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Informist, Thursday, Sep 19, 2024

By Darshan Nakhwa and Pallavi Singhal

MUMBAI – S&P Global today cut its forecast on the share of new electric vehicles in overall vehicle sales in India by 2030 to 18.5% from 22.0%. The global rating agency attributed the downward revision to the emergence of multiple clean fuel options.

"Powertrain pluralism has emerged as the dominant narrative, with multi-fuel solutions taking centre stage in India's decarbonisation strategy," said Puneet Gupta, director, South Asia, automotive sales forecast.

According to S&P Global, the uptick in sales of hybrid vehicles, Uttar Pradesh offering incentives for the category and lack of incentives for electric passenger vehicles in the recently announced PM Electric Drive Revolution in Innovative Vehicle Enhancement scheme are some of the factors that have triggered the downward revision in electric vehicles forecast.

Further, compressed natural gas has also emerged as a transition fuel especially in the mini-cars segment in India. By 2030, the rating agency expects the share of compressed natural gas-powered vehicles in overall vehicle sales to rise to 21% from 13% in 2023. 

However, hybrid vehicles' sales are expected to plateau 2028 onwards because of the emergence of efficient hybrid technologies and a likely decline in battery prices, led by domestic manufacturing and improvement in technology, the rating agency said.

According to S&P Global, the share of hybrid vehicles is expected to increase to 13% by 2030, from 2% in 2023. In comparison, the share of electric vehicles is seen growing from 3% in 2023 to 18.5% in 2030. And the share of diesel and petrol vehicles is seen falling drastically during the same period.

Sales of hybrid cars and sport utility vehicles have grown at a faster pace for the last several months, narrowing the market-share gap with electric vehicles. In this backdrop, Uttar Pradesh, the second-biggest sub-national market for cars, waived registration fees on strong hybrid and plug-in vehicles. If other states follow Uttar Pradesh, and if the central government cuts goods and services tax on hybrid vehicles, the segment is likely to be in a strong position.

Currently, there are five strong hybrid models available in the market, two of which are offered by Maruti Suzuki India. Those models are also cross-badged by Toyota under different names. Honda City, meanwhile, is the only strong hybrid variant outside the Toyota-Maruti arrangement. In the luxury segment, companies like Volvo, Mercedes-Benz, Range Rover and Lexus offer hybrid vehicles.

"Hybrid vehicles' sales are picking up, because they give the benefit of everything. You don't need to worry about the charging infrastructure, but they also provide efficiency gains (in terms of mileage)," Gupta said.

In hybrid vehicles, the rating agency expects plug-in hybrid vehicle sales to gain traction in the future. Plug-in hybrid electric vehicles use batteries to power an electric motor and another fuel, such as petrol, to power an internal combustion engine. Plug-in hybrid electric vehicles batteries can be charged using a wall outlet or charging equipment, or through regenerative braking. The vehicle typically runs on electric power until the battery is nearly depleted, and then the car automatically switches over to using the internal combustion engine.

In India, automakers remain divided over the hybrid and electric vehicles. While many argue that the transition from the internal combustion engine to electric is easier through hybrids, others support no half measures and want the government to incentivise only electric vehicles.

Last week, the government announced the PM Electric Drive Revolution in Innovative Vehicle Enhancement scheme with a total budgetary outlay of 109 bln rupees for two years. The scheme will provide subsidies for the purchase of electric two-wheelers, electric three-wheelers, electric trucks and buses, as well as electric ambulances. Apart from these, the scheme will also support 88,500 electric vehicle charging sites. However, electric cars have been excluded from the scheme.

"Going forward, electric vehicles are the only solution. There is no debate about it. But in India, different paths are being followed by automakers," said Gupta. "We have cut forecast on the electric vehicle, primarily because we are giving space for hybrid vehicles."

"When you see a very mature market like the US having its own challenges with electric vehicles, I'm not surprised that India is seeing a very different trajectory (in transitioning to electric vehicles)," he said.  End

Edited by Akul Nishant Akhoury

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