Customer demand, not legislation, to drive EV growth

Customer demand, not legislation, to drive EV growth

16th Sep 2020 11:30 am

A successful switch to EVs will only happen with a shift in customer expectations and technological improvements, believe industry experts.

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With faster-than-expected rise in global temperatures and climate change quickly shaping up to become the world's greatest threats, the automotive industry has been called out for a swift reduction in carbon emissions. Since electric vehicles (EVs) provide a gateway to a sustainable future, there have been deliberations the world over, and in India, for mandating a timeframe for the shift to pure electric mobility. But is the strategy holistic enough to factor in limitations of the industry and needs of the consumers? We take a closer look.   

  • Changing customer expectations, not legislation, to primarily fuel EV demand
  • Battery prices falling to $95/kWh to make EVs more attainable 
  • Commercial vehicles better suited for electrification than private vehicles  

Darwinian approach will accelerate EV adoption

Expressing his thoughts on electrification at the International e-Conference on Electric Mobility, organised by our sister publication Autocar Professional, Dr Andy Palmer, chairman, Optare Plc, and former CEO of Aston Martin said, “The route to EVs is more disruptive on the auto industry than any other event in history.”

He added, “The investment in transforming the portfolio to EV is enormous and will have a material impact on each carmaker's bottom-line over the coming years.” The Indian auto industry, for instance, spent an estimated Rs 70,000 crore in merely the upgrade to BS6, and is now gearing up for upcoming emission norms. A switch to EVs would be vastly more expensive and any regulation for electrification, consequently, would have a profoundly negative impact on the carmakers.  

Palmer opined that instead of legislation, customer expectations, following the Darwinian theory of natural selection, should be allowed to become the driver for sustainable mobility. “While I expect majority of the 2030 (global) sales to be EVs, I still believe that we should not legislate EV, rather we should allow a Darwinian approach to the technologies of zero emission and enjoy the best of the breed in each segment,” he said. Elaborating further, he mentioned, “I personally prefer the Darwinian approach, which is to let people try and, if necessary, fail and you'll get a natural evolution, rather than being bespoke to certain segments.”

The increased sensitisation for eco-conservation is nudging consumers towards sustainable mobility the world over. “Gen-Z vehicle owners lead the charge towards electric vehicles more than any other generation,” said Palmer. The growing demand and technological push by new entrants into the automotive space have the potential to catalyse EV adoption.

However, the industry veteran notes that an initial push, in the form of state subsidies, would be needed to get EV sales off the line. “The government does have a role to play in incentivising and cushioning the load of change, particularly for the primary movers. But ultimately, over time, it will be the changing customer demand that will basically drive the industry, through Darwinian approach, towards the adoption of EVs,” he said.

Reduction in battery prices to be the inflexion point

Other than a limited charging infrastructure, the biggest impediment to EV adoption is the high cost of lithium ion batteries. Though battery prices have come down sharply from $1,100/kWh in 2010 to $156/kWh last year (as per International Energy Agency estimates), they are still too high for the democratisation of EVs.

Giving the keynote address at the Electric Mobility e-Conference, Ashwani Gupta, COO, Nissan Motor Corporation, projected the necessary reduction in battery prices for EVs to make a viable business case for average consumers. “The day we will cross $95 to a kWh of battery cost, that's the tipping point in terms of cost (of EVs),” he said.

From last year’s level of $156/kWh, battery prices are expected to continue falling in the coming years, owing to ongoing research and development efforts aimed at refining battery chemistries, reducing usage of expensive metals and improving charge densities.  

Greater value addition crucial for electric cars

Palmer mentioned that the global automotive industry is currently witnessing a period of massive change. “The change is being driven by many influences, the most profound being changing customer expectations. Emerging Gen-Z consumers view a car more like an appliance. Nearly 56 percent agree that a car represents no more than a means of transportation, some 70 percent do not have their driving licence yet and up to 30 percent have no intention of getting one,” he said. He added, “The implications of these insights are far reaching. The industry needs to immediately rethink how to excite Gen-Z customers.”

Since electric cars are significantly more expensive than their combustion engine counterparts, they need to have certain standout features, over and above just higher performance figures, to attract consumers and make them feel that they are getting their money’s worth. “The customer wants to see what the unique selling point of the EV is,” said Ashwani Gupta.  

The Nissan COO believes that value addition can happen by offering advanced driver assistance systems, autonomous driving capabilities and smart connectivity features which can goad the customer into making the switch to e-mobility. “Because these technologies are comparatively easier to put into an EV, the more we do it, the more value we create for the customer. When the value crosses the cost, the customer will buy (the EV),” he added.    

Commercial vehicle segment more suitable for going electric

While the adoption of private electric vehicles remains riddled with challenges, the commercial vehicle (CV) segment, including buses, delivery vehicles and taxis, presents a far more suitable case for electrification.

Known pattern of usage of CVs makes it easier to optimise their battery size and also set up charging infrastructure along common routes. Electrification of CVs has a far greater potential to curtail vehicular carbon emissions since commercial and public transport vehicles cover more kilometres than passenger vehicles.

Our government, too, seems to be aware of the advantages of transitioning CVs to electric propulsion. So, while private electric car buyers might only benefit from a lower GST rate and some income tax sops, the CV segment gets greater attention under the FAME II scheme (Faster Adoption and Manufacturing of Electric vehicles), with subsidies allocated for electric three-and four-wheelers used for commercial purposes, as well as electric buses. Moreover, even state transport departments have ramped up their efforts at procuring electric buses in the past few months.

It is evident, then, that while e-mobility is the future of transportation, the path towards electrification needs to be chalked out with greater precision in order to deliver the desired impact.  

Also see:

Every electric car currently on sale in India

UN study highlights environmental impact of EV battery production

Passenger vehicles at back of queue for government relief

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