Electrical Vehicle Industry To Suffer Rude Business Jolts In 2020-21

Emerging suddenly in China, the virus of COVID-19 now had infected all sectors of the world economy with EV-segment falling as one of its worst victims. The overall growth of Indian EV-sector in line with that of the international trend has been stunted due to it. 

COVID-19 attacked when the nation’s EV industry was standing at the cross of business history: industry trying to emerge as an independent tier of the automobile sector and the Centre too inclining to promote it to combat carbon emission caused by the fossil-fuel run vehicles.

The gravity of overall downturn in the global economy can be gauged from the fact that a joint report of the World Bank and World Health Organization says the global GDP decline is likely to be 2.2% to 4.8% in 2020. In India’s context, the Barclays says the country’s growth would come down to 2.5% from 4.5% (as estimated by Barclays earlier this year) in the current year. 

As the auto industry plays a very dominant role in India in terms of GDP, the current slowdown in it going to affect the overall national economy adversely. The reason is that auto segment accounts for a robust 7.1% of India’s GDP. 

Impact on Indian EV Industry 

Though the entire auto sector currently is witnessing a 10% slowdown in sales, it has affected EV industry the most as its CAGR is bound to suffer as the new order booking may slow down. The production-line in 2020 may also suffer following this industry’s dependent on imported cells and other electronics items from China and South Korea.

Since the market size of EV in India is very small, just 1% of the total motorized vehicles running in India, its growth require constant nurturing. The COVID-19 hit when this sector was scrambling to keep afloat following lower sales throughout January-February, 2020 phases. In March 2020, activities came to a grinding halt. 

Import Dependence Affecting EV Industry

COVID-19 disrupted the supply chain of lithium-based cells and other components from China and South Korea hampering the production-line of new EVs by Indian companies impeding its growth.  

In fact, COVID-19 has very adversely impacted almost anything and everything concerning the EV sector be it the EV manufacturing companies, startups, new entrants, OEMs, fleet operators, EV retailers, and EV owners. 

It has also impacted adversely the investment scenario of the EV sector as investors, stakeholders and vehicle companies may tilt to buy some time to see the growth chart of this sector. 

As the intensity of the viral attack is expected to slowdown globally by the end of March 2020, the outlook of investment in this sector too will take time. But a lot depends on the policy framers of India and governments in other nations.  

The fall in demand scenario of EVs in India is also telling upon the commercial health as the sales/booking slumped almost by 88% compared to September-October phases of 2019. Even the showroom owners have also downed their shutters across India. 

EV Startups in India 

The EV-startups in India currently is suffering rude jolts due to COVID-19. Following the forecasts that EVs will become the 4th largest auto market in India by 2014, several startups entered into this business. But the total disruption in the supply chain of lithium-based cells and other components has hit startups very hard. 

Naturally, EV startups would need a massive governmental push, new economic packages and pro-active attitude of investors. Announcement of special benefits for EV startups now is needed to catalyze its growth after March 2020.  

The main factor of growth of EV startups, however, is the regular supply of lithium-based cells and other components. Liberalization of terms and conditions for their import is needed urgently. Besides, the Central and State government should also buy EVs for public sectors to boost the startups. 

We know boom and bust is the cyclic nature of business of all types. Naturally, nothing is lost for the EV sector, particularly the startups, have a silver lining as the current phase of bust is only temporary. 

The EV segment will look up after the COVID-19 ends in India. A report of CRISIL Research says EV’s penetration in-vehicle market is expected to improve by 12% to 17% in the next three years. 

Vikrant K Aggarwal

Guest Author Vikrant K Aggarwal is Director and Co-founder at EVI Technologies. He is also an IIT- Delhi Alumnus. Vikrant closely worked with Enviro Group & Jaypee Group) power sector for almost 5 years.

Rupesh Kumar

Guest Author Rupesh Kumar is co-founder and CEO at EVI Technologies. He is an IIT- Delhi Alumnus. Rupesh has extensive years of work experience in the power sector.