🇮🇳 How India is Making Affordable EVs!
EVs across the world are super expensive but India is managing to make affordable ones. What's our secret? ReadOn!
Wondering what's the next big hype in town? Just look at what people are searching on Google!
And one of the winners this year (along with crypto and inflation): EVs!
EV searches hit an all-time high this year, thanks to the insane prices of oil and gas.Â
But though EV sales doubled in 2021, they still make only 9% of the global automobile market share. And in India? Just 1%!Â
But why is EV penetration so low?Â
Well, there are a number of reasons but a major one is money. EVs are 2x more expensive than normal cars.
Wondering why EVs are so expensive? ReadOn!Â
📈 Behind the High Costs of EVs
While lack of charging infrastructure and the safety of EVs are major concerns, most people opt out of buying an EV due to the high upfront investment.Â
In a survey in the UK, 33% people said that high costs of EVs discouraged them from buying EVs.
You see, EV batteries require rare minerals like lithium and cobalt. Scarcity of these raw materials increases costs (Economics 101).
Another factor that's making EVs expensive is the cost of research and development.Â
Research and Development or Random Disbursement?Â
Now, because EVs are fairly new, a lot of research and development is required to make them more efficient and affordable.Â
But for many EV companies (including top EV companies like Rivian, XPeng, Nio Inc), this R&D money is not yielding results just yet. The worst part is that there is no clarity on what this research is about.Â
Rivian, for instance, has spent $2.268 billion on research and development in 2022 alone.Â
But it produced only 7,363 cars in Q3 22 and delivered 6,584. The unit economics for Rivian, thus, make no sense.Â
Here's a look at the spending v/s earnings ratio of some of the world's biggest EV companies.Â
Indian companies like Ola Electric also seem to be going in the same direction. Ola has committed $500 million for research and development this year but it only sold 9,634 vehicles in September 2022.Â
However, Ola has clear goals about what it wants to achieve with its investment: develop in-house batteries, and create fast chargers.Â
Now, we'll have to see if the $500 million will actually yield results or go down the drain.Â
💵 India is Making Cheap EVs
Other Indian companies are also spending money on research and development (it's kind of a necessity when you're in the EV space).Â
But a lot of this money is being spent on making cars cheaper (typical Indian mentality!).Â
Result? In just one year, two super cheap EV cars were launched in India!Â
The first was the Tata Tiago, with a starting price of Rs. 8.49 lakhs.
And the second was PMV Electric's Eas-E which costs just Rs. 4.79 lakhs.Â
How did these companies manage to make cheap cars when everyone else is struggling?
Well, Tata already has some experience in producing cheap cars. Remember the Tata Nano? It also started its EV journey with jugaad that helped it cut costs (you can read all about it here).Â
But how did PMV Electric, a 4-year-old company manage this feat?Â
Simple: it innovated.Â
The company created a car that seems like a car but is not really a car. Confused?Â
Their car is a two-seater on four wheels. This allows it to reduce the size of the battery, lowering costs. Genius, no?
Plus, since this car isn't technically a car, it doesn't have to comply with multiple laws and safety regulations that are applied on cars, saving more time and money.Â
But the title of "India's cheapest EV" may not be very desirable. Why?Â
Because of Tata Nano.Â
🚘 The Tata Nano Case
Remember those small quirky cars that created quite a buzz back in 2008?Â
Well, we don't see them around nowadays. Wondering what happened?Â
Well, the car majorly failed and in 2018, the company completely shut down.Â
Ironically, one of the major reasons behind its failure was the tag of the cheapest car.Â
You see, Tata Nano positioned itself as an affordable people's car that anyone could buy for just Rs. 1 lakh.Â
This obviously created a huge media buzz. But the media positioned it as a "cheap" car.Â
Now, Indians may love cheap things, they may love bargaining for hours, but once you label something "cheap", they lose interest in it.Â
It's basic consumer psychology. When we get something cheaper than normal, we begin to suspect whether or not it is a quality product.Â
Plus, in India, people buy cars as a status symbol. So, nobody wanted to risk their status by buying a "cheap" car.Â
The same thing may happen with Eas-E. And with people now more cautious than ever about EVs (thanks to multiple vehicles catching fire), the cheap, sorry, affordable EVs may not take off.Â
But we'll have to wait and watch.Â
P. S. Interestingly enough Tata Nano may come back as an EV soon. Will it be able to make it this time?
⚡In a line: India is able to make cheaper EVs because unlike others we aren’t spending money on frivolous research.
💡Quick question: Do you think India could become the EV capital of the world soon?
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What about Tesla EV ?