A glimpse into the history of technological innovation reveals that there comes a time when newer technologies replace the older ones, subsequently, making them redundant. For example, smartphones have made landlines redundant. Successful technologies follow an S-shaped adoption curve, implying that the initial acceptance is low until technology reaches an early-adopter phase. The gap between the early-adopter and early-majority phase, called the ‘chasm’, is the most difficult for any technology. India and the USA are in the early-adoption phase with electric vehicle (EV) penetration ranging from 1.6% to 5.3%. Germany, China, Denmark, Sweden, and Norway have crossed the ‘chasm’ with the EV market share ranging from 16% to 84%. Various studies indicate that a 5% market share is the tipping point for any new technology to cross the chasm.
To surpass the 5% mark, the EV market in India needs to overcome major barriers such as charging infrastructure, affordability, and product range. According to a recent market research, the lack of charging infrastructure and battery life have been highlighted as major barriers by 75% of respondents. Battery charging speed, driving range, fast battery range depletion, and high cost of replacing and disposing of batteries have been mentioned by 61% of respondents. Resale, reliability, and availability of replacement battery are barriers highlighted by 45% of respondents when it comes to EV adoption.
China’s EV adoption is a case in point. The Chinese EV market reached the tipping point of 5% in 2018 and it has a share of 18% currently. Both India and China have a similar urban-rural population mix and market dynamics. A comparative analysis indicates that three key vectors—policy support, charging infrastructure, and original equipment manufacturers’ (OEMs) product strategies—are critical to large-scale EV adoption in India.
China has been supporting the development of the EV industry through subsidies and associated means. Since 2009, the country has provided USD 14.8 billion in subsidies to consumers. The Chinese government has also heavily subsidized battery manufacturing. During 2015-2019, OEMs in China were required to use batteries from a handful of white-listed domestic companies to be eligible for government subsidies, a measure that helped create domestic battery giants such as CATL and BYD. Similarly, the Chinese government guidelines mandate parking spaces in new residential buildings to be equipped with charging capabilities. India has also pushed EVs through various state-driven incentives in the last decade. Multiple policy levers such as Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) I and II, production-linked incentive (PLI) scheme, battery swapping policy, duty reduction and tax rebates are helping the Indian EV industry grow.
Range anxiety is a major impediment to EV adoption. China’s charging infrastructure has expanded by leaps and bounds with huge investments leading to a 30% growth rate in 2022. Its two main state electric companies—State Grid Corporation of China and China Southern Power Grid—maintain networks of high-speed charging stations along highways, while private companies typically install facilities within cities and villages. India has been following a similar pattern of setting up charging infrastructure with the help of public and private entities. The Indian government has robust plans to increase the number of public charging stations in the country. The Ministry of Heavy Industries has sanctioned around 1,600 public charging stations. State-run oil marketing companies (OMCs) have plans to install 22,000 charging stations over the next three-five years.
Vice President, Automotive, India,
Capgemini Invent
The availability of multiple EV options—brands, variants, and range—is another crucial factor driving purchase. A recent industry study showed 56% of people consider the lack of multiple options a major deterrent. Only six brands offer passenger EVs in India, of which four cater to the mass market. In a price-sensitive Indian market, the lack of mass-market brands acts as a barrier to EV adoption. Comparatively, China has over thirty brands that cater to both the mass as well as the premium markets.
Since the EV infrastructure is expected to mature in four-five years, hybrid vehicles could help transition to EVs. Many feel the lack of range and economical nature are key influencers for adopting hybrid technology. It is highly likely that hybrid will act as a pitstop for India’s transition towards EVs until adequate cleaner grid infrastructure is built.
Considering the multiple factors at play within India, the EV market is likely to reach its tipping point of 5% by 2026-2027. Once the chasm is breached, other factors such as the lack of more EV options would be addressed, providing the tailwinds for a faster rise in EV volumes. India will subsequently speed up its transition towards mass EV adoption as seen by other mainstream EV markets such as China.
(This article is authored by Ashish Sharma, Vice President, Automotive, India – Capgemini Invent)