- 1 Definition / Scope
- 2 Market Overview
- 3 Key Metrics
- 4 Market Risks
- 5 Top Market Opportunities
- 6 Market Drivers
- 7 Market Restraints
- 8 Industry Challenges
- 9 Pricing Trends
- 10 Regulatory Trends
- 11 Market Size and Forecast
- 12 Distribution Chain Analysis
- 13 Competitive Landscape
- 14 Competitive Factors
- 15 Key Market Players
- 16 Strategic Conclusion
- 17 References
- 18 Appendix
Definition / Scope
In comparison to conventional cars that run with an internal combustion engine, electric vehicles have electric motors that can store electricity. Cables are used to charge the motors and unlike petrol or diesel cars; the specifications are same. The charging batteries are flat in nature and inserted at the bottom of the vehicle which in turn provides low center of gravity for better handling and improved safety.
In terms of volume, passenger vehicle sales in India is currently the fourth largest in the world.
Mahindra Motors, which boasts almost the entire market share in India, sells it E20 Plus EV model for an estimated market price of INR 734,076. It is important to note that the average price of conventional cars in India is estimated at INR 695,955.
Latest market research conducted in three prime Indian cities of Bangalore, Delhi & Kolkata states that more than 45 percent of households now own a four-wheeler. As of present, a comparatively expensive BMW EV3 series is competing against Mahindra vehicles. Charging stations for Electric Vehicles in India acts as both a challenge and market opportunity. There are reportedly less than 300 charging stations; of which 200 of them are located in the capital city-New Delhi.
|Base Year||2017||Researched through internet|
Despite of very less public charging stations, the lack of will from a policy perspective is a major market risk to consider. There are no competitors and hence, prices are not yet affordable. There is a considerable risk of unstable supply dependencies as Tesla; another international EV maker has reportedly experienced supply shortages due to the circumstances of having to maintain multiple supply partners. Minerals required to manufacture lithium ion batteries have natural deposits in countries like Congo, Bolivia or China; all which are either authoritarian or non-democratic regimes. Policies are also not yet favourable.
Top Market Opportunities
By 2025, India’s projected PCI is estimated to increase in the range of US $3650, which would itself be a 125% rise from its present number. Decreasing prices of raw materials are also showing encouraging signs. Market research from Frost & Sullivan have recorded that the prices of lithium ion batteries have reduced over the past years. Prices of battery packs have fallen below $260 kWh in the year 2017.
There are two key market drivers. Firstly, interdependence via investment links with some of the largest battery makers in China is an opportunity for Indian sellers. The largest production corporate for EV batteries-Samsung SDI has factories located in China, so has A123 Systems; another renowned battery manufacturer. Circulating news of Chinese will to improve trade ties with India has increased the scope of trade. China is willing to formulate an investment pact with India via the BIT. It is hence seeking to address its trade deficit in the coming years.
Secondly, market research from McKinsley indicates that sales possibilities for EV increases dramatically with low cost business models; which is an opportunity for manufacturers in India. Similarly, it is also predicted that in between the year 2012-2020, total sales of small cars in the BRICS region is going to rise by 66%
A pilot case study of Mahindra sales dealer in India illustrates the problem of territorial exclusivity present in the market. While the company has specified a policy of establishing at least one dealership within a radius of 120 kms; it was found that Mahindra’s competitors on the conventional category are competing fiercely for market penetration. Below is a google map illustration of the amount and types of competitors in the Jodhpur-Barmer bypass road in Jaisalmer.
As per the map, there are 12 registered dealers in the range of 120 kms. Maruti Suzuki, Fiat, Renault and Hyundai have equal number of presence in the region. Red strip in the map denotes dealers other than that of Mahindra. Despite having more than 1000 outlets in India, territorial mismatch remains and penetration has proved to be highly competitive.
A 2014 report on the Environmental Impact of Automobiles in India concluded that carbondioxide emissions have increased by 36.5% since the year 2004. Similarly, road emissions have increased by 29% in industrialized nations and by 61% in the rest.
There have been reported news of high-level government agencies declining to utilize both Mahindra and Tata electric vehicles. Agencies have pointed towards poor global standards and lower efficiencies of electric cars. In fact, global battery standard is 27-35kwh, whereas Mahindra cars use the same of 17.
Although the average cost of car in India is estimated around $6000-8000, the cost of SUV’s are similar to the global average of EV’s; approximated to be around $21000.
Furthermore, battery costs have also fallen since the year 2010. McKinsley & Company’s report published in Electrek states how a $1000 kWh battery pack has debilitated into a mere $227. Further, the report claims that prices are going to fall below $100/kWh by the year 2030. Cyclical price trends of raw materials are rather consistent, except for labour costs that amounts 15% of the battery’s total production cost26; second to assembling battery electrodes.
