more fun to drive because of the instant torque of the electric motor.
• Longer life with far lesser parts to service.
• Environmentally responsible choice for densely populated Asian cities
• Much lower running costs and total cost of ownership (TCO) than fossil fuel cars.
• eV ride quality is comparable to much pricier luxury vehicles due to the absence of a noisy engine and related gear box and transmission systems.

By picking a car with a bigger battery, customers enjoy longer range without the need to charge regularly or look for charging infrastructure when away from home. Killing range anxiety is essential if we want customers to buy with the confidence that they will not get stranded before reaching their destination. We have already seen in the last article, the “affordable” Nexon eV is not really affordable being ~70% more expensive than its petrol cousin. By introducing premium eVs with 80kWhr battery packs we suddenly offer 500+ km range Harrier/XUV700 at a price point comparable to their diesel siblings by leveraging the existing tax code.

A smoother eV ride …NVH is lower than ICE vehicles.

Noise, vibration, and harshness (NVH) is a measure of how much unpleasant tactile & aural feedback the car delivers as you drive. Luxury cars are excellent at suppressing the NVH of their powerful petrol and diesel engines (ICE). Sound and vibration-suppressing material adds weight, which can spoil handling, acceleration, and fuel economy of an ICE car. The beauty of the eV is that it inherently has a much lower NVH, almost to the complaint of pedestrians that you cannot hear the cars driving by. This makes it easier for premium cars with good quality materials to be able to compete with luxury cars on NVH, thus upping their game and providing a comparable ride quality to the pricier luxury vehicles.

eV efficiency shines when compared to gas guzzling fossil fuel SUVs.

Beyond taxes and a thrilling ride, we must not forget how incredibly energy efficient eVs are compared to their fossil fuel-fed ICE counterparts.

Large diesel SUVs or luxury petrol sedans are notorious for terrible mileage and high monthly fuel costs. Bring in SUV eVs, and you get much lower running costs allowing people to break even on their total cost of ownership (TCO) in a far shorter time. Every economic incentive seems aligned to making sure the larger, more expensive cars go the eV route first. As battery prices continue to nosedive from the economies of scale from these top-tier cars, the sub-compact eV will become truly affordable. GM’s notoriously diesel hungry Hummers have been relaunched as an eV brand, a markedly different approach because of the costly lessons learnt with the Chevy Bolt.

To reiterate our calculations of how inexpensive it was the operate an electric Harrier @ ~₹1/km v/s a diesel Harrier @ ₹7.7/km. By conservative estimates, a car is driven about 12,000 km (7500 miles) annually. After the break-even on the upfront cost is achieved, the electric variant saves the Harrier eV owner ₹75,600 in fuel costs every year! Once people sitting on the fence about buying a premium eV realize this incredible saving, the decision to go electric is automatic (no pun intended).

A diesel Harrier costs far more to maintain with oil changes and lubricants. Fewer parts in the car ensure a longer life, thus resulting in returning annual savings to the buyer for more years. Car manufacturers would be able to sell their idea of lower TCO more easily if they compared eVs with cars that already had high TCO, like large SUVs and premium sedans.

Manufacturer’s opportunities

Making eVs aspirational by starting out with premium eVs

Cars are an emotional purchase decision. If the eV market is seeded with cars priced at the masses (with their range, performance, and creature comfort limitations), then we will attract just the early adopters. Great marketing always changes the narrative and helps consumers realize their aspirations. By starting at the premium end of cars the adoption curve starts with nicer cars while using the purchasing power of the affluent to generate enough demand for battery prices to fall.

Tesla knew they were catering to a quite different market segment: an affluent car buyer who cared about the environment and loved the latest in tech. One who loved discovering new features that came to the car with over the air software updates. There is no reason why domestic car manufacturers cannot use the same playbook albeit at a price point where premium cars are still priced well below what the western world can afford with Tesla & Lucid. The mindset of consumers will play out the same way, with the masses yearning to own and drive an electric car.

Total Addressable Market (TAM) for premium eVs

eVs in India are a demand constrained market today because they are positioned with smaller batteries given the high unit cost (₹/kWhr). To bring scale, we need to leverage the demand from premium eVs which are not priced at a further premium just because they are electric.

