Low-Cost Models Key To Future Of EVs

India's electric car sales more than doubled in 2023, driven by affordable models priced around ₹10 lakh. Electric vehicles (EVs), however, remain a drop in the ocean in the world's third-largest auto market by volume. Out of 41 lakh cars shipped in 2023, just 2.2% were electric. The government aims to increase this to 30% by the end of the decade. But without affordable EVs that offer stress-free range amid sparse and decaying public charging infrastructure, it remains a tough ask. India needs more electric cars at mass-market price points to drive EV penetration to 20% by 2030, says a report by Bain & Company.

Sales break-up for 2023 confirms this. Out of seven EV models under ₹20 lakh, four belong to Tata Motors—hatchback Tiago.ev, entry-sedan Tigor.ev, compact SUV Nexon.ev and newly launched Punch.ev. The other three are Mahindra XUV400, Citroën eC3 and MG Comet. With such a head start over competitors, it's not surprising that Tata has nearly 75% market share in EVs. Nexon, priced ₹15-20 lakh, was the top-selling EV before Tata began deliveries of its cheaper entry-level hatch Tiago.ev last year. Since then, Tiago.ev has been outselling Nexon, and now accounts for 40% of EV sales of India's largest electric carmaker.

EV buyers are hesitant to splurge on pricier models but may be open to experimenting with cheaper cars, say industry executives. "There is a lot of switching between a ₹18 lakh car (Nexon) and a ₹10-12 lakh car (Tiago) because a lot of EVs being sold are second/third cars in the family. Many times we see a customer considering Nexon but switching to Tiago," says Shailesh Chandra, managing director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility.

Only about 25% Tiago EV buyers are first-time car owners. There is a need for more choices at different price points to drive EV penetration, says Chandra. For instance, the internal-combustion engine (ICE) segment, which accounts for 98% market share, has more than 70 models priced under ₹20 lakh.

"A person with same budget will consider an EV which is ₹3 lakh expensive because that (additional cost) can be recovered from (lower) operational cost," he says. The average selling price of cars in India went up from ₹10.58 lakh in 2022 to ₹11.49 lakh in 2023. It was around ₹8.19 lakh in 2019. "If ₹10-11 lakh is the median price of ICE cars, you know the median of a mainstream EV," says Chandra. The newly launched Punch.ev targets this mass segment with prices starting from ₹11 lakh and going up to ₹14.5 lakh.

But it's not just about price. Range, too, is an important factor for buyers. "Five years back, EVs had a 100-km range. When we launched Nexon EV, we reached certified range of 300 kilometres, with real range being about 230 kms. Post that, we have come to real range of 325-330 kms with Nexon's higher-end vehicle," says Chandra. "In case of 85% customers, the maximum inter-city drive will be 400 kms. This means if you achieve a real range of 400 kms, dependence on public charging will come down," he says, adding that this barrier still exists.

Carmakers Rev Up

With sparse offerings and limited mass-market price points, EV customers don't always get what they want. "Until customers get a certain body style at a price point they are looking for, they might wait," says Chandra.

That is why companies are working on expanding range. Tata Motors plans to launch two more electric cars this year—Curvv and Harrier EV. "Our strength will be offering customers a spectrum of price points and sizes," says Chandra. The carmaker plans to launch Sierra EV and Altroz EV in 2025.

Tata Motors, which forayed into EVs four years ago, is also opening separate showrooms for electric cars in view of limited space at current outlets. "We will have new EVs. Where will we put those? If we put them in current outlets, their sales may come at the cost of ICE cars. This will give breathing space to both businesses," says Vivek Srivatsa, chief commercial officer, Tata Passenger Electric Mobility.

Tata's EV models account for 12-15% of its passenger car volumes. In terms of revenue, they contribute 17-20%. With new launches, Tata Motors expects EVs to account for 15-17% volumes in 2024. Curvv will come in second half of 2024 and Harrier EV in December quarter. Tata Motors is eyeing 25% sales from EVs in next three years and 50% by the end of the decade.

While the Tatas have made serious inroads into the EV car market, others are playing catch-up. Their market share is related to affordability and range of offerings. India's second-largest EV seller, MG Motor India—majority owned by China's state-run SAIC Motor Corp. and part-owned by Sajjan Jindal-led JSW Group—has 12% market share in EVs. Its flagship MG ZS costs upwards of ₹25 lakh. The company sold 9,498 EVs in 2023, 17% of total sales.

However, MG's two-door Comet, which costs less than ₹10 lakh, hasn't been as successful as Tiago.ev. But that's mainly because the two cars aren't comparable—Tiago.ev is a four-door hatch with a boot and a slightly higher range than Comet.

"Our MG Comet and ZS EV, combined, have achieved a sales figure of over 20,000 units," says Gaurav Gupta, deputy managing director, MG Motor India. The carmaker is targeting 60-75% sales from EVs by 2028, Gupta says.

Mahindra & Mahindra is scripting an EV comeback. It was India's first large automaker to bet on EVs when it acquired a controlling stake in Bengaluru-based Reva Electric in 2010 and launched two-door Mahindra e2o in 2013 and four-door electric hatch e2oPlus in 2016. It also rolled out India's first electric sedan, eVerito, in 2016. Many of these had to be discontinued due to poor sales. However, Mahindra's EV business turned the corner in 2023 after it launched its electric SUV, XUV400. It sold 4,233 electric cars in 2023, cornering the third-largest market share after Tata Motors and MG Motor India. The company now plans to launch five "born-electric" SUVs in 18 months starting December this year to recover the ground lost to Tatas and MG. "This is unprecedented because auto companies don't usually launch five products in just 18 months. We are doing this to ensure we have a full portfolio of born-electric products for the transition to happen much faster," says Anish Shah, managing director and CEO of Mahindra Group. "In addition, we are also looking at electric Thar," says Shah. The sport utility vehicle (SUV) maker is eyeing 20-30% sales from EVs by 2027.

