Conclusively now, electric vehicles are the future! Global automobile players have already made significant progress in delivering hybrid and electric vehicles. The industry on one hand is refining the consumer adaptability while on the supply side, manufactures are gearing up for ultra-modern production lines augmented with highly advanced research. Expectedly, new challenges are becoming obvious as the industry tries to establish how it will exactly power and build all these new vehicles. Globally, 2.1 million units of EVs were sold in 2019 of which plug-in EVs accounted for 68 percent of electric vehicle sales . It is expected that the plug-in category will become more popular by 2026 with a compound annual growth rate (CAGR) of 15.6 per cent. 

Tesla: Taller than the tallest

Shortly after General Motors destroyed its prototypes for electric vehicles, in 2003, Tesla was founded. By 2008, Roadster, an all-electric powertrain had been launched. Although priced heavily, it was able to meet customer needs and, as per US testing standards (EPA), could travel up to 255 miles (~410 km) on a single charge  (Model S today can cover 402 miles ~646 km! ). It is no surprise that Tesla will make to the S&P 500 Index with the start of business on December 21, 2020.  Today Tesla Motors Inc. is the biggest automaker in the world by market value and it is worth more than BMW AG, Daimler AG, Fiat Chrysler, Ferrari, Ford Motor Co., General Motors, Honda Motor Company, Hyundai Motor, and Volkswagen AG combined.  

The company has been reporting profits for five straight quarters and since its initial public offering (IPO) in 2010, its return is to the tune of 18,000% with a seven-fold increase in share price amidst the global lockdown in 2020. Several global investors are venturing into US stocks and creating accounts solely to invest in Tesla, even when not everyone is familiar with their core business. It, therefore, becomes imperative to define Tesla Inc.’s business area. Whether it is an automaker or a technology company or a combination of both? For any given price target, Tesla’s spending would typically look in the following way:

This shows that Tesla not only delivers efficient electric cars but also invests in operating a fully autonomous taxi network that reinforces its image as being the most innovative company, garnering support from its stakeholders. 

India’s cautious walk

The pillars of India’s urban mobility initiatives rest on three distinct features:

• Creating a sustainable and cleaner environment 
• Reduction of dependency on oil imports
• Catering to the mobility needs of a billion Indians

The automobile industry accounts for India’s 7 per cent of the country’s Gross Domestic Product (GDP) and its contribution is projected to increase to 12 per cent by 2026. In 2018, India displaced Germany as the world’s fourth-largest market for vehicle sales by volume and McKinsey projected that India may overtake Japan as the third-biggest market by 2021. A study by Council for Energy, Environment & Water estimates that India’s EV market could be worth nearly $ 206 Bn in the coming decade if the cumulative EV sales, across segments, cross 100 million units by FY30. Government agencies are more than ever interested in this building up this sub-sector. The Ministry of Power’s notification for delicensing charging as a service is a notable step. Further capital incentives for EV adoption, tax cuts (GST reduced to 5% for all EVs), dedicated state EV policies have further helped to boost EV production and adoption. Beyond end customers, three key parameters will play an integral role in the EV transition in India: Eagerness of automotive industry players (component makers/ ancillary industry/ battery makers), government support (policy incentives, end benefits), and infrastructural availability (battery charging/service providers). This triad is the rock bed in evolving the EV ecosystem. 

Learning it Tesla’s way

Although non-comparable, yet India has missed the EV opportunity to its counterparts, which started a decade back with investors going frenzy in the rare earth material search. It now seems prudent for the industry to focus on the value chain till domain expertise is reached. The start-up culture in the EV industry is inching towards this objective with the agile ‘panthers’ having a clear, relevant, and often inimitable business proposition that builds up their reputational capital . There are Indian ventures in charger point operators, battery swapping operators, charger manufacturers, SaaS platforms, fleet providers, vehicle renting and leasing, battery materials, OEMs, and charging technology providers even when the consumer adaptability is reasonably low. It is this very infrastructure that needs to be created and business models to be invented even before future cars become common on Indian roads. For Elon, EV is not a buzz, but right in front of the world-materialized! People know what Tesla does because they know who Elon is, just as Apple was known for Steve Jobs- the power of human capital. 

Disruptions in the EV sector create ripples in the auto insurance industry too as companies align their policy structure to insure an entirely new set of components unlike in IC engine-driven vehicles. Software as a Service (SaaS) platforms are exploring opportunities to integrate the software architecture of the car with damage assessment techniques and transmit the same directly to the insurer. The same software is further planned to augment other public facilities like parking lots, car washing, and drive-in food places. Tesla goes one step ahead of where it has built up its own charging network for its cars across the United States, to begin with. Such impressions, amplify and creates an entire set of complements needed for a consumer to use its product. Indian EV start-ups already have a blueprint in the form of Tesla whose trajectory it can refer to and seek brilliance in their product. 

To conclude, electric vehicles are not about replacing ICE automobiles but of the larger disruption in energy and transportation. Mobility is at the core of modern civilisation and technological changes will drive this transition to a greener environment. Urban planners need to frame spatial designs that support EV adoption and plan for optimal location of charging infrastructure. Digitisation will further enhance customer experience and support efficient service management.  India’s EV roadmap should conform to Tesla’s convoy of sustainable transport.

This blog has been authored by Harsh Vardhan, Consultant in the Food Processing team at Invest India.