Trystan Casey
Electric vehicles (EVs) are the future, but their high upfront cost in India is a deterrent for consumers. The average cost of an electric car in India is nearly three times that of comparable petrol or diesel-run cars. This is primarily due to the cost of the battery, which constitutes up to 50% of the total cost of manufacturing an electric vehicle. Other factors contributing to the high cost of EVs in India include the limited demand and lack of local manufacturing, which results in most manufacturers relying on imported batteries. While the running costs of EVs are lower than conventional vehicles, the high initial cost remains a barrier for many potential buyers in India.
| Characteristics | Values |
|---|---|
| Electric vehicles are more expensive | Twice the cost of comparable petrol vehicles |
| Battery cost | 40%–50% of the total cost of manufacturing |
| Battery type | Lithium-ion batteries |
| Battery limitations | LIBs are expensive, and not suitable for long-distance travel |
| Battery weight | 500 kg |
| Battery composition | Lithium, cobalt, nickel, manganese |
| Battery production | Requires specialised facilities |
| Battery supply | Short supply, with most reserves in a few countries |
| Battery alternatives | Hydrogen fuel cell vehicles |
| Battery cost impact | 70% of the cost of two-wheelers, 50% of cars |
| Battery cost reduction | 85% in the past decade |
| Cost comparison | Electric cars are 3x the cost of petrol or diesel cars |
| Cost reduction methods | Boost manufacturing, decrease procurement costs, provide buyer incentives |
| Local manufacturing | Needed to reduce reliance on imports |
| Infrastructure | A problem, but improving |
| Running costs | ~₹1 per km for EVs, ~₹9 for petrol, ~₹6 for diesel, ~₹2.5 for CNG |
| Total Cost of Ownership (TCO) | Lower for EVs than ICE vehicles |
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What You'll Learn
Electric vehicles are more expensive upfront than traditional cars
The high upfront cost of EVs is a major deterrent for consumers in India, where the per capita income is 31% lower than in China, one of the biggest EV markets globally. The income range of a large proportion of automobile buyers and the current price of EVs in India are miles apart, and this gap needs to be addressed for mass adoption.
While the cost of batteries has decreased by 85% in the past decade, at the current battery prices, it is challenging to offer an electric vehicle with comparable performance in the sub-INR 1 million price range, which is the core of the Indian market. This results in electric cars being launched in the mid-premium price range, making them unaffordable for many.
However, it is important to note that while EVs have a higher upfront cost, their Total Cost of Ownership (TCO) is often lower. This is because EVs have significantly lower operating expenses, and in many use cases, the TCO is close to breakeven with traditional cars. For example, an E-Auto with an average daily use case of 100 km has a TCO that is about 15% lower than an ICE Auto.
Despite the benefits of lower TCO, the high upfront cost remains a significant barrier to the widespread adoption of EVs in India. To address this issue, manufacturers can boost the affordability of electric cars, and the government can provide incentives to buyers to lower the overall cost of ownership.
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The cost of manufacturing batteries is high
The high cost of batteries is a major factor in the high on-road price of EVs. The average cost of an electric car in India is nearly three times that of comparable petrol or diesel-run cars. The battery constitutes up to 35% of a vehicle's cost, and while battery costs have decreased by 85% in the past decade, at current battery prices, the upfront cost of EVs is still higher than that of internal combustion engine (ICE) vehicles.
In India, most manufacturers rely on batteries imported from China, South Korea, Japan, and Europe, which further increases costs. To make EVs more affordable, India needs to encourage local manufacturing and develop an ecosystem for producing electric vehicles.
The high cost of batteries also impacts the range and flexibility of EVs. A fully charged battery in an electric car offers a range of about 350-400 km, and intercity trips may require additional time to fast charge along the way. The limited range of EVs is a concern for potential buyers, in addition to the high upfront cost.
To summarize, the cost of manufacturing batteries for EVs is high due to the reliance on imported raw materials, the specialized manufacturing process, and the high upfront investment required. These factors contribute to the overall expense of EVs in India, making them less accessible to the average Indian buyer.
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There is a lack of local battery manufacturing in India
Electric vehicles (EVs) are expensive in India due to a variety of factors, one of which is the lack of local battery manufacturing in the country. Currently, India relies heavily on importing lithium-ion batteries from China, South Korea, and Japan. This reliance on imports drives up the cost of EVs in India, as the batteries themselves account for a significant portion of the vehicle's overall cost.
To address this issue, India is taking steps towards localizing EV battery production. OEMs in India are investing heavily in local cell manufacturing facilities, and the government has announced incentives to encourage companies to boost local manufacturing and increase exports. These efforts are expected to reduce India's dependence on imports and drive down the cost of EVs over time.
Despite these efforts, local EV battery manufacturing in India is still in its nascent stages. The country faces challenges in sourcing the raw materials needed for battery production, such as lithium, cobalt, nickel, and manganese. While India has lithium reserves in Jammu and Kashmir, extracting these reserves in a way that is environmentally sustainable remains a complex issue.
