Tesla Motors of the US and its iconic founder Elon Musk are household names today. It all started in 2003 with the vision of making electric cars with zero emission to challenge the fossil fuel-guzzling automobile industry. It was a great business idea and it is moving the world closer to more sustainable transportation.
Tesla has never made a full year profit ever, and can only boast of a couple of quarters it has been in the black. Yet its shares are trading 70 per cent higher than they were at the beginning of calendar 2017.
Though it doubled its revenue at $2.7 billion for the first quarter of this year, some analysts predict Tesla might not make a quarterly profit till 2020. But, investors and car users don’t care as for them Tesla is the future. And, it’s not just about cars. Elon Musk says he is prepared to rebuild storm-ravaged Puerto Rico’s power grid on solar energy.
Welcome government push
It is for all the above reasons we must welcome the Narendra Modi government’s decision to purchase 10,000 electric vehicles for government use through the state-run Energy Efficiency Services (EESL).
The ambitious target, the government says, is to sell only electric vehicles (EVs) by 2030. This will reduce its oil consumption bill by an estimated $60 billion and emissions by 37 per cent.
Big talk, some may say, but even if it is a small nudge, it will make a difference. The tender floated for the EVs is the single largest procurement for electric vehicles worldwide. The first test tranche will be for the supply of 500 vehicles – 350 from Tata Motors which has won the bid at Rs 11.2 lakh per car, and the remaining 150 from Mahindra & Mahindra (M&M). The two companies, if they meet the supply and quality deadlines, can reap a big windfall in the form of 9,500 EVs that follow.
M&M has announced it will be investing Rs 3,500-4,000 crore to ramp up EV research and production. The pressure seems to be working on market leader Maruti Suzuki, too. There is talk it has signed a deal with Toyota Motors in February this year to set up an electric car unit in India.
Big challenges ahead
The challenge is huge. India’s gasoline-based auto industry sold over 3 million passenger cars and 17.5 million two-wheelers in 2016-17. Electric vehicle sales in FY16 were a minuscule 20,000 cars and 2,000 bikes. Pricing is a huge deterrent. The base price of Tesla’s mass-market Model 3 is $35,000 (Rs 23 lakh) while the mid-segment ‘Model S’ costs $75,000 (Rs 50 lakh). But, then you buy cars with acceleration that can beat similar petrol-powered cars and have batteries that run for 300 km. Our electric models in India are way, way underpowered.
Prem Shankar Jha, in his critique of the government’s EV green policy, says there is not enough production worldwide of lithium, the core metal of the EV car lithium-ion battery. He says that to wean away the 2 billion conventional car users the world over will require 20 million tonnes of lithium. If the number of electric cars grows just by 2 per cent, the annual demand for lithium will be 580,000 tonnes. Against this, the entire global production of lithium in 2015 was just 160,000 tonnes and expected to reach 239,000 tonnes by 2021 making it an unviable route map, says Jha.
It is also obvious that the Indian government has got caught up in the worldwide stampede for the green option without weighing viability. In the past few months, Norway, Britain, France and China have all announced they will do away with the use of conventional gasoline cars by 2040. Germany wants to go all-electric by 2025. The Indian government, too, has fallen for these targets, which seem unreachable.
However, if electric cars become a real option for consumers in the next 4-5 years with even a 5-10 per cent share of the market, it will be a big step towards a cleaner environment.
An alternative for the consumer will make the traditional market change its ways. In the US, the Big Three – GM, Ford and Chrysler – have around 23 electric models in the works to challenge Tesla. The challenges of raw material (lithium) and high prices are surmountable with pioneering, alternative technology. Haven’t we seen the mobile phone industry start at Rs 25 a minute and handsets that looked like hairdryers?
Electric cars are bound to get cheaper and better. It is the way forward.
The author can be contacted at gurbir1@gmail.com
Going green
Tenders were floated by Indian government for procuring 10,000 electric vehicles and it was the single largest procurement for electric vehicles worldwide. In the first phase, Tata Motors, which has won the bid at H11.2 lakh per car, will supply 350 vehicles and Mahindra & Mahindra will supply 150 vehicles