India’s electric vehicle (EV) industry is really young and so far the success has been limited to electric two-wheelers & three-wheelers. At present, electric car ownership in India is very low. One of the main roadblocks of the electric car industry is the higher cost of technology, which leads to the higher cost of vehicles which ultimately restricts its reach to fewer people.
The Battery Factor:
The most significant part of an electric car’s cost is its battery. Although battery prices have been decreasing over the past few years, they still remain the most noteworthy cost component.
India’s EV batteries are imported (mostly from China). This is the main reason why EVs are expensive. They run on batteries that have elements that come from very far away. Lithium is mined in South America & Australia, from where they travel to China to become part of battery cells. These cells are then imported to India. In India, these battery cells are assembled into battery packs.
But these prices will go down. When the first personal computer came, it was not affordable. Same can be said for laptops & mobile phones. The early personal computers, laptops & mobile phones were priced around $2500 (approx Rs 2 lakhs), $5000 (approx Rs 4 lakhs) & $4000 (approx Rs 3.25 lakhs) respectively. Every new technology is expensive at first but slowly the cost goes down.
Just like mobile phones and laptops, EVs also use lithium batteries, only much bigger in size.
Battery Chemistry:
Apart from lithium, EV batteries also contain rare earth metals like cobalt, nickel, manganese, etc.
This complex battery chemistry is the main reason why automobile manufacturers are finding it difficult to achieve price parity between electric & conventional cars.
Other Factors:
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- Semiconductors are used in both conventional petrol/diesel cars and electric cars. The number of semiconductors used in an electric car is more than double of which are used in a fuel car. There are hundreds of ‘Electronic Control Units’ (ECUs) in electric cars, which have a role in everything from motor to charging unit to even the brakes. The foundation of these control units are semiconductors, the tiny chips that make electronics work.
This humble semiconductor chip is a critical component of an electric car and it has reshaped the very fabric of vehicle functionality and in the process, driven up costs.
- Electric cars are far from the same level of production & economies of scale as conventional petrol/diesel cars.
Electric car prices will come down when production volume goes up.
Conclusion:
Recently, Tata Motors & MG have reduced their electric car prices. Tata Motors has slashed prices of its Tiago EV electric hatchback and Nexon EV electric SUV. MG has taken a chunk out of its Comet EV electric micro-car and MG ZS EV electric SUV. In a press release, Tata Motors clearly stated that the company is ‘passing on battery price reduction benefits to customers.’
As battery costs decrease and local manufacturing of EV components increase, it is expected that the prices of electric cars in India will become more competitive, further encouraging their adoption in the market.
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