Low affordability and the government’s priorities on reviving the otherwise suffering auto industry could shift the focus away from EVs in the interim

COVID-19 pandemic would delay the penetration of electric vehicles (EVs) in the Indian automobile industry, India Ratings and Research (Ind-Ra) said in a report.

Low affordability and the government’s priorities on reviving the otherwise suffering auto industry could shift the focus away from EVs in the interim, it said.

“Passenger vehicles (PVs) would face a double whammy as consumers would be wary to buy a costlier EV than an internal combustion engine (ICE) vehicle while original equipment manufacturers (OEMs) would refrain from incurring high capex,” the report added.

Stating that growth in buses may take a back seat as orders for city buses are largely from state transport undertakings, and state governments are already grappling with a falling GDP, it said two wheelers (2W), especially scooters, could see an upside due to the lower pricing delta between an EV and ICE and several models available to consumers.

“Though the EV penetration is likely to be faster in scooters, buses and three wheelers (3W) in the medium term (defined as three to five years), PVs may take longer,” it said.

Ind-Ra said the underlying challenges in the adoption of EVs such as higher battery cost and reliance on imports would prevail in the medium term, and robust government policies would remain key for the development of EVs in the country.

It said reduced affordability and lower economic activities due to the pandemic could result in the automobile industry recording a decline in sales of over 20% year-on-year for the second consecutive year in FY21.

“This is likely to impact the sales of EVs which are costlier than an ICE vehicle. 2Ws have benefitted from rural demand and shift to personal mobility, and the segment could be the least impacted with regard to electrification due to better pricing and model choices,” it said.

However, 3W and buses, which have seen higher electrification in 2019, are among the most affected segments in FY21 and hence could see a delay in electrification, it added.

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