Opinion
India’s car market should use a hybrid lane for a green pick-up
Summary
Electric cars are gaining share too slowly and hybrids could help.India is now among the world’s top three auto markets. A feat indeed, but it’s being driven by internal combustion-engine cars even as global pressures force a pivot to cleaner electric vehicles (EVs). Over 4 million four-wheel vehicles were sold in India last year, surpassing Japan and coming in behind China and the US. That’s a stunning reversal from almost eight months ago, when sales tanked to a decade-low and capacity lay idle. Now, with the economy growing at a fast clip, car buyers are back. While the broader market is largely made up of mobikes, sport utility vehicles (SUVs) are now a larger portion of the whole mix.
Automakers released a slate of glitzy EVs at the India Auto Expo, with promising announcements from BYD, Kia and others. Trouble is, four-wheeler EVs are luring prospective buyers to showrooms, but once they get there, cost concerns pop up. India’s electric success has been limited to its two-wheeler (2W) market. The economics of 2W electrics work well in India: Their powerpacks are smaller and cheaper, battery-swapping promises to cut out range anxiety and charging points are increasingly available. Petrols prices not being able to impact household bills is a plus. The government’s incentives are also helping.
The rise of 2W electrics is akin to that of CNG cars in India. Cost savings and regulation pushed drivers to adopt these; cabs, especially, were willing to wait in long lines for refills. Such economic calculations, though, are why four-wheeled EVs are likely to have a bumpy ride. Despite a host of options, electric cars are too expensive for what they offer drivers. Power systems can’t support charging networks, even if firms are incentivized to set up infrastructure and we get enough stations. Electricity supply isn’t consistent in many parts of the country, and charging larger batteries requires higher capacity and voltage. The existential EV problems of range and anxiety over running out of charge persist, especially given the distances across India and its notoriously bad traffic. Stack that up against the price of an EV, and it’s clearly a luxury purchase.
Until it’s more economically viable for the market’s bulge, imminent mass adoption is wishful thinking. Meanwhile, the costs for most manufacturers are also rising. Battery supply is hard to come by and as of today, unreliable. Anecdotally, the quality of powerpacks coming into India is also low.
That poses a problem for Prime Minister Narendra Modi’s government, which has ferociously pushed a greening mission, along with all the big companies that came along for the ride. At Auto Expo, the likes of Ashok Leyland and Tata Motors had all sorts of alternative fuel vehicles on display: hydrogen, ethanol, flex fuels (which work on ethanol blends), electric, you name it.
There’s a more realistic solution: Go hybrid. Before dismissing it as a transitory idea, it’s worth remembering that’s what we need—a means to an end. They can help lower emissions so Delhi and other parts of India can come out from under the cloud of smog that threatens the health of millions of citizens. Buyers have the option to test out the electric side while releasing fewer emissions and getting through their day without worrying about charging. Meanwhile, hybrids also use a fifth to a quarter of the batteries needed for EVs, meaning they are less affected by the rising price of powerpacks (that account for almost 50% of the cost in electrics). The car ends up being cheaper and more efficient. Throw in bigger subsidies and they could become an attractive value proposition for Indians. Policies in the US and China already indirectly incentivize purchasing these vehicles.
No wonder, then, that savvy BYD, one of China’s top-selling automakers, announced its intention to corner 40% of India’s EV market by the end of this decade. However, it hasn’t committed to setting up huge production operations yet, preferring to gauge demand first. The firm assembles cars from imported semi-knocked down kits and will continue to import batteries that it manufactures in China. The world’s largest automaker and staunch-believer in hybrids, Toyota Motor, launched a second model in India late last year—a cleaner version of the already popular Innova.
Sure, the issue with hybrids tends to hover around how drivers use them. Studies have shown they end up being driven less on electric and more on fuel. Fair enough, but as energy costs and emissions become front and centre, they provide a better option than gas guzzlers.
Further incentivizing players like BYD to first bring in hybrid offerings could help jumpstart India’s transition to lower carbon emissions. Automakers, too, may want to focus on realistic solutions that work right away for India’s planned energy transition, not just on a distant future. For Indians, electrification will happen—at the right price, though. Hybrid technology is a useful step in that direction.
Anjani Trivedi is a Bloomberg Opinion columnist covering industrials including policies and firms in the machinery, automobile, electric vehicle and battery sectors across Asia Pacific.
©Bloomberg
