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EVs - Next Big thing or too soon to say?

6 MIN READMay 25, 2020

The Evolution of the EV Sector

The very first electric vehicle (EV) was developed for postal delivery back in Scotland in 1898. From there, humankind regressed in terms of technology and went back to using animals and  Internal Combustion (IC) engines for transportation. Range anxiety was one of the main reasons for this. Although the first IC engine was developed in 1872, it was only until 1913 that the first petrol station was developed as only rudimentary petrol cans were used before 1913. We have come a long way with the use and now overuse of IC engines and users are now well aware of its impact on the climate globally. With recent solutions available to overcome range anxiety, cost effectiveness and the adaptability of electric vehicles, it is the time to look at a green future.

Key policy changes and government support provided in the EU for EVs

Europe was the first continent to look at electric vehicles as a good alternative to IC engines vehicles and made some bold policy changes for the early adoption of EVs. While big incentives were offered to EV manufacturers and users, equally big penalties were levied on IC engine vehicle manufacturers and users. For example, Scandinavia was the first to double the import duty on IC engine vehicles, making them more expensive than EVs. This is the reason for the sale of EVs being higher than IC Engine vehicles today in Norway.

Some of the incentives offered by the UK government to EV users were rebates on purchase prices and on import duties, waived congestion charges, vehicle road taxes and parking charges, which ensured a faster adoption of EVs.

Mitigating Employment Losses in EV Transition

The following steps were taken by the industry with government support to reduce the risk of  job losses during the transition from IC engines to EVs:
  • Retraining by Original Equipment Manufacturers (OEMs) with limited government support
  • Repurposing old OEM plants for new EV manufacturers
  • Technology development grants for zero emissions
  • Indirect grants for EV development (subsidies for new plants, conversion of production lines, incentives to build new plants for components e.g., batteries)
The challenges that have yet to be addressed are job losses in the after sales market such as dealer networks, aftermarket suppliers, petrol retailers, Tier 1 and 2 suppliers. The most commonly serviced/replaced parts of an IC engine car are not part of an EV. Hence EVs do not need these after sales networks, there is bound to be an impact on employment in this network.

The EV Market Today and Future Forecasts

The world is changing and moving toward digitization in every aspect of life. Electric vehicles are considered to be one of the main change drivers moving forward. The major global economies are spending 7-8 percent of GDP for recovery and some of these investments can be made in this digital transformation, as per the green initiatives. Some of the global reports suggest that by 2025, 10 percent of all auto sales will be EVs and by 2030, this percentage could become 30 percent. By 2026 India plans to transform 40 percent of all its fleet into EVs. More than 33 percent of all busses in 2019 were electric and estimation is that by 2030 almost 60 percent of all busses will be running on electricity.  

The main challenges faced right now are: the total costs of ownership, range anxiety, battery life and quality, and charging infrastructure. Some of these challenges will soon be overcome, for instance battery prices have been reduced by 87 percent in 2019 and are expected to drop another 13 percent in 2020, impacting the cost of EVs in a positive way.

Corporate Involvement in the EV Revolution

We are at a tipping point in terms of incentivizing the policy for increasing EV usage. Due to low oil prices, taxes are very high all over the world. Changing fuel taxes to climate taxes would incentivize EV buyers and definitely shift focus toward EVs, creating a silver lining in this pandemic. People are accustomed to the high cost of fuel and hence will not mind spending the same amount of money while helping the climate. Many large corporates have signed up to participate in green initiatives set by the European Green deal. These corporations have large fleets purchased or leased by them and hence can play a big role in increasing the usage of EVs by switching from IC engine vehicles to EVs - corporates will play a big role in faster EV adoption.

Is Fast Charging the Need of the Hour?

Home charging vs public charging was debated by some participants. The experts' opinion was since 85 percent of the time vehicles are idle, there is plenty of time for slow charging. Intra-city transport can depend on slow charging at home or at work, while long distance or inter-city needs depend on fast charging through public infrastructure.

The use of a battery park to balance the grid and using batteries of idle cars for other purposes are some of the new experiments which are currently being looked at. Once the scale of EVs increases, these experiments can be done more effectively.

COVID-19 Impact on the Transition

At the moment, it is difficult to assess the impact of the current pandemic on the future of EVs. Usage of EVs in ride sharing services for personal use has been increasing and was expected to grow at a fast pace. Current pandemic might slow down this growth for a while since it will take time for people to be comfortable to use ride sharing services again. However, the impact of COVID-19 has been very positive on the last mile delivery services in India and larger corporates are looking to adopt EVs for delivery services and employee transportation.

Secured Growth for EVs in the Future

People often do not understand  the subtleties of EVs and have presumptions about its costs. Even today, running the most expensive EV is cost positive in comparison to running a high-end VW Passat car. This cost difference will increase as the EV technology improves over time. About 10 years ago, the first EV was introduced by Tesla with no charging infrastructure, and 10 years later, most car manufacturers are thinking of it or have introduced Electric Vehicle versions of their lines.

The three main reasons that will bolster EV growth in the next years are:
  • Superior technology - EV technology is better with superior user experience. Faster, better to drive and pollutes less
  • Changing consumer behaviour - Generation Z will become a predominant workforce by 2040 and will not be going to the office everyday, hence will not want to invest in an expensive asset which depreciates over time. 
  • Sentiment around the environment - In the last 2 years there is more awareness and acceptance of  IC engines not being environment friendly, and people want to adopt climate friendly options. Both corporates and  the governments promoting EVs are merely responding to the sentiments of people and act as catalysts in EV growth.
EVs were the battle for the automotive sector in early 2010s. The battle for the next 10 years is autonomy. The ability of large car manufacturers to adopt autonomous technologies will be the deciding factor whether they will swim or sink.
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