The decline in e-2W sales – an opportunity to review the ecosystem

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India E-2W sales results for the month of June 2023 came as an unexpected shock, with everyone watching with trepidation how price-sensitive e-2W consumers would react to the change in demand subsidy from INR 15,000 kWh to INR 10,000/kWh from 1^st June 2023. In this article, Gurusharan Dhillon looks at the sales results as a new starting point for the entire ecosystem.

June 2023 e-2W sales

Major e-2W OEM June 2023 Sales

The Government of India has taken a long-term view towards sustainable transportation with various enabling measures to help promote E-mobility, starting with MNRE’s pioneering effort of promoting EVs by providing financial assistance in the form of capital subsidy way back in 2010 to the current FAME 2 scheme set to expire on 31^st March’2024. The main objective of FAME is to encourage the Faster adoption of Electric and Hybrid vehicles by way of offering upfront incentives for the purchase of Electric vehicles and establishing necessary charging Infrastructure for electric vehicles. FAME also supported localisation by mandating that at least 50% of the components should be localized to achieve Domestic Value addition. Taking cognisance of the challenges to enable mass adoption of Electric vehicles total of 22 States and 2 Union Territories (3 States and 1 Union Territory policy in the Draft stage) have announced policies aimed at increasing adoption and incentivising investment.

Focus on charging infrastructure has helped increase Public charging infrastructure from 900 publicly accessible chargers in 2021 to nearly 11,000 in 2022. In March 2023, MHI sanctioned 800 crores to Oil Marketing Companies (IOCL, BOCL, HPCL) for setting up charging stations across the country, with installation expected to be completed by March 2024.

However, the majority of E-2W owners preferring to utilise Home charging still face challenges in obtaining the necessary approvals from Group housing societies to install charging points in the Housing society parking area (concerns related to common society meters, basement parking, etc.).

In terms of helping overcome challenges in monitoring localisation and Domestic Value addition, the Ministry of Heavy Industries launched Automated Online Data Transfer for capturing critical data related to Domestic Value Addition (DVA) from the PLI applicant’s ERP system to PLI Auto Portal, thereby enabling complete transparency and ease of assessment. Addressing the core issue of cost structure and the need to focus on localisation, the Government launched the Advanced Chemistry Cell PLI Scheme to improve India’s manufacturing capabilities of Advance Chemistry Cell (ACC) in India. The ACC PLI scheme aimed at selected companies setting up 50GWh manufacturing facilities by 2024; however, with only 30GWh capacity now under consideration government is now reviewing its Production-Linked Incentive (PLI) scheme for Advanced Chemistry Cells.

Without a doubt, the use of Electric vehicles is much more cost-effective in comparison to ICE vehicles. However, higher upfront procurement cost has deterred prospective EV consumers from taking that first step. While medium-term benefits are quite evident, we now need an increased focus on reducing the higher upfront cost of EVs. Today, many EV 2-wheeler companies have introduced multiple ownership models, exchange programs, assured buyback, private leases, and deals with financial institutions to make buying and owning an EV accessible for more Indians.

State-wise EV Sales June 2023 vs May 2023

The future of mobility for India is at a critical point, and the mass transition to electric mobility is not easy. There are very strong and divergent views on subsidies, with one school of thought opining on their necessity and others strongly advocating the need for the removal of dependencies and achieving self-sufficiency. The experience of other developed and developing economies has clearly shown that sustaining sales momentum after the withdrawal of subsidies is challenging.

While clearly understanding that shift towards electric mobility is essential for India considering the high amount of petroleum imports, adverse impact on the trade balance, and savings of valuable foreign exchange and environment, a comprehensive and holistic approach to balancing factors like supply chain localisation, charging infrastructure, financing etc. will help enhance the enabling ecosystem and support our EV adoption goal.

There is a lot that still needs to be done, careful evaluation of demand incentives, self-reliance in the battery manufacturing ecosystem that extends beyond manufacturing to securing critical mineral supply chains, access to charging infrastructure, supporting R&D investment into developed and emerging technologies and closer integration between Centre and State policies.

Conclusion

Electric 2 Wheelers have a very important role to play in terms of providing low-cost, safe and environment-friendly transportation to a vast majority of Indian middle-class households and weaning consumers away from subsidies will need to be gradual and closely aligned with the readiness of the overall ecosystem to help unlock Indian market E mobility potential and support our long-term objectives of achieving 80% penetration in the e-2W segment by 2030. With 9 months remaining for the FAME scheme, we need to carefully look at June 2023 results either as an early warning sign by extremely price-sensitive and value-seeking e-2W customers or as a moment of hesitation and a pause before sales return to normal.

Looking forward with much interest to the months ahead.

About Author

Gurusharan Dhillon is an automotive professional with 30+ years of expertise in strategy, operations, sales and marketing. He currently serves as a Director of eMobility at Customised Energy Solutions. With a focus on the electric mobility sector, Dhillon specializes in Powertrain, Battery Technology, Charging Infrastructure, and emerging technologies. He has worked with leading automotive OEMs like Toyota, Nissan, Honda and Hyundai.

Also Read: Taking care of your electric 2W during monsoon.