EV Vs. ICE How 2023 Proved To Be A Transitional Year For The Indian Automotive Industry
Every technology that has been developed improves, but the fate of being phased out with time is the fate of the internal combustion engine (ICE), which began phase-out in 2023.
Etienne Lenoir created the first internal combustion engine in 1860, which was successful commercially. In 1863, Lenoir placed this engine inside a vehicle and named it the ‘Hippomobile’.
ICE was first introduced and thanks to its efficiency, automation, commercial use and other features, it quickly became popular. The global demand and adoption of technology have cemented ICE's position across segments and sectors. In a highly competitive market, ICE gained traction and eventually established a monopoly in the automotive industry through commercial acceptability and ongoing innovation.
Once, American writer and actor Steven Wright said, “When everything is coming your way, you're in the wrong lane."
The Paris Agreement was signed on December 12, 2015, and it was adopted by the majority of 196 nations. The United Nations Conference on Climate Change (COP21) is a legally binding international treaty. This agreement was primarily concerned with long-term adoption across industries, including the automotive industry. It projected some specific visions for automobile transformation.
“Transport contributes almost one-quarter (23 per cent) of the current global energy-related greenhouse gas (GHG) emissions and is growing faster than any other energy end-use sector. GHG emissions from transport are anticipated to rise from today’s levels (2015) by nearly 20 per cent by 2030 and close to 50 per cent by the year 2050 unless major action is undertaken." Stated at UN COP 21.
Limiting the global temperature increase to below two degrees Celsius requires changing this transport emissions trajectory, which involves the development of an integrated electro-mobility ecosystem encompassing various transport modes, coupled with the low-carbon production of electricity and hydrogen, implemented in conjunction with broader sustainable transport principles.
In 2021, the COP26 summit was held in Glasgow, where over 100 national governments, cities, states and major businesses signed the Glasgow Declaration on Zero-Emission Cars and Vans to end the sale of internal combustion engines by 2035 in leading markets and by 2040 worldwide. At least 13 nations have also committed to ending the sale of fossil fuel-powered heavy-duty vehicles by 2040.
The UN has also supported various initiatives and partnerships to promote the transition to low-carbon and sustainable transport, such as the Global Fuel Economy Initiative, the Partnership on Sustainable Low Carbon Transport, the Electric Mobility Programme, and the Sustainable Mobility for All initiative.
“The global transportation sector is a major polluter, producing more than seven billion metric tonnes of carbon dioxide (GtCO2) a year. Cars and vans were the biggest source of transportation emissions that year, accounting for approximately 48 per cent of global transportation emissions,” stated Statista.
Lithium-ion batteries have emerged as a major alternative to fossil fuel-based mobility. With the major demand for electromobility, multiple start-ups emerged to fulfil the demand.
India, being a developing country, has set its target to become carbon neutral by 2070 in Cop 26. “Installation of Vapour Recovery System (VRS) in new and existing petrol pumps selling gasoline greater than 100 kL per month in million-plus cities and those selling greater than 300 kL per month in cities with populations between one lakh and one million. Subsidy on e-vehicles under Faster Adoption and Manufacture of Hybrid and Electric Vehicles in India." was stated in a release by PIB.
To meet the commitment and demand from the market union, the government introduced multiple schemes, such as the Production-Linked Incentive (PLI) Scheme for the Automotive Sector, which started in September 2021 with a budgetary outlay of INR 25,938 crore, to boost domestic manufacturing of advanced automotive technology (AAT) products and attract investments in the automotive manufacturing value chain. The SOP details that the scheme has two parts: Champion OEM, which will make electric or hydrogen-powered vehicles and Component Champions, which will make high-value and high-tech components. The scheme has attracted a proposed investment of INR 74,850 crore against the target estimate of INR 42,500 crore over five years.
The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME India) Scheme was started in 2015 to reduce dependency on fossil fuels and address issues of vehicular emissions. Currently, Phase II of the scheme has been implemented with an outlay of INR 10,000 crore for five years commencing on April one, 2019. Out of total budgetary support, about 86 per cent of the fund has been allocated to create demand for EVs in the country by supporting 7000 e-buses, five lakh e-three-wheelers, 55,000 e-four-wheeler passenger cars (including Strong Hybrid) and 10 lakh e-two-wheelers.
Amitabh Kant, former CEO Niti Ayog and Sherpa of the G-20 said at the auto component summit that "those who don't go electric will lose market share," indicating OEMs should adopt a changing paradigm of manufacturing.
While EV adoption across the segment is boasting, the two-wheeler and three-wheeler segments are leading in EV sales and business.
