The year 2021 has seen a lot of movement in the electric vehicle (EV) sector with several large-scale partnerships from non-traditional auto players to state policies and subsidies and new product launches. Several EV players ramped up their production lines to handle the anticipated volumes in 2022 at OEM, battery and component levels. Both industry leaders and startups announced their future plans, and 2022 will be the year we witness the execution of these plans on a massive scale. Overall, looking into the upcoming year, four key trends are emerging:
Mainstream adoption of battery swapping
2021 saw some battery swapping in pockets, with a few OEMs launching swapping-first products and visible swapping infrastructure in metro cities. This has helped break the myths associated with swapping as a solution and showcased how it is superior to charging. It saves downtime, removes the recurring capex problem, and lowers the upfront cost to purchase the vehicle. 2022 will see battery swapping become a mainstream proposition for two-wheelers and three-wheelers, especially in commercial use cases, which will be one of the most significant changes in the EV space. To put this into perspective, today, with all swapping players combined, India has less than 1 lakh batteries in circulation. This number is set to grow by 100 times in 2022, with 10 crore batteries being utilised.
The year of two-wheelers
One lakh electric two-wheelers were sold this year, which is 1% of the total two-wheeler sales. We anticipate this to increase to 4-5% share in the coming year. Everything from the price point to subsidies from the government and policies to infrastructure, India is exactly where China was in 2016 with respect to EV two-wheelers. Fast forward five years, China now has 300 million electric two-wheelers on the road. Following the same trend, India might reach similar heights in the next 6-7 years. We already see early indicators, as the second half of 2021 saw significant launches like Ola’s Electric S1, Ather’s 450x, and Bounce’s Infinity E1. All of these products have just started to hit the road. Aligning with the goal of NITI Aayog to ensure at least 80% of the two-wheelers on the road by 2030 are electric, major cities will start seeing the adoption of these two-wheelers along with more launches by other players.
EVs are becoming more affordable
The cost of batteries has reduced by 90% in the last ten years, which is why EVs have become affordable now. This, coupled with state policies and subsidies, has helped OEMs, infrastructure players, and consumers make EVs much more affordable and at par with their internal combustion engine (ICE) counterparts in terms of capital expense. With a growing predominance of Swiggy, Amazon, and grocery delivery startups coming up, the operating expense is also much lower, thus making them not just at par but even lower in terms of the total cost of ownership. The savings is also higher, as the drivers spend only ₹0.5 per km for their EVs compared to ₹2 per km previously. The same applies to three-wheelers with lower capital costs and operating costs. We are at an inflection point, and the results of these inflection points will help create massive adoption of electric two-wheelers and three-wheelers.
More visible EV infrastructure, beyond metros
While 2021 saw infrastructure being set up in metro cities like Delhi, Bangalore, etc., 2022 will see the same penetration in 20-25 cities outside of the metros, led by large-scale partnerships. Tier-II and III cities are an attractive market for any company, and we will see a rise in charging and swapping infrastructure there, which will help the EV adoption in these cities.
The EV ecosystem in itself is partnership-driven, and it is a massive disruption to the very old automobile industry. Not just at an OEM level (like Reliance Jio and Mahindra Group or Hero Motor and Gogoro), but also at a service-provider level, like fleet operators and banks financing these companies. A lot of capital infusion is coming into the country on the back of several innovative businesses, partnerships and a strong policy framework. All of that should help in the greater adoption of EVs.
Every company needs to ramp up its execution capabilities, deployment capabilities, and, similarly, all capital allocation in this sector will ramp up. Venture capitalists and bank financing need to start acting now because the electric vehicle revolution is not in the future anymore, it is happening now, and one cannot ignore it.
