Electric vehicles (EVs) have been making headlines for all the right reasons since the COVID-19 pandemic. With climate change now a global priority, the push to decarbonize transportation has become crucial. Auto manufacturers have invested billions in EV R&D, as well as in overhauling their supply chains.
Elon Musk’s Tesla has been a trailblazer in the EV industry, while providing exceptional returns to its investors. Tesla also made it very cool to own an EV.
The EV industry is expected to boom in India as well, and I did some research on this space and thought of sharing some of my findings here. I’ll also share a framework that will help you evaluate whether an EV is the right choice for you.
EVs are gaining popularity in India – Fast growth though on a very low base
But we are lagging behind the other Major countries…
Higher upfront costs a deterrent:
The higher upfront cost of EVs v/s ICE vehicles (ICE stands for Internal Combustion Engine, which is the engine type in our regular vehicles) has been the main deterrent for people who want to adopt EVs.
But things are changing now.
Batteries are becoming cheaper:
Battery prices have been falling recently and are expected to drop further. Indian automakers are offering substantial discounts on electric cars, passing these savings on to consumers.
Govt. subsidies:
To make EVs more affordable, both central and state governments have introduced various subsidies. For example, the central government launched the FAME (Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India) program to incentivize EV adoption. The second phase of FAME will end in July 2024, with FAME-III likely to be announced soon.
In addition, many states are waiving road taxes and offering additional subsidies for EVs. Maharashtra, for instance, provides subsidies of up to ₹1,00,000 for a 4-wheeler while exempting 100% of registration fees and road tax.
Total cost of ownership is to be seen:
While most consider only the upfront cost while making a purchasing decision, it is the total cost of ownership (TCO) that should be looked at. The TCO considers the costs of maintaining and running the vehicle over a number of years.
Check out this graphic by the TOI where they show that the additional costs of buying an EV can be recovered within the 1st year only.
If you want to calculate how much you would save per kilometer, you can visit this link: Journey Cost Calculator
Improving charging infrastructure:
I’ve noticed numerous charging stations popping up in various office complexes, and you can even install one in your private parking space. If your primary goal is to drive within the city, range anxiety shouldn’t be an issue.
Coming back to investments, to capitalise on the EV wave, a few Mutual Funds have launched or are planning to launch Thematic funds in the EV and Automotive space. Such schemes require precise timing of entry and exit to maximise benefits. Which is not easy. So a simple diversified fund could often end up delivering similar or better returns over the medium term.
But I would definitely consider EVs over ICE vehicles the next time I would look to buy a car.
I would love to hear your thoughts and feedback!
Till the next time,
Vijay.
CEO – InCred Money
