⚡ From fuel to electric
How the EV industry is changing the way we travel.
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The Big Story
Almost all of mankind's significant technological achievements can be traced back to one specific moment in history: the industrial revolution. We got our first steam-powered locomotives during that period, and as time progressed, we slowly shifted from gasoline-powered vehicles, until finally today, when the world is gradually making the switch from fuel to electric. But what most people don't know is that electric vehicles (EVs) have existed for more than 100 years. The first successful electric car made its debut around 1890, which was created by an Iowan chemist named William Morrison. He built a six-person vehicle that could go as fast as 14 miles/hour. And since then, the US, and the world at large, began its journey towards sustainable vehicle production.
In recent times, the global market share for EVs has grown exponentially higher from 3 million units in 2017 to 10 million in 2020, with the majority of this growth occurring in Europe, China, and the US. This growth is only expected to continue as the industry is estimated to grow at a CAGR of 29% from 2021 to 2026 due to climate change concerns.
In India, while the shift from traditional cars to EVs is still at a nascent stage, it's growing faster than ever. In the last seven months alone, India's EV industry reported Rs. 25,045.31 crores in investments. During the same period, EV firms in India raised around Rs. 1652.15 crore, suggesting the inevitable behavioural shift from fuel-powered vehicles to EVs. But that's not all; even venture capital and private equity have increased investments into the sector, pumping nearly $672 million between 2019 to 2021 compared to the $200 million in the preceding three years.
While the cash inflow has been exceptional, small firms are still facing some challenges in raising money from investors, mainly due to the lack of critical manufacturing components, almost non-existent charging infrastructure, and import dependence for batteries. This has led to a drop in EV sales in India, which decreased 19.9% to 236,802 units in FY20-21.
Despite such challenges, startups like Ola Electric, Ather Energy, Magenta Power, and Ampere, among others, remain bullish on the sector. Ola Electric, which acquired Dutch electric scooter startup Etergo, has set up a manufacturing facility in Tamil Nadu to produce electric two-wheelers in India. They launched the two-wheeler this week called, Ola S1, which you can now reserve at Rs.499. Ather Energy, another leading EV startup, launched two scooters in major cities and has established a new manufacturing plant in Karnataka in hopes of fulfilling the future demand for EVs. Even legacy players like Hero MotoCorp, Bajaj Auto Ltd and Mahindra and Mahindra Ltd are making serious investments to take on these startups for a substantial market share.
But the journey is long and far from being easy. In order to successfully transition to EV, these firms have to completely revolutionize their entire pipeline, right from product development to distribution. To make this a bit easier, the Indian government has provided some relief measures. It recently announced a 50% increase in incentives for electric two-wheelers under the Faster Adoption and Manufacturing of Hybrid and Electric vehicle (FAME) scheme to push EV sales in the commercial market. Additionally, the government's Production-Linked Incentive Scheme for ACC Battery Storage Manufacturing aims to reduce import dependence on batteries and incentivize domestic production. If India's post-COVID-19 recovery remains stable and firms remain true to their commitment, the sector could offer a $206 billion revenue opportunity by 2030.
Observing this shift from fuel to electric happen in real-time is interesting and disquieting at the same time given the pandemic-induced uncertainty. Still, the main question remains: who's going to lead this transition?
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