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Summary:

The Indian government has announced an aggressive $4B plan to get 6 million electric and hybrid vehicles on its roads by 2020. Here are at least five hurdles I see for the plan.

A rare Reva spotted in Delhi

The Indian government has reportedly passed a $4.13 billion plan to boost the production of electric and hybrid vehicles, with a goal to have 6 million green vehicles on its roads by 2020. Reuters reports that 4 to 5 million of these vehicles are expected to be electric and hybrid two-wheelers (scooters, commuter cars, electric bikes).

The proclamation could provide a new market for all our electric and hybrid vehicle-focused entrepreneurs looking to find new markets. However, there are at least 5 things I think you should know about this plan:

1). From 0 to 60: India’s electric car market is non-existent right now. The country has a domestic electric car maker Reva, which has struggled over the years, but which now has the support of Indian conglomerate Mahindra & Mahindra, which bought the company in 2010. Where are these vehicles going to come from? Probably China, if the Chinese electric car market kicks into gear anytime soon.

2). Lofty goal: The Indian government has long made lofty proclamations like this — Indians call them aspirational, not necessarily goals that have to be met on time. The country’s solar power goal is similarly eye-openingly high. In comparison, China has a similar plan to boost electric vehicle production, but is only shooting for 500,000 electric and hybrid cars on its roads by 2015.

A rare Reva spotted in Delhi

3). Totally different vehicle buyer: The Indian vehicle buyer fits a totally different profile than the American, European or Japanese electric car buyer. The electric car buyer in these developed markets is willing to pay a premium for an electric or hybrid car — which are generally more expensive now than their gas counterparts — for the opportunity to be at the forefront of technology and greener vehicles. Most Indians are ultra price sensitive and won’t pay extra costs for luxury or greener goods. There is a growing Indian population that are looking to pay a good deal for vehicles, but a lot of those buyers want western models and brands like SUVs and classic luxury cars. These are generalizations but you get the picture.

4). Two wheelers are a bright spot: The Indian government says a lot of these aspirational vehicles will be two-wheelers, which could have more of a chance of selling in India. But that will depend on the emergence and popularity of an electric scooter or motorcycle being produced at a very low cost, as two-wheeler buyers in India tend to be even more price sensitive. Manufacturers in China are working on these now, so we’ll see how popular these become in India.

5). Power grid problem: If the recent blackouts are any indicator, India has some real problems with its power grid. If the country adds millions of vehicles plugging into the power grid, that’s going to add an even greater strain on it. If the Indian government is serious about plugging in vehicles to its grid, it needs to invest in the grid simultaneously, as well.

  1. Check out Jonathan Weinert’s blog, Two Wheel Tigers on the progress of the Chinese Electric Two Wheeler (E2W) market – he did his UC-Davis PhD on this topic and predicts that E2W’s will be bigger than the market for traditional motorbikes by 2015.

    A big driving force for adoption in the Chinese market was the 2003 ban on petrol powered scooters in many cities. If only we had such similar moves in the West…

    http://www.two-wheel-tigers.com/blogs/

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    1. Thanks will do!

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  2. No one predicted how the Mobile market exploded in India. So this can be a possibility for sure.

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  3. Lofty goal: …

    I see that it is very common for an outsider to comment about India negatively. If we look at the
    California high speed rail project or even wind/solar projects in the US, US is same as or worse than India or any other country.

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    1. Didn’t mean that to be negative. Just the reality when reflecting on the country’s solar goal. This is also coming from what Indian clean tech entrepreneurs and investors have said to me — have done a bunch of interviews on this, and spent some time in three cities there in December.

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    2. N lets be honest… Indian govt is corrupt to the core, and people are powerless. So it is not a wrong thing if an “outsider” comments negatively. It is something that Indians should be improving by themselves.

      A lot of people of India do not have enough to eat, $4B on electric cars is just another way to waste money. And where does the Govt plan to provide for the electricity?

