ICRA opines on domestic penetration of electric vehicles; believes it may remain low in medium-term

ICRA in its latest report has said that the domestic penetration of electric vehicles (EV) will remain low in the medium-term in segments like passenger vehicles (PVs) and commercial vehicles (CVs) due to high prices and the absence of strong direct & indirect financial stimulus from the government for encouraging adoption of EVs.

The rating agency has also said that unless there is a standardisation of battery specifications, including charger specifications, across the original equipment manufacturers (OEMs), meaningful success in battery-swapping adoption is unlikely.

According to the report, at present, the FAME II incentive for electric PVs is restricted to the commercial taxi segment only, which also highlights the government’s awareness that the attractiveness of EVs for personal car buyers will remain distant in the near to medium term. It further said the modality of vehicle financing in a battery-swappable model, where the core battery is owned/leased by a third party and financiers only have control over the residual vehicle, is another challenge.

Apart from this, the report also stated that the EV vendor systems need substantial investments to keep costs under check and reduce dependence on the imported electronic systems. It believes that battery swapping will face strong resistance from automobile OEMs due to a possible impact on their product differentiation capabilities as well as pricing flexibility. Its acceptance therefore will be limited to certain less complex automotive sub-segments like the three-wheelers. Further, given the importance of battery hardware and software in the overall performance of an EV, it said battery swapping will face strong resistance in technologically complex products like cars or two-wheelers.