The Tata Harrier sold 32,258 cars in CY 2022 (source: RushLane). Along with its nearest rivals the Jeep Compass, Mahindra XUV700, MG Hector and other premium mid-size SUVs, the market size was 181,585 in CY2022. Using the recipe described in these articles, we believe almost everyone would want the electric variants of their fossil-fuel premium cars. The eVs would just be better cars to own, drive, and maintain.

It is my conservative assertion that 60% of these premium 4W SUV sales would be electric if the 80kWhr battery was made standard. That would mean 108,951 premium eVs annually compared to the 41,538 sub-4metre Tata eVs sold in India (CY2022). The “affordable” eV approach is only attracting the early adopters willing to pay a 70% premium. The need for batteries for premium SUVs itself would skyrocket demand to 8.72 GigaWattHours, justifying 2 domestic Gigafactories!!

Now consider that these 80kWhr batteries are 2.65 times the size of the existing 30kWhr Nexon eV battery. That means the 108,951 mid-size SUV eVs is the equivalent of selling the battery capacity of 288,612 Nexon eVs annually. A staggering increase in battery production necessitating multiple Gigafactory in India to meet 2W, 3W and 4W demand.

Production floors at car companies will thus change their mindset to looking at eVs as a profit center rather than a cost center that relies on extensive marketing. This is the change we need for eVs in India to go mass market.

Choose the vicious or virtuous cycle?

Getting eVs to mass adoption presents the classic chicken and egg problem. Until we have sufficient eVs on the road, the infrastructure players will not see enough of an addressable market to make public charging ubiquitous. Until the battery prices don’t fall, we won’t have enough eVs. Until premium eVs are available, we won’t have enough eVs. This dependency loop can only be broken with bigger battery premium eVs as we have been arguing in this series of articles.

There is a better option though that organically scales the demand for battery cells and justifies Indian Gigafactories which cause battery prices to plunge. All it needs is a shift in direction towards building premium eVs with bigger batteries.

The choice is for the car manufacturers to make. The consumers and the demand will follow their cue.

Conclusion…sufficient demand needed for Indian Gigafactories

The US and China started large scale lithium-ion battery production for eVs and energy storage to keep up with the demand for electric cars. Europe is following suite. India and the rest of Asia is far behind in making such investments.

Europe’s groundwork for the future of electric mobility.

While today Europe has < 10GWhrs of annual battery production their plan is to have about 300GWhrs of battery production. The investments from leading battery players worldwide does a great job of illustrating the seriousness.

This will lead to a tipping point for gigafactories in Europe. We need to see this happening in India within the decade. Premium sedans and SUVs with bigger batteries is what will drive up the demand to get us there.

Closing remarks

Over these articles we have covered the eV landscape, taxation and the approaches in the West. We have explained how the obstacles could be converted to opportunities by manufacturers with the bigger battery go to market strategy for India. Battery prices need to fall drastically and that is unlikely to happen given the present slew of sub-4m cars that attract the lower GST, as they remain compromises on range while costing much more than their ICE equivalents. eVs need to be aspirational to begin with to help the consumer overcome the initial inconveniences, this will only happen when premium eVs flood the market. The total addressable market (TAM) exists, we just need better product market fit. This will force battery manufacturers to setup shop in India and cause the $/kWhr prices to come crashing. This is when we can expect a truly affordable eV for the Indian consumer that will significantly reduce India’s dependence on oil imports and secure her energy future while preserving the environment for future generations.

Tata Motors, Mahindra and other domestic eV manufacturers along with the Hyundais and Kias of the world need to manufacture premium eVs with larger batteries to completely change the eV adoption curve. We need to end the conversation about how much extra one must pay for the eV version of a petrol/gasoline or diesel car by serving up a more compelling eV which takes advantage of the tax benefits and lower running costs. eVs need to become aspirational and preferred over their petrol and diesel counterparts, only then will they have mass appeal.

© Aditya Govindarajan. Reproduction in part or whole is only permitted with prior written approval.

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This article has been published in EVreporter Feb 2023 Magazine, which can be accessed here.