Regulatory trends over the years have demonstrated favourable climate for EV sales. Emission standard in India has been improving over the years from a policy level with the introduction of emission indicators like Bharat Stage 1 to Stage 6. On March 2018, the Indian government announced that charging station owners would not need a licence to run their outlets. In a latest effort to spearhead the electric vehicle ecosystem in India, the government has asked seven of its ministries to formulate guidelines; rather than policies.
Market Size and Forecast
As published in techsciresearch, the electric car market in India is projected to grow by 37% over the year 2018 until 2023. The National Electric Mobility Mission 2020 has predicted sales quantity of 6-7 million e-vehicles by the year 2020.
Comparatively, the growth of passenger cars is also predicted to grow by 7% over the next five years. Favourable forecasts of electric vehicles with per capita increase is an encouraging sign for the industry. Furthermore, the industry’s sole market player-Mahindra has declared its intent to sell over 5000 units, every month in the next couple of years.
Investors such as Reliance Industries, Suzuki, Toshiba, IOC, Exicon, Panasonic and others have announced manufacturing plans of lithium ion batteries in the coming future. The market outlook seems favourable in India for potential investors as well as for consumers looking for cheaper yet efficient models.
Distribution Chain Analysis
Competitive Analysis/Distribution Chain/Key Market Players
Figure depicts the distribution chain in the Indian electric car industry. There are five industry players namely mining companies, battery manufacturers, automakers, dealers and consumers in this chain. Battery makers are continuously anticipating the quantity of material proportions (mining capacity) for new car projects whereas carmakers are relying on the viability of future car prices from a consumer’s point of view. Mining companies on the other hand are anticipating supplying raw materials in relation to the amount of investment made.
Additionally, it is important to acknowledge the importance of private mining companies as part of the alternative distributive chain. This nature of largely undetermined and unpredictable nature of distribution chain is holding profit margins as batteries are redesigned for the betterment of manufacturers.
The competitive climate in India is enormous. Although there are very less EV producers till date, sales performance of India’s leading car manufacturer-Maruti Suzuki is staggering. It sold more than 1.5 million cars in 2017, with an annual sales growth rate of 11%.
MS, in partnership with Suzuki and Toyota has declared to launch its first EV by the end of year 2020. Even though Mahindra has dominated the passenger section of EV in India, more than ten other manufacturers are selling their models in the form of two and three wheelers. It is possible that other EV manufacturers could easily switch towards the production of passenger cars in the future.
The possible key players are Tata Electric, Hero Electric, Yo Bikes, TVS, Ashok Leyland, Ola Electric, 22 Motors and Menza Motors. As such, market fragmentation appears low as consumers are only betting on cheaper yet efficient options.
A brief outlook of India’s leading car sellers in 2017 determines how price acts as the key competitive factor in the automobile industry. In 2017, MS vehicles bragged leading sales in the Indian market. Maruti Suzuki Alto was the most sold car with approximately 2,57,732 units.
MS Alto was also the cheapest among the rest. It is important to note that despite strong consumer preferences for MS vehicles, Hyundai Grand i10 sold 154,787 units at the price of 5.48 lacs than MS Vitara Brezza with 140945 units at the price of 7.52 lacs.
Key Market Players
Industry Performance of Tata & Mahindra
While Mahindra Motors sold approximately 242,721 units of cars in 2017, Tata amounted to 169,599 units in comparison. Fourth Quarter net revenue (2017) for Mahindra was estimated at INR 43,785 cr and INR 77,272 for Tata. Presently, there are 576 Tata dealers in 426 Indian industries whereas Mahindra has facilitated 537 in 378 locations.
Directives from Modi government to switch from a policy homework to formulating feasible guidelines is a step in the right direction. For an industry struggling to make a leap from its infancy, the switch will provide more freedom for all key actors in the distribution chain. The aims of National Electric Mobility Mission 2020 is also very encouraging.
Although there are very few industry players ready to compete with an experimenting Mahindra, the government is making the right calls to enhance market attractiveness. As mentioned in the report, almost half the number of households in three major Indian cities own four wheelers. The opportunity to penetrate deeper into the vast population of affording households could prove to be vital for investors.
Battery problems exist, but rectifications can easily improve impressions while Indian consumers can rely on a cheaper alternative. The next five years in India will determine the destiny of future EV sales and the climate seems favourable; especially because of leading conventional sellers like Maruti Suzuki entering the competition. There is a real possibility of EV’s being marketed not as an option but compulsion.
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- EV: Electric Vehicles
- PCI: Per Capita Income
- KWh: Kilo Watt per hour
- BIT: Bilateral Investment Trade
- BRICS: Nation block of Brazil, Russia, India, China & South Africa
- MS: Maruti Suzuki