The rising popularity and increasing affordability of electric vehicles is posing a direct threat to CNG vehicles, according to a report by Kotak Institutional Equities.
“So far, due to relatively expensive four wheelers, the impact of EVs on CNG segment was not very significant,” said Kotak analysts Anil Sharma and Aditya Bansal in a note to clients.
“But, with EV four-wheelers now available at lower price points (Rs 8-15 lakh), and CNG’s price arbitrage reducing, we think EV adoption for lower priced vehicles will be now on fast-track,” they added.
Electric vehicles have been increasing in their popularity in recent years due to the extremely low cost of running them.
The fuel cost of an electric car like Tata Nexon EV is estimated at just Rs 1/km, compared to Rs 4/km for a CNG car and Rs 10/km for a petrol car.
However, because of batteries that cost upwards of Rs 5 lakhs, the total price of a CNG car used to come to at least Rs 10 lakhs.
This, pointed out the analysts, has changed in recent months, both due to competition, subsidies and better technology.
They also pointed out that EVs did not suffer from some of the drawbacks of CNG vehicles.
The “adoption of CNG required significant compromises – less boot space, lower distance per fill, long waiting times for refueling and even [lower] ride quality,” the analysts added.
As long as the starting price for EV cars were in the Rs 12 lakh range, only those who drove a lot – such as salesmen – used to switch towards EVs. It was believed that EV cars made sense only if you drove at least 100 km/day, or about 36,000 km/year.
Now, however, a person can break even as soon as he or she has driven a vehicle like Tata Tiago EV for the first 31,000 km, pointed out the analysts.
“Even on total cost of ownership (TCO) over 100k km, we estimate EV variants to be around 11% cheaper versus comparable petrol variant and largely on par with CNG variant,” they noted.
One of the biggest drawbacks of electric vehicles is the expensive battery, costing a few lakhs of rupees. However, said the analysts, that is going to change as the technology matures, while the cost of fossil fuels will keep increasing.
“With scale, the battery replacement cost for EV would likely further decline and tilt the balance further in favor of Electric Vehicles. On the other hand, the gas costs would progressively increase and thus CNG prices are likely to inch up in future,” they pointed out.
TRANSITION
The analysts pointed out that transition in EV adoption rate is much likely to be faster in taxis and other commercial vehicles.
“In the recent draft policy for cab aggregators/delivery service aggregators, Delhi government has proposed a phased mandate for fleet operators to transition their fleets from conventional internal combustion engine to EV,” the duo noted.
They pointed out that a new draft policy by the Delhi government on the use of EVs by cab aggregators is likely to lead to EVs constituting 5% new additions initially to 100% adoption in just four years.
2-WHEELERS & 3-WHEELERS
One area where the adoption of EV technology has been stronger in India has been in two wheelers and three wheelers. This is primarily because of the smaller battery required. A smaller lithium ion battery makes the vehicle more affordable for the end user.
The analysts pointed out that Delhi has witnessed “a bulk incremental three wheeler addition” to its EV shift, the analysts said.
PUBLIC TRANSPORT
The report by the analysts also gave a glimpse into the adoption of EV technology in public transport, particularly in buses in Delhi.
It pointed out that the penetration of EV technology in buses in Delhi is relatively low at just 350 buses out of a total of 7,500 CNG buses run by the Delhi Transport Corporation and Delhi Integrated Multi-modal Transit System.
“But with continued push, incrementally more EV buses are being added,” they noted.
“While private buses will take longer to switch to EV, the risk is that over the next few years, the share of EV in government-operated buses will continually rise. Further, as EV charging infrastructure gets more ubiquitous, we expect this trend to further accelerate,” the report read.