Questions for 2020: Electric affordable cars?

EV sales being powered by fleet segment.

Earlier this month, Tata Motors launched Nexon EV, a compact SUV. The company is betting on buyers willing to pay about 20-30% (Rs 15-17 lakh) more than a conventional diesel-fueled alternative. The pricing was arrived at as a customer will get FAME (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles) scheme benefit of Rs 3 lakh based on the battery power that will take the vehicle to a 200-km distance on a single charge.

Tata Motors is confident that EVs are getting more affordable in India, especially in the fleet segment. It’s a different story in the personal segment for individual buyers. This is because GoI incentivises commercial fleet-owners with FAME II and GST concessions. Individual buyers are eligible only for a few tax concessions.

Indian carmakers have caught the policy drift and are now making cars for the fleet segment which can run far longer distances of about 200 kms, ensuring the EVs are eligible for higher incentives as the policy links it to battery capacity. So, longer-range EVs are now a viable ‘value proposition’ for fleet operators vis a vis a diesel-powered vehicle.

EVs for fleet owners are, thus, poised to grow. Further, EVs for them will become more affordable when in April, BS-VI norms kick in, making diesel-fuelled cars compatible with the new emission norms costlier. Oil refineries will try to recover huge investments they made in making fuel compatible with new emission norms.

The results have started showing. EV sales in Q1 2019-20 were 280-300 units; Q2 2019-20 saw it climb to 480-500 units. They expect Q3 to reach 780-800 units.

Primarily the sales of EVs is being powered by the fleet segment. This is the conundrum carmakers are facing. EVs owned by a fleet owner run at least 200 km a day. In the personal car segment, a car is driven an average 30-40 kms a day. But individual customers demand features such as more power, connected cars and more mileage — but at a reasonable price.

Can carmakers offering EVs in the mid-segment replicate at the entry-car category? That’s the challenge. After all, technology cost and the battery for an entry car and a compact SUV is the same if mileage is 200 km or more.

Battery prices are falling. If anyone can succeed, it will be India’s two-wheeler and three-wheeler makers who can build for the world an entry-level EV or an electric Quadricycle.

This story is part of the ’20 Questions for 2020′ package.