To overcome these challenges, India is exploring alternative battery technologies, such as sodium-ion batteries. Sodium-ion batteries have the potential to enhance the driving range of vehicles while reducing their charging times, making them a promising alternative to lithium-ion batteries. Additionally, India is forming joint ventures and international alliances to secure supply chains and foster sustainability and efficiency in the EV battery market.
In conclusion, the lack of local battery manufacturing in India has contributed to the high cost of EVs in the country. However, India is actively working to address this issue by incentivizing local production, exploring alternative battery technologies, and forming strategic partnerships. These efforts are expected to reduce the cost of EVs in India over time and position the country as a global leader in EV battery manufacturing.
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Electric vehicles are not as flexible as traditional cars
Electric vehicles (EVs) are more expensive in India than traditional cars due to the high upfront cost of their batteries, which can account for up to 50% of the total manufacturing cost. The batteries are made from expensive metals like lithium, cobalt, nickel and manganese, which are in short supply and are mostly found in a small number of countries. For example, 65% of lithium reserves are in Bolivia and Chile, while 60% of cobalt is in the Congo.
While it is true that the Total Cost of Ownership (TCO) of an EV is lower than that of a traditional car, this does not help the fact that the upfront cost of an EV is often out of reach for the average Indian buyer. This is especially true when compared to the cost of a traditional car, which is often available for less than INR 90,000 for a two-wheeler and less than INR 1 million for a four-wheeler.
The high upfront cost of EVs is a significant barrier to their mass adoption in India. To make EVs more affordable, manufacturers could increase production and decrease the procurement cost of components, or the government could provide incentives to buyers to reduce the overall cost of ownership.
Another way to reduce the cost of EVs would be to encourage local manufacturing of batteries in India, rather than relying on imported batteries from other countries. This would also help to reduce the country's trade deficit. However, this may not be possible in the short term due to the lack of demand for EVs in India, which has resulted in a lack of investment in the infrastructure and manufacturing capabilities required for local production.
In addition to the high upfront cost, EVs also suffer from a lack of flexibility when compared to traditional cars. The range of an EV is limited to a certain number of kilometres per charge, which can be problematic for intercity trips. For example, the Nexon EV has a range of 312 km per charge, which means that for longer trips, one would need to factor in buffer time to find a charging station along the way. This lack of flexibility is another reason why EVs are not as popular as traditional cars in India.
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Electric vehicles are simpler to construct than traditional cars
The battery is the most critical and costly part of an EV. The typical EV battery is a large pack made up of hundreds of lithium-ion cells that use metals like lithium, cobalt, nickel, and manganese. Each metal has a specific function, such as lithium's role in generating electrons to charge the battery and cobalt's role in preventing overheating. The problem is that the world does not have enough reserves of these metals, particularly lithium and cobalt, to meet the demand if EVs were to replace current automobiles. This short supply, coupled with the fact that most reserves are located in just a few countries, has driven up prices. As a result, the battery accounts for a significant portion of the overall cost of an EV, estimated to be around 50-70%.
While EVs are simpler in design, the current limitations and costs of battery technology prevent them from being a viable replacement for traditional cars on a widespread scale. This is particularly true in a country like India, where the adoption of EVs is closely tied to the availability of inexpensive next-gen batteries. The high cost of EVs in India can be attributed to this factor, among other considerations such as infrastructure and running costs.
Despite the challenges, there are potential cost-saving benefits to EV ownership in India. For example, the rising petrol and diesel prices in India have sparked a discussion about the financial advantages of EVs. While the infrastructure for charging EVs in India is still a work in progress, the running costs of EVs are significantly lower than those of conventional vehicles. An electric vehicle with a 40 kWh battery can achieve a running cost of ₹1 per km when charged at home, compared to ₹9 for petrol and ₹6 for diesel vehicles.
In summary, while electric vehicles are simpler in design and have lower running costs, the high price of EV batteries due to limited metal reserves and battery technology constraints makes them more expensive to acquire than traditional cars in India.
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Frequently asked questions
The high price of electric vehicles in India is mainly due to the cost of manufacturing the battery, which involves mined elements and raw materials that are expensive to procure. The manufacturing process is also costly, as it requires specialised facilities. The battery accounts for 40-50% of the total cost of manufacturing an electric vehicle.
The high cost of electric vehicles is a major deterrent for consumers in India. The income range of a large proportion of automobile buyers and the current price of electric vehicles in India are miles apart. This gap needs to be bridged to encourage the mass adoption of electric vehicles in the country.
The running cost of electric vehicles in India is around ₹1 per km, while the running cost of petrol vehicles is ₹9 per km and diesel vehicles is ₹6 per km. Despite the higher upfront cost of electric vehicles, their total cost of ownership (TCO) is often lower than that of conventional vehicles due to their lower operating expenses.
One of the main challenges for the electric vehicle market in India is the lack of indigenous battery production. Most manufacturers rely on imported batteries, which increases the country's trade deficit. However, there is a high growth opportunity for Indian battery players to explore this segment due to the limited number of competitors and the bright future of the EV market.
