Improved battery technology and concerns over climate change are set to make electric vehicles the dominant force in the automobile space
The increased use of Electric Vehicles (EVs) is the first major game-changing revolution sweeping the automobile industry ever since the internal combustion engine changed the sector’s dynamics. Powered by improved battery technology and made extremely relevant by growing concerns over climate change, EVs are slowly but steadily moving towards becoming the dominant force in the automobile space. In 2018, the global sale of plug-in vehicles reached 2.1 million units, which constituted a 64 per cent increase over the previous year. Of this, 69 per cent were all-electric models while 31 per cent were plug-in hybrids, indicating that the consumer is increasingly preferring pure EVs. Electric bicycles (e-cycles) are another category that is fast catching the public’s imagination globally. According to a recent report by a leading market research organisation, the global e-cycle market is expected to touch $21 billion by 2024, growing at a Compound Annual Growth Rate (CAGR) of 12.5 per cent between 2019 and 2024.
Interestingly, a bulk of this growth in the EV category is coming from China, which accounted for more than 50 per cent of global sales. It is the Scandinavian countries, however, that lead the way when it comes to adoption of EVs. In Norway, a whopping 40 per cent of new car sales in 2018 comprised EVs while in Iceland it stood at 17.5 per cent and in Sweden 7.2 per cent. In India, the Government has already provided a major boost to the EV sector by announcing major investment goals for realising the objective of creating requisite charging infrastructure for them. The last Budget also announced significant income tax breaks for people buying EVs. As the transport sector globally tilts towards them, a great amount of churning is expected to take place in the automobile industry, which is currently dominated by internal combustion engine-powered vehicles.
An increasing shift to alternative energy is transforming different aspects of the automotive industry. With EVs clearly emerging as the future of the industry, automobile sector players are already expected to invest billions of dollars in this emerging technology. With EVs becoming a reality sooner than it was expected, investing in this technology will be key for all major players to stay relevant. Currently, the EV divisions of most automobile manufacturers form a miniscule part of their overall businesses. Most manufacturers have just one or two variants of EVs in place. However, as this is likely to change in the near future, the next 10 years will be very critical for conventional automobile manufacturers. It is not that the automobile technology has not witnessed any transformation in a century. However, the transformation was ushered by continuing development of existing technology. A shift to EVs, however, marks a complete change in automobile technology as well as major disruption in the automobile ecosystem. For example, automotive parts manufacturers are likely to be hit since EVs use fewer parts than other vehicles.
The coming years will witness a huge boost in Research & Development (R&D) in the EV sector as an increasing number of conventional car manufacturers work overtime to improve their EV technology. The battery supply issues, need for fast-charging batteries as well as long distance charging concerns need to be addressed now. Most R&D efforts in the automobile sector are, therefore, expected to focus on improving battery performance and reducing battery costs to make EVs more affordable. The e-cycle space is also likely to witness a greater churning and growth. The bulkier lead-acid batteries have already made way for much lighter nickel-cadmium and lithium-ion batteries that have made newer models much more viable and acceptable to the end consumer. Newer emerging trends in the e-cycle space include luxury folding e-bikes and high-tech bikes with smartphone integration.
With much-improved battery lives, e-cycles offer a highly sustainable and effective solution to the air pollution-cum-traffic congestion woes of countries like India. E-cycles launched in the country are already offering a viable, versatile and eco-friendly alternative to motorised bikes. These e-cycles come with substantial battery life and can easily be pedalled back manually in case of loss of battery. Interestingly, most path-breaking innovation in battery technology is coming from startups and not from established automobile players which also indicates that the latter might have to fight harder for survival.
Another interesting shift might be observed in the global centres of automobile manufacturing. With countries like China and India giving a major policy push to EVs, a lot of automobile manufacturing is likely to shift to these countries over the next 20 years. The next Detroit might as well emerge in one of these countries.
The emergence of EVs in a big way also gives a shot in the arm to the alternative fuel sector in general. An increasing yearning for a carbon-neutral world has prompted greater work in the direction of making a basket of clean fuels workable. An ethanol-powered bike has already been launched in India. The decline of fossil fuels in general and a shift towards a greener economy will, therefore, provide a boost to biofuels as well as solar energy.
(Writer: Pankaj M Munjal; Courtesy: The Pioneer)