Stellantis-owned French carmaker Citroën is India's fourth-largest mass-market EV manufacturer. Its electric hatch ë-C3 has a claimed range of 320 km and is priced between ₹11.61 lakh and ₹13 lakh. "Citroën sold its entire stock of over 2,350 units (e-C3) from its launch in February 2023 until October 2023," says Aditya Jairaj, managing director and CEO of Stellantis India.

In contrast, South Korean Hyundai Motor India has in the past taken a top-down approach, which it is now recalibrating. It launched its first EV, Kona Electric, priced around ₹25 lakh, in 2019. Although Hyundai was among the first companies to introduce EVs, Kona struggled. In 2023, India's second-largest carmaker launched its flagship IONIQ 5 EV, with claimed range of 631 km. It sold 1,100-plus units last year. The model is priced over ₹45 lakh.

The company is now counting on the upcoming Creta EV to grab a bigger piece of the EV pie. "Its (IONIQ 5) success has given a fillip to our EV plans. We have already announced localisation of battery packs which will help us bring down costs and introduce EVs in the mass market space," says Tarun Garg, chief operating officer, Hyundai Motor India. By early 2025, Hyundai will start launching high-volume EV models, says Garg. "We are not going to stop with one car. We will get into more segments, more body types and more price points," he says. Hyundai is aiming for 20% EV penetration by the end of this decade.

Hyundai's sister company Kia entered the EV race in India with premium electric crossover EV6. But unlike IONIQ 5, which is assembled in India, EV6 is imported in completely built form. The carmaker plans to launch its flagship electric SUV EV9 this year. "Our EV portfolio in India is less than 1% as we are operating in premium and luxury space. EV6 costs about ₹65 lakh, so volumes are less," says Hardeep Singh Brar, national head, Sales & Marketing, Kia India. Kia's first mass-market EV, slated for launch in 2025, will be designed for Indian consumers. It aims to capture 10% of India's EV market by 2026. "Today, people don't have too many choices. There are few manufacturers. Also, there is some anxiety about range and charging infrastructure. In next couple of years, once this is sorted, we will have better volumes," says Brar.

But missing from action so far is India's largest carmaker Maruti Suzuki India. It will roll out its maiden battery electric vehicle, eVX, by the end of 2024. "We plan to export to Japan and European countries," says Toshihiro Suzuki, president of Suzuki Motor Corporation.

Also, Warren Buffett-backed BYD (Build Your Dreams), which surpassed Elon Musk's Tesla as the world's largest EV seller in last three months of 2023, hasn't had a smooth sailing in India. The company shelved its $1 billion investment after New Delhi tightened noose around Chinese firms. However, BYD is not giving up on India yet.

The carmaker, which sold 2,004 EVs in India in 2023, plans to roll out its luxury sedan, BYD Seal, this year. At present, about 60% sales come from Atto 3, priced over ₹34 lakh. The rest come from multi-purpose vehicle e6, bought mostly by fleet operators.

"Our EV customers are second or third-time car owners because of the price point. They already own luxury cars and want to own an EV with a comfortable range," says Sanjay Gopalakrishnan, senior vice president, BYD India Private Ltd. "First-time EV buyer fears lack of charging infrastructure. They may be staying in apartments where they don't have access to charging. Even for slow charging, one needs a three-phase connection," says Gopalakrishnan, adding it will take some time for them to go for EVs.

Charging Infra Woes

One reason for slower EV offtake is bottlenecks around charging. Public chargers are few and far between. Lack of confidence in charging infrastructure is holding back people from buying an EV as their first and only car, says Tata Motors' Chandra. "There is a need for charging infrastructure. This is where real work needs to happen," he says, pointing out need for government intervention to clear roadblocks. "Tiago surprised us with nearly 30% sales coming from electric variant after the launch. But it stabilised around 20% with current level of charging infra," says Chandra.

In metros, many apartment owners are not allowed to install chargers in parking lots, let alone renters. "To deal with this, government needs to promote residential-level common charging," says Chandra. "I have three parking lots but I can't put a charger because the society does not allow it. Practically also, it is not possible, because your meter will be far from your parking slot. The solution is common chargers, which government can mandate," says Chandra. He expects EV sales growth to slow in 2024 owing to high base of last year. "Growth would moderate to about 40%," says Chandra. "We need to compare this to the PV industry's growth rate, which is expected to be 5% or below," he says.

EV buyers don't want the hassle of charging every day. "People are not going to wait in line for an hour," says Mahindra's Shah. "Charging times need to come down. That is one single gating factor as far as adoption of EVs is concerned," says Shah.

The forthcoming stringent emission norms for ICE cars are expected to jack up their prices, making 30% EV penetration by 2030 achievable, says Chandra. "Tata is going for localisation. Every new-generation aggregate is coming at a lower cost. Scale is building up," he says.

With battery prices projected to fall over next 12-18 months, EVs with at least 200-220 kms of real-world range can be delivered on parity with their ICE variants having automatic transmission, says Chandra. That will be a true inflection point.