India’s electric vehicle transition: Impact on the auto industry

– By Naveen Munjal, Managing Director, Hero Electric

The driving force behind India’s electric vehicle transition is the commitment towards a net-zero emissions economy by the year 2070. Keeping in mind the constraints that can arise with a transition of this scale, the move can be labeled highly ambitious yet commendable. Our dependency on crude oil and the damage it has created to the environment is the root cause, and in an attempt to prevent permanent damage, a drastic switch toward renewable energy is the need of the hour.

The mobility sector plays a big role in this regard. Global announcements have indicated that a majority of car manufacturers have firm plans in place to switch to electric mobility. In fact, as soon as 2025, around one-third of all vehicle manufacturers will abandon internal combustion engines in favor of going electric, with that figure rising to 40% by 2040.

Specific to the Indian market, the rate of electric vehicle adoption has surpassed most predictions. Consumers are flocking to EVs in a big way, leaving support structures to play catch up, like charging infrastructures and renewable energy production. This is especially true for electric two- and three-wheelers.

Needless to say, there are wide-ranging impacts on the auto industry as a result of this massive transition.

It bears mentioning that the adoption of electric mobility is a big opportunity to reduce the total cost of ownership and improve financial sustainability and profitability as far as manufacturers go. However, a smooth transition can only be done with strategic policy interventions and private initiatives to support market development.

As of now, a major uncertainty surrounding the EV transition in India is the impact it would have on the automotive value chain, particularly on the automotive components industry and the jobs in this sector. However, adoption rates can further go up once we begin to locally mass-produce electric vehicle components. Currently, the auto components sector has limited expertise in electronics, electrical and system supplies that are crucial to the construction of electric vehicles. It’s estimated that the biggest cost center of an EV is the battery, but by 2030, that cost will come down significantly, which will further fuel the EV adoption rate.

Perhaps one of the biggest talking points of the transition to electric vehicles will be the impact it will have on job creation across industries. The onus will have to be on the manufacturers to hand-hold and guide the way for suppliers, dealers, and subsequently consumers, but with a strong roadmap in place, this will be less than a task.

The concern borne by the transition is that of workers being displaced thanks to proportionately fewer sales for internal combustion engine vehicles and, as a consequence, the skill sets acquired for that particular field. However, the big picture shows us that this is a transition that will keep jobs secure for a lot longer. So the investment is not just money, but also time will surely pay off in the long run. The key to this entire process is the mass production of electric vehicle components, which will provide consumers with an easier entry barrier into the world of electric mobility.

The impact that a 30% adoption of electric vehicles by 2030 would have on a country’s carbon footprint would be immense. The goal is set at committing our economy to a 1 billion tonnes reduction in projected carbon emissions by the year 2030. This would be no small task, certainly, but it would enable us to be well on our way to the target of net-zero emissions by 2070.

The path to an electrified future was always going to be fraught with challenges, as is the case with any transition of this magnitude. However, the end goal of a cleaner, brighter and greener future is one that needs to be embraced, and in the larger scheme of things, this transition period will be but a blip on the radar. The opportunity for growth and the chance for effecting change for the greater good is one that’s tremendously exciting, and it’s one that we, as Hero Electric, relish.

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