“The cumulative EV sales in India reached 23,37,761 units by the end of FY2023. While the annual EV sales crossed 12 lakh vehicles in FY2023, more than 60 per cent of the share was accounted for by registered electric two-wheelers (E2W), followed by passenger electric three-wheelers (E3W P) with a 29 per cent market share”. Reported JMK research.
While EVs are in growing demand, they face the most common challenges that affect the decision-making of buyers: their range and charging infrastructure. To mitigate the risk of running out of charge, manufacturers are initiating common charging implantations along with fast-changing options. “Tata, Charge+Zone and Ather are the top three players in the fast-charging category, while Bolt and EVRE are the top two players in the slow-charging category.”
If we look back on automotive development, India faced challenges in early ICE technology adoption due to colonial challenges and import culture instead of domestic manufacturing. Now, with the latest technology and adoption of electromobility, India is growing neck to neck with global development and technological adoption.
“As we approach the end of 2023, the automotive industry is undergoing a significant change. Between January and August 18, a total of 901,364 electric vehicles (EVs) were registered, while sales from November 2022 to October 2023 reached 1,460,846. This remarkable surge in growth, highlighted by 847,439 EVs sold until August 3, 2023, suggests a promising 50 per cent increase, showing the clear momentum behind the electric revolution," said Abhinav Kalia, CEO and Co-Founder of ARC Electric.
While optimistic about EV growth and development, industry expats are equally looking for government-backed initiatives to boast EV growth in the nation, as the latest Economic Survey underlines that India’s automotive industry will play a critical role in the transition towards green energy. It is estimated that the country’s EV market is expected to grow at a compound annual growth rate (CAGR) of 49 per cent between 2022 and 2030 and that the annual sales of EVs in 2030 may cross one crore units, leading to the creation of five crore direct and indirect jobs by 2030.
“Today, we stand at a pivotal moment in the history of transportation. As we look back at 2023, we see a clear shift in people’s preferences towards electric vehicles (EVs) over internal combustion engines (ICEs). This shift is not just a trend but a testament to our collective consciousness towards the environment. In the Indian logistics sector, this transition is particularly evident. Many players are switching from traditional vehicles to EV fleets. This shift is not only contributing to a greener future but also revolutionising the way we think about logistics and transportation,” said Rohan Shravan, CEO and Founder of Tresa Motors.
With the clear ground prepared for EVs to attempt to make sustainable changes in automotive mobility visible, would this be possible enough to take over ICE in the upcoming year?
Industry experts reported their views on the future of ICE and EVs.
“Last year, our supplies to the EV industry were just about one per cent of the turnover of the auto component industry. In the first half of this year, it has gone up to three per cent of the overall turnover of the auto component industry. This indicates the growing adoption of EVs in the country. Having said that, EVs still make up a very small proportion of the overall automotive industry. The auto component industry predominantly supplies to the ICE industry and considering the way the road map is evolving, India will have room for the coexistence of all various kinds of power trains for some years to come. We see no slowdown in consumption or sales of the auto component sector to the ICE industry soon," said Vinnie Mehta, DG ACMA.
As experts state, the theory of coexistence is the dent over the monopoly of the ICE in 2023, but phasing it out shortly seems difficult for now.
“While traditional internal combustion engine (ICE) vehicles are not expected to disappear entirely in the next 15-20 years, the move towards electric vehicles is evident. The automotive sector is in a transitional phase, emphasising coexistence between traditional and sustainable mobility solutions. As of April 2022, India's auto industry is valued at over USD 100 billion, generating Rs 8.7 lakh crore in revenue in FY23. Given that roughly 80 per cent of the market share remains within the domain of ICE vehicles, it highlights a substantial opportunity for the EV market to capitalise on, potentially displacing the internal combustion engine market," said Abhinav Kalia, CEO and Co-Founder of ARC Electric.
2023 can be seen as a transaction year for the automobility industry, where adaptation, innovation and sustainability without compromising on economic goals have seemed.
Year Ahead:
Looking ahead to 2024, the future of EVs appears brighter than ever. With significant infrastructural developments underway, we are laying the foundation for a sustainable and efficient logistics ecosystem. The Indian government’s ambitious plans, coupled with private sector participation, are accelerating the deployment of charging infrastructure, thereby addressing one of the key challenges in EV adoption. Said Rohan Shravan, CEO and Founder of Tresa Motors.
Will 2024 be characterised solely by the coexistence of ICE and EV? The answer appears to be different, as hybrid vehicles are gaining popularity in emerging markets due to a lack of market options. With a range of options available and a launch scheduled for 2024, they have outpaced EV sales in the final month of 2023.
It will be interesting to see new market dynamics in the eco-friendly mobility segment of hybrid vehicles versus EVs.
