Electric Vehicles: Electrifying Opportunities & Shocking Challenges

Day 14, Mahabharata: Arjuna has vowed to kill Jayadratha by day-end or he will take his own life. It is already afternoon and Arjuna still cannot find his target. At such desperate time, Krishna declares that his 4 horses are thirsty. Arjuna creates pond of water using an arrow and fights on foot while the freed horse recharge.

Surely the ace archer Arjuna could fight on foot but can the current day Arjunatunga (logistics manager) achieve the desired targets if his much-awaited vehicles are recharging for hours somewhere enroute.

Before we extend our support to Arjunatunga, let’s first celebrate the talk-of-the-town solution: EVs. EV provides a high-voltage solution with zero tail emissions, no noise pollution and 40% lesser carbon footprint. So, EV must be the solution that we should ALL embrace without much ado? Sorry to spoil the party…but I do not think so.

Let me try to discover the right question/problem to which EV is an apt solution.

Three Questions/Situations

I have 3 possible concerns to which EV could be a good solution:

1. Vehicular pollution is 25 to 40 % of the total carbon emissions. 21 out of top 30 most polluted cities are in India.

Counterview: EV penetration is less than 1% currently, and even after 2 decades EV may not be able to make significant reduction in carbon emissions. Instead, we should popularise use of public transport.

2. New car technology, new models. “My car is an extension of my personality”.

Neutral-view: it is smart opportune marketing. Acquisition cost is high. CNG did not get the same positioning.

3. Logistics application. E-Commerce and e-B2B channels are growing fast. Last mile deliveries need to be done faster (10min sprint promise). Food delivery, e-comm, grocery, on-demand courier all have promised fastest delivery to the customer…nd the customer has tasted blood (not literally though)

Support-view: We can not bring large warehouses inside the city, so take birth the dark stores. Mid-mile (warehouse to dark store) and last mile (to customer) are done in smaller quantity and through densely populated areas. Only 2/3 W can do quick deliveries for such order profiles.

With entry and plying restrictions for ICE vehicles in cities like Delhi. Green, acceptable alternative is EVs. 2/3W-EVs for very short haul are available at much lower unit economic costs’ vs regular ICE 2/3/4-Wheeler options.

Note: ‘Green tax’ (for entry to Delhi) adds ominously to the distribution cost.

Rising Fuel costs have only tilted the balance in favour of EVs.

Despite above attractive benefits, the obvious question that comes to mind is why is sales of EV only 1% of the total vehicle sales? 

Answer lies in 3 factors: i) high acquisition cost, ii) lack of trust on technology (can I find a roadside mechanic) and iii) range anxiety (km per charge).

Three themes supporting the cause of EVs 

  1. Government push for EV adoption: GST on EV is 5% versus 28% on other MVs. As part of FAME II scheme, subsidy as high as INR 15000 is given on 2W EV. Further, there are subsidies for individuals, fleet owners and incentives for EV manufacturers.
  2. Technology and infrastructure shift: Unit economics of acquisition / operations costs is key. It is heartening to note that the battery pack cost has substantially reduced in last 10 years ($1100/KWh to $156/KWh). Advancement in battery technology and vehicle engineering has given increased driving range (300+ km per charge). More charging stations are coming up at convenience locations.
  3. Many Start-ups and playing a key role: In addition to providing EVaaS, the start-up ecosystem is also addressing the age-old issues of visibility, vehicle utilisation, tracking, route optimisation et al. Shippers want productivity, cost saving AND sustainability. The “AND” is important.
  4. BaaS (battery as a service): Charging time is a big deterrent to the idea of EV as it forces vehicle to be idle when it could do business. BaaS provides an intelligent solution to this dilemma. Battery swapping is possible for 2/3 W vehicles. Driver just swaps his battery at the charging station and avoids charging activity all together. Battery is 40% of the total EV cost. This model also helps reduce the EV acquisition cost.

Three Questions: Charge for thought

1. What other (transport) means to the same end?

The per vehicle emission problem is also being addresses with improvements in fuel quality and BS-VI standard being mandated. CNG has been well adopted in cars and LCV as well. Refilling infrastructure is set up too.

Have we maximised the benefits of CNG technology? Research and innovation work on Newer technologies like hydrogen fuel may become commercially and operationally viable in sorter time. Should we not be encouraging (government subsidy) these technologies too?

2. Source of electricity: Is the source of the electricity that we are using to charge EV also green?

India has more than 60% dependence on thermal power. There is remarkable development effort put in renewable sources of power, viz wind, solar, tidal and nuclear power.

Note: Solar energy is produced only for sunny part of the day and has to be stored during this time. Is this sector competing for the batteries with EVs, creating a higher demand-supply imbalance.

3. Suitable (high charge carrying, light weight) Battery availability: I must say this is a prime focus of innovation.

The challenge for us, however, is that the necessary RM (Lithium) is not available in India and needs to be imported. The question to ponder is how much of the import dollar shift can we afford from crude to Lithium? It is cardinal to reduce the total import bill for the Atmanirbhar Bharat.

This article by Shammi Dua, Vice-President, Kearney originally appeared in the SCM Spotlight segment for the June 2022 issue of Logistics Insider magazine. All views expressed in the article are his own and do not represent those of any entity he was, is or will be associated with.

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