Electric Vehicle Sales Are Booming, But Marketers Need To Penetrate Deeper

In 2023, more than 1.5 million EVs were sold. That was an astounding increase of about 50 per cent from 2022, when 1.02 million electric vehicles were sold across the country. However, EV penetration is growing mainly in the premium segments compared to the mass market because of the high upfront cost. While the overall penetration of EVs has reached 6 per cent, it is still far off the 30 per cent electrification target set for the end of this decade.

According to a recent report by Bain and Company, metro and tier 1 cities currently drive the majority of EV sales. For example, these cities account for 80-90 per cent of 3W EV sales, compared to only 55–65 per cent of comparable 3W ICE vehicle sales. This is because there is lower EV distribution footprint in tier II cities, limited understanding of benefits offered by EVs over their lifecycle and high range anxiety among customers.

To meet the 2030 goal, industry experts say, focus needs to shift to ramping up infrastructure and knowledge about EVs outside the urban centres - from where the next wave of vehicle buyers is expected to come as the economy grows.

"No doubt the data suggests good trends for EVs, but it is too early to say about the future of EVs in India. EVs are definitely good for the environment, but they lack cost competitiveness for consumers to buy. EVs are still expensive for consumers due to the upfront cost of EVs,” Murad Ali Baig, an automobile expert, told The Secretariat.

There is a need for Original Equipment Manufacturers (OEMs) to broaden their product offering to include those who are price-sensitive.

B2B Model

It’s true that EVs have not been able to match ICE vehicles on most of the parameters. For instance, a majority of the EV options available today are more expensive, have lower top speeds, and shorter range vs ICE models. The only domain where EVs score over ICE models is the Total Cost Of Ownership (TCO), that is the total expenditure of having a vehicle over its lifecycle.

And that is why EVs are an attractive option as B2B vehicles. OEMs can tap into the B2B or commercial market – such as delivery platforms, logistic firms and cab fleet operators – and increase penetration quickly. Notably, some logistics apps, delivery platforms and cab operators have already introduced plans to electrify their fleet.

OEMs also need to redesign their dealership models in Tier II and Tier III cities to advance scalability without hampering profits in the long run. The traditional distribution model puts margin and cost pressures on OEMs and dealerships earn only 10–15 per cent of their revenues via service and parts as compared to 30 per cent for ICE dealers, since EVs involve fewer components and infrequent repairs. Thus, OEMs should think of multi-brand dealerships to drive higher volume and profitability.

If these challenges are addressed, EVs could account for more than 40 per cent of India’s automotive market and generate over US$ 100 billion of revenue by 2030, the report added.

“EVs are a good choice as commercial vehicles to be used as fleets by platforms as they have patterned routes and vehicle owners can outline a time period for charging their vehicles,” Baig said.

However, he added that for personal usage, EVs have limitations because there are no patterned routes. “The owners need to outline their schedule (to see) where they have time for charging. This makes charging a time-consuming endeavour.”

Battery swapping could be an option to resolve this issue but it is still at a very nascent stage. Baig pointed out “It is also important to note that disposing of the end of life batteries is still uncertain, and it would take another 20 years to understand what will be done for that.” The improper disposal of end-of-life batteries can have detrimental effects on the environment.

Policy Support

Government’s policies – such as the Vehicle Scrappage Policy and the second phase of FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) – have helped wean consumers away from ICE vehicles as well as contributed to decarbonising the roads.

Analysts believe that the scrappage policy, which was introduced in 2019 with an objective to remove older unfit vehicles that contribute heavily to vehicular emission, pushed up the demand and sales of new vehicles. And some of these buyers shifted to electric vehicles.

It is expected that the Government will extend the FAME II subsidy scheme for EVs for the next financial year and will likely increase its corpus in the next Budget. The FAME III, which was to replace the second phase, has not yet received Finance Ministry nod, the Economic Times has reported.

The government launched Fame I in April 2015 and Fame II in April 2019 to boost charging infrastructure and provide subsidies for electric and hybrid vehicles. These policy interventions have helped EVs get a solid start in India. So far, under phase-II of the FAME India Scheme, Rs 5,248 crore subsidy has been dispensed to EV manufacturers on the sale of 11,61,350 electric vehicles till December 12, 2023. A total of 62 OEMs have been registered till November 29 last year under the scheme.

For EV manufacturers to really penetrate the tier 2 and tier 3 markets, there is a need to quickly build infrastructure, including public charging points, on highways connecting cities like Delhi, Jaipur and Agra. Besides, states should grant concessions on road tax to EV buyers to wean them away from gasoline guzzling ICE vehicles.