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  4. Maybe the Indian government is about to make the same mistake as Tata made with the Nano. Car buyers in India can afford foreign cars and there is no market for low cost cars. The same may happen with electric cars. Two and three wheelers may be a better segment to target on the condition the offering is TCO competitive with gas vehicles.

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  5. 6. GoI’s policy latency syndrome:
    The NCEM was announced in April 2011. The plan was almost finalized in March 2012 (according to a acquaintance on one of the working groups), and they have not announced the policy even now (should take another 3 months or so to announce it). Further, given Indian government’s track record in terms of policy implementation, it seems unlikely that anything concrete would emerge before 2015!

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  6. Good info, Katie. I live in India, but hadn’t heard this one. Your and other opinions on this post are both right and wrong, but pehaps a little more on the wrong. Allow me to explain:

    The Indian consumerr is price sensitive for sure. Right on that one. But perhaps that’s the reason electric vehicles may work. Given the price of petrol being double of diesel, everyone is buying diesel cars. A lot of people have installed CnG kits in their cars because that’s even cheaper. In fact, in delhi, ALL public transport runs on CNG.

    The Reva didn’t do well because it hasn’t been a good car. Too tiny, too expensive and short range.

    The Tesla can do very well here. Its expensive, has a premium brand appeal, fantastic performamce and great range. If I had the money. I would pick up a tesla dealership here.

    People love to buy something that adds a bit of prestige to their lives. No one wants to buy a car who’s sole selling point is ‘cheap’. Nano being the case in point. The brand must be marketed and PRd better, so consumers feel they are getting great value, not the ‘cheapest car’.

    If Nissan Leaf, Chevy Volt kind of cars can be sold for about 25000 usd (after any import duties, freight etc), they will make a killing. Tesla can sell plenty of Model S and X. You should see the number of range rovers and Audi Q7s on our roads.

    There is ample electricity in the large cities of mumbai, bangalore, chennai etc to power an electric car like tesla, which needs only overnight power, thanks to the range. These cities will the early adopters.

    Shucks, wish I had the money to start a dealership!

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  7. For such vehicles in India (or any other developing countries) one of the major issue would be Power grid. To have success for such cars, they will have to fix the power shortage first otherwise such plans will only make situation worse (especially for rural areas).

    As some one mentioned regarding cell phones, I think they were not that much power hungry while having millions of cars being charged by power would certainly create problems.

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  8. Some points I would like to make. I live in India.
    a) There is a peak electricity shortage. But there is easily enough power to charge electric vehicles at night.
    b) If there is enough choice in the offering, extended range electric vehicles or pure electric vehicles will do very well. Offer one drive train but in different vehicle types.
    c) I live in India and I really want a Volt or an Ampera (or, a plug-in Prius) at a reasonable price. I would pay $25000 to $30000 for such a vehicle.
    d) Incomes are going up in general. What was relevant 3 years ago would not be relevant today.
    e) Li-Ion battery prices are going down by 8% to 9% a year. At some point, the rising price of petrol and dropping price of batteries should enable a switchover.

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  9. Even if the Indian Govt has the plan to create enough electricity to charge all the electric vehicles, isn’t the source of that electricity important? If we are burning coal to produce electricity through thermal power plants, how is it relatively better than a car running on petroleum extracts? More than 60% of India’s power comes from burning coal…

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  10. Priyanka Shekhawat Saturday, November 3, 2012

    interesting insights in the article n comments. I think an almost ideal starting point would be MREV’s next electric car, which is a four seater, and travels almost 100km on a single charge. Now, only if MREV would price the vehicle right. I think the vehicle can begin to catch up a bit. Part of the reason would be rising fuel costs, constantly denting consumers’ pockets. The government already subsidises purchase of EVs, and I am hoping it would continue to. But there can be more done in terms of incentives. May be dedicated lanes, where more fuel efficient vehicles can drive in, similar to California’s HOV stickers. Malls and office buildings should be incentivised to set up charging spots.. greater visibility and accessiibility is the key. Focus should be on starting at grassroot levels rather than cribbing about what bigger issues can hinder the prospects…

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