What is making some of the biggest names in India's auto industry go slow on electric vehicles? Probably the lack of infrastructure to charge these electric vehicles?
Not really. Instead, it is the conflict of interest that is making vehicle makers to go slow, believes Rajiv Bajaj, MD of Bajaj Auto.
Vehicle makers who have already spent billions of dollars in developing an ecosystem of dealerships, vehicle service and spare parts sales are reluctant to give it up for a much more economical solution (read: electric vehicles).
Interestingly, at the same time young startups are not only building but launching electric vehicles at a rapid pace.
"The biggest challenge for electric vehicles is the conflict of interest in the minds of vehicle makers who are currently making internal combustion (IC) engine products. What one can see around the world is that large successful organisations which make petrol and diesel vehicles who have enormous resources have been generally very slow in developing EVs. Whereas everyday there is a new start up which is willing to burn cash to do the same," said Bajaj at a recent event in Pune.
While Pune-based Bajaj Auto has promised to commercially launch its first all-electric two-wheeler Chetak in January 2020,its rivals including Hero MotoCorp and Honda Motorcycle and Scooter India, are yet to formulate product strategies for electric vehicles.
The two Delhi-based companies control 63 percent of domestic two-wheeler sales. Together they have more than 10,000 dealerships, service center and touch points spread across the country.
A dealer clocks a margin of 2.5-3 percent on vehicle sales but for vehicle service the operating margins range between 10-13 percent. Vehicle service is the main profit driver for any dealer. An electric vehicle has around 10-20 moving parts compared to more than 2000 in an IC engine vehicle thereby resulting in greater wear and tear.
"Service and spare parts are huge part of a dealer's revenue. After the introduction of EVs it will become almost unheard of. There will hardly be a need for service or part replacement. This is why there is a reluctance on the part of existing incumbents to move quickly in this direction. Whereas those who are new and have nothing to lose are steadfastly moving in that direction. So these are the two extremes," added Bajaj.
Almost every vehicle maker has cited lack of charging stations as one of the main reasons for them going slow on electric vehicle adoption. The other reasons being high vehicle acquisition cost, limited driving range and dearth of battery makers.
Bajaj equated the electric vehicle conundrum with CNG adoption, when it was first introduced in Delhi.
"When CNG was first introduced autorickshaw drivers used to wait for 6 hours in the queue for filing the fuel. But demand for it gradually became so strong that now there is abundance of CNG pumps. Same way infrastructure for EVs will also come up. We should not get caught in the chicken and egg situation because nobody is going to put the infrastructure for anything unless they actually see demand. Once demand is created everything else will fall in place," added Bajaj.
Startups such as Ultraviolett Automotive, Evolet, Ather Energy, Emflux, Tork Motors and Yulu Bikes are some of the companies which have either launched electric two-wheelers in the market or are in advanced stages of launching them.