Future is in the business of electric vehicles

Dhiraj Shetty

The rise in fuel prices is the talk of India. But, it was inevitable. All of last year, when trade had ground to a halt for a few months, oil producing nations were offering crude at rock bottom prices because no one was buying. 

With global trade picking up, this is the time for them to recoup their losses. In any case, there is very little we can do to stop oil-producing countries from dictating prices.

You can protest all you want. Post as many tweets as you want. Rant on Facebook and on blogs. But that is the extent of your power over oil prices. The bottomline is that we have no alternative to petrol and diesel.

If anyone does, please raise your hand!

The reality is that we have to get used to a new normal in terms of fuel prices.

Either that, or we find alternatives to petrol and diesel where our only hope right now is India’s resolve to ensure that all vehicles sold in 2030 and onwards will be powered by electricity. 

The two major hurdles to owning an electric vehicle are the initial cost and charging infrastructure.

As of today, the two-wheeler sector has come up with several products and models as compared to four-wheelers. Some companies are purely into electric vehicles, which is a very good indication of the potential.

Legacy auto companies (who manufacture vehicles that run on petrol) are coming up with hybrid models (petrol + electric), which enable them to make use of their existing infrastructure while transitioning to electric vehicles in the long term.

Pure play electric vehicle manufacturers are burdened by the cost on research and development plus setting up marketing and sales infrastructure. This is translating into relatively higher purchase cost for the consumer when compared to scooters and bikes that run on petrol.

As of now, all other parameters being equal, the cost of an electric scooter is higher than that of an internal combustion vehicle.

Once a consumer overcomes the cost barrier, he or she is up against range anxiety. Electric vehicles can run up to 100 km on a single charge; this number may be more or less depending on the model and manufacturer.

In the absence of charging points in public areas, motorists have to charge their electric vehicle either at home or in their office premises.

Here the scenario gets complicated.

When charging at home, you pay domestic rate for the electricity. If you are charging the vehicle in your office or in a commercial establishment, you will pay commercial rate for the electricity. A good number of two-wheeler users are either self-employed or work in small and medium enterprises. They might not be allowed to charge their vehicles in their place of work.

The end result is that users may suffer from anxiety about running out of charge.

Another disadvantage is that the life span of electric vehicles is significantly less compared to internal combustion vehicles. 

In the next few years, manufacturers are likely to find solutions to all the problems. Until then, entrepreneurs have an opportunity to provide various services, develop their business and nurture a clientele. 

Emerging opportunities

First up, a dealership looks like a very good idea, especially in a non-metro city because the real estate cost will be lower.

Another advantage is that range anxiety should not be a problem in non-metro cities. The commute is shorter as compared to large cities. In most cases, the end-to-end distance is not more than 20 kilometres. Think of Vellore, Rameswaram, Satna, Rewa, Banavar, Pali, Jaunpur, Kharagpur, Bhuj, Amravati, Jalna, Siwan, Jalpaiguri, Aizawl, Anantapur, Pathanamthitta, Sawai Madhopur, Rewari, Rohtak, Dehradun. 

Anything more than 20 kilometres end-to-end?

Buyers will be able to re-charge their electric bikes or scooters at home.

The problem is that of price. You cannot set up a business without accounting for the disadvantages. Price is a disadvantage, but if you analyse the difference in the prices of conventional scooters and electric vehicles, the difference in price is not more than 50%.

Please note, I say, not more than 50%. Which means that the difference could be as less as 20% in some cases after accounting for tax relief on eco-friendly vehicles.

This is not a huge challenge to overcome.

Remember that electric vehicles are a new product. They will keep improving with each year. This will translate into expanding the size of your potential market.

With every year, the size of your potential customers will increase. You can expect to grow for at least 20 years as India makes the transition from internal combustion engines to electric vehicles.

Since the life span of electric vehicles is not more than 5 years (this point is arguable), your initial customers can be persuaded to upgrade to newer models.

Bottomline: You must enter this business now to make the maximum profit in the long term. Right now, motorists are looking for alternatives to petrol and diesel. They are open to new products. They will not mind paying up to 50% more if they can avoid queuing up for petrol. After all, they can re-charge electric vehicles at home!

But this is not the only opportunity in the electric vehicles business.

Buyers will need the services of a mechanic in case of a breakdown. They will need to replace old batteries.

While mechanical problems can be solved by those handling conventional vehicles, batteries will be a new sector of business.

Right now, multiple companies are investing in development of better batteries. This is an expanding sector. A battery dealership is bound to grow along with the electric vehicles business. After all, the battery is the lifeline of the electric vehicle.

If you want a real life scenario, just look at the mobile phone business. People have set up businesses selling mobile phones, phone covers, phone batteries, repair of phones and purchase of old phones.

So, if you are looking for opportunities to set up a new business, the rise in the price of fuel is a sign to look at the electric vehicles sector. More so, if you live outside the metro cities or are looking forward to shifting to a non-metro city for a better quality of life or to stay closer to your family.

Lessons from solar power

Those who want an idea of the potential in a business of electric vehicles must study the growth of solar power business in India.

Solar power took off some time in the early part of the 2000s. People in metro cities would not have experienced this growth because most of it took place in non-metro cities. Homes in non-metro cities are built on individual plots. Each owner could decided whether to opt for a solar power unit on the terrace.

The government offered subsidies to promote the use of solar power. Initially, the solar power plant would only deliver hot water to the bathrooms as the price of the unit was high compared to the alternatives. But, as the number of units sold increased, manufacturers started coming up with newer products, which included power back-up units. The back-up units would be re-charged with solar power.

Now, if you visit any non-metro city, you are likely to find solar powered water heaters and back-up units in many homes. 

In these 20 years, the growth in the number of large-scale solar power plants is significant. In the early part of the 2000s, the cost of producing one unit of solar power was well over ₹10. Now, the cost is hovering around ₹3 owing to relentless improvement in technology. 

While India did not have any large-scale solar power plant in the early part of the 2000s, now the government is receiving multiple bids from all over the world for every new project. The government has either stopped or reduced the subsidies on large-scale solar power plants. Yet, the bids are pouring in.

One reason for the growth of solar power is the public support for finding alternatives to coal-fired power plants, which pollute the environment.

Right now, the public is in favour of finding alternatives to petrol and diesel. This is a good time to take advantage of the public mood and get into the business of electric vehicles. 

Categories: Business


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