Three-wheelers (3Ws) play a vital role in last-mile connectivity. Electrifying them is crucial for eco-friendly transportation. As per September 2022 Vehicle Retail Data by the Federation of Automobile Dealers Associations, the 3W segment is shifting from internal combustion engine (ICE) vehicles to Electric vehicles (EV), with a notable rise in e-rickshaws. The cumulative EV sales in India reached 10,90,641 units by the end of FY2022. While the annual EV sales crossed 4 lakh vehicles in FY2022 with 35% of share accounted for by registered electric three-wheelers (E3W). (JMK Research & Analytics 2022).
The figure below illustrates the E3W registration trends in India from 2013-14 to 2022-23. Registrations witnessed consistent growth from 2015-16 to 2019-20. However, there was a significant decline in E3W registrations in 2020-21 due to the impact of the COVID-19 pandemic on the Indian economy across various sectors. Nevertheless, recent years have shown a recovery, with registrations doubling from 88,585 in 2020-21 to 1,72,284 in 2021-22.
However, 3W electrification is facing various financial, operational, manufacturing, and safety-related challenges such as manufacturing concerns, financial challenges, the battery swapping ecosystem, and state policies’ role in E3W adoption. In order to increase adoption of E3Ws in India, AEEE in association with International Copper Association, conducted a research study and stakeholder consultation on, ‘Catalysing the Market Transformation of Electric 3-Wheelers in India’. This study examines the perspectives of consumers and different stakeholders involved in the E3W ecosystem – fleet operators, financial institutions, dealerships, and service centres. The study was carried out in three cities – Delhi, Lucknow, and Bangalore, with the majority of the survey (70%) conducted in Delhi.
Insights from Stakeholder consultation
Retrofitting of conventional three-wheelers to the electric drive train
Retrofitted EVs use almost the entire body frame of the original vehicles. They offer the same economic and environmental benefits as new EVs of comparable specifications while allowing for the reuse of body parts and materials that would otherwise be disposed of. This helps reduce both the cost of purchasing a new electric car and the amount of scrap created by existing vehicles. Furthermore, retrofitting of existing vehicles helps maintain the traffic on road by reducing the influx of new (electric) vehicles on the road without additional measures to replace the older (ICE) vehicles.
FAME II does not offer incentives on retrofitted vehicles, but many state EV policies support such retrofits. For example, Telangana’s EV policy includes a 15% subsidy, or INR 15,000, for the first 3,000 retrofits of passenger E3Ws. Subsidies for retrofitting 3Ws also need to be provided from the central government so as to make this shift easier. Currently, the cost of a 3Ws retrofitting kit is INR 1.8-2.2 lakhs for fixed batteries.
Manufacturing of electric three-wheelers
Interventions in key areas such as R&D for EV technologies, battery life enhancement, interoperability, component manufacturing, certification procedures, safety standards, and standardization are essential for E3Ws. To ensure safety and standardization, thermal propagation test requirements should be established, while manufacturers should provide charge and discharge cell data. Tailoring cell selection to Indian conditions is crucial, but the country’s heavy dependence on raw material imports poses a challenge. Additionally, an effective Battery Management System (BMS) is necessary for accurate estimations of battery pack life and performance.
Source – Vahan Dashboard (MoRTH 2022). Accessed on 12.07.2023.
However, the implementation of interoperability remains a challenge as the industry is still in its early stages. The government should provide guiding principles or broad outlines rather than specific requirements for form factor or battery shape. Norms and standards should be industry-led to foster experimentation, evolution, and innovation without stifling investments in the sector.
Financing challenges for electric three-wheelers
E3W financing is divided into two categories: 1. Individual financing, where last-mile connectivity players own the vehicle, and 2. Financing of fleet or government E3Ws used for purposes like cargo transportation and garbage collection, owned by contractors. Collaboration between original equipment manufacturers (OEMs) and financiers is crucial. Currently, financiers are uncertain about the investment potential due to a lack of performance track records. It is essential for OEMs to provide technologically detailed information, such as telematics, to financiers, which can enable tracking and reduce the risk of nonperforming assets (NPAs). Managing credit risk lies with the financiers, while product risk is the responsibility of the OEMs.
Major OEMs have established their finance subsidiaries, like Omega Seiki, to offer easier access to financing options. This model can incentivize consumers to purchase E3Ws. Financiers need to gain more awareness of EV technology, including telematics, which can aid in tracking and mitigate the risk of NPAs.
Consumers have range anxiety and low confidence in switching to EVs due to long charging times. Battery swapping has the potential to eliminate this issue. However, every technology comes with its pros and cons. Mishandling of batteries due to lack of training leads to losses for the operators. There is a need to educate drivers on battery use and handling. In the case of damage, the company should be responsible since it is a Battery-as-a-Service (BAAS) model.
To enhance the adoption of E3Ws, two models should be implemented: 1. The BAAS model, which reduces the cost of E3W ownership through battery swapping, and 2. The Mobility-as-a-Service model, where vehicles are available for rental.
The government has introduced several policies and plans to increase the pace of EV adoption among consumers. The central government has introduced schemes such as FAME I and FAME II that provide different types of financial incentives. There are two major relevant central policies. First, the government has allowed the sale of E3Ws without batteries, which can reduce their upfront cost and facilitate battery swapping. Second, there is a new voluntary vehicle scrappage policy and age limit to undergo a fitness test for a private vehicle is set at 15 years.
State-level policies encompass a range of measures such as E3W targets, purchase subsidies, tax exemptions, scrappage policies, interest subvention, free permits, designated green zones, reserved parking spots, capital subsidies for charging equipment, and battery swapping. These policies incentivize the adoption of E3Ws through subsidies for new vehicles and retrofitting incentives for existing ICE 3Ws.
States can also encourage retrofit kit manufacturers by offering incentives, promoting market competition, improving product quality, and driving down prices. Additionally, state EV policies should address battery recycling and reuse for a more comprehensive approach.
The following recommendations are derived from the various parts of the study, including the E3W technology classification, consumer survey, review of national and state-level policies and schemes, and stakeholder consultations. The recommendations aim to address the barriers to EV adoption in India, particularly in the E3W segment.
The Alliance for an Energy Efficient Economy (AEEE) and International Copper Association India (ICA) collaborated on a study to identify barriers to the adoption of electric three-wheelers (E3Ws) in the market. The resulting whitepaper aims to identify pathways for a market transformation for E3Ws in India. It consists of chapters providing an overview of the E3W ecosystem, findings from the consumer survey, insights from stakeholder consultations, and recommendations to address barriers to E3W adoption.
Read more about the project here
This blog is written by Vikas Nimesh, Senior Research Associate, E-mobility, Alliance for an Energy Efficient Economy (AEEE) & Anmol Jain, Research Associate, E-mobility, Alliance for an Energy Efficient Economy (AEEE)
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