The way ahead for Indian electric vehicle manufacturers

The sky-rocketing price of oil in 2008 reminded the world that it needed to speed up work on technologies which helped its citizens reduce their dependency on fossil fuel. One area which got a boost due to the peak in oil prices that year was developmental work in electric vehicle (EV) technologies and usage. Still the pace of growth of the EV segment has been quite slow the world over. It is estimated that the EV market, globally, would stand at around 1.2 million vehicles by 2015.

Environmental friendly, mass mobility vehicles are not new to India. I remember visiting the Taj Mahal at Agra many years ago and travelling from one point to another in non-petrol, battery-driven vehicles. Similarly, EVs have been in use in the country for several years now. REVA Electric Car Company launched its first prototype car for the masses in 1996.

Chetan Maini, the deputy chairman and chief technology officer of the company, faced an uphill task finding buyers for his cars as well as getting recognition and support from government. In 2002 he was quoted in a leading business newspaper elaborating the help he wanted from the central government. Yet the response was lukewarm.

Unlike Karnataka, his home State and where he did get some support, Maini could not make much headway in a territory like Delhi for instance. Finally, after nearly six years Delhi listened and did something by announcing a 29.5 % subsidy for electric vehicles and this encouraged the company to launch its cars in the capital city! Since the launch of its first prototype, REVA has sold 3,500 cars till now.

Today, we have a variety of electric two-wheelers as well, some of which are being made by already well-known companies like TVS, Avon, Hero, etc. Their presence and product offerings have created multiple choices for consumers. Yet in the recently released vehicle statistics by the Society of Indian Automobile Manufacturers, the sales of electric two-wheelers fell by minus 88 per cent to 3,001 units in April-March 2010 against 26,445 units in April-March 2009. Assuming that these figures do not relate to all but a section of the manufacturers in this segment, still the picture of demand for these vehicles is dismal.

The Society of Manufacturers of Electric Vehicles in India has been asking for tax incentives to boost sales besides wanting a separate policy for the EV segment in India. Subsidies and a policy will undoubtedly be helpful but there will still be several influential challenges for EV makers and their products.

It has taken nearly 125 years for internal combustion engine-based technology to get where it has today and since the invention of the first automobile in 1885 by Karl Benz, vast technological advances have been made in automobiles for the masses in all areas of an automobile. Today, consumers can demand and then buy what they need in their vehicles.

In a highly price sensitive market such as India, it would be difficult for EV makers to take large technological strides as more technology would mean higher prices and the takers would be fewer than those who have already bought EVs. As it is, without uniform benefits from different states in India, the prices of many products are still very high.

To add to this challenge are existing low volumes, deterring benefits such as economies of scale, and this is expected to continue in the near future as well.

The Western world has enjoyed itself thoroughly and travelled a full circle economically and otherwise. So it is more receptive to curbing conventional means of mobility and looking at environmentally friendlier ways.

That will not be the case in countries like India and China where consumers are treading and will want to travel the same cycle as what the Western world travelled. In addition, peer pressure will influence mindset where a cousin or friend enjoying the speed, performance and power of a petrol-driven Bajaj “Pulsar” bike will influence someone’s buying decision between an electric or conventional fuel-driven vehicle.

To make things more difficult for EV makers, breakthrough products such as the Nano car by Tata, will make ICE-based mobility available at radically cheaper prices. Hence, instead of paying something around Rs. 40,000 for an electric two-wheeler, a consumer can stretch his or her budget and accommodate one’s whole family comfortably in a vehicle costing slightly over a lakh of rupees.

Despite these challenges and others, there is hope of gains to be had and REVA is showing the way. And that way is to look outwards -- to export. REVA expects to establish itself as a global electric vehicle brand and sell in 40 to 50 countries by 2012.

The Indian auto component industry is today a robust and technologically advanced sector primarily because it took exporting seriously. Exports brought not just earnings for companies but several other benefits. Exposure to advanced overseas markets pushed the frontiers of quality among component makers, brought in better technology and innovation into products and manufacturing and eventually also gave the desired volumes that many companies wanted.

EV makers in India, should they decide to make exports their focus as well, to my mind will benefit the same way that the Indian auto component industry did and also the way REVA will benefit once it reaches its goal of being a key exporter of electric cars.

Markets abroad, especially in the developed world, will challenge Indian EV makers on several fronts -- aesthetics, quality, technology and innovation, among other things – and these will translate into learnings. More importantly, the eagerness to buy environmentally-friendly vehicles and that too at higher prices would be greater in the Triad markets of North America, Western Europe and Japan, thus giving volumes that Indian manufacturers need. The gains could be applied in products for the domestic market eventually, as demand for electric vehicles increases in India.

However till such time demand does sizeably increase in India and with technology of EVs still being limited especially in the two-wheeler segment, a key ingredient for an EV maker to strike big in the domestic market would be the seriousness in which it takes its branding and in building and conveying the brand value of its products. And as one of India’s most respected executives and co-founder of MindTree Consulting, Subroto Bagchi, says in his book The High-Performance Entrepreneur, “without great value, you cannot build a great brand”. Value, he says, should not only be reflected in the company’s product but inside the enterprise and what it does for its external environment as well. The company will have to bear this in mind.


(Published in Auto Monitor magazine's April 16, 2010 edition)