Triggered by a drastic reduction in subsidy, electric vehicle (EV) sales in Bengaluru and Karnataka have seen a sharp decline echoing a nationwide trend. Data for monthly sales show a dip in the range of -39% to -71%, a direct result of the decrease in subsidies. Will this dip, coming after a whopping 1,500% increase in two-wheeler EV registrations during the 2019-2022 period for the city, be more than a temporary setback or stay longer?
Industry and green mobility analysts are hopeful that buyers would delay their decision to switch to EVs by a few months and not more. But July numbers have shown only a marginal improvement.
First, the numbers. Starting June 1, the subsidy under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME) II scheme has been sliced drastically from 40% of a vehicle’s cost to 15%. The subsidy amount too is now down to Rs 10,000 per kWh of battery from the earlier Rs 15,000 per kWh. This sharp reduction had an almost immediate impact on sales of electric two-wheelers in June, falling hard from the May 2023 numbers.
In Karnataka, EV registrations dived from 18,847 in May to 9,394 in June, improving only marginally in July at 10,757. This decline was seen in Chennai and the rest of Tamilnadu, where May sales of 11,463 EVs fell to 6,165 in June. In Kerala, the numbers decreased from 8,642 to 5,175 while Andhra Pradesh saw a drop from 4,729 in May to 1,212 a month later. Across India, the total EV sales came down from 1,58,291 in May to 1,02,339 in June, according to data sourced from the Union Ministry of Road Transport and Highways (MoRTH).
The dip is particularly glaring in the context of a robust, almost exponential growth in EV registrations in Karnataka, particularly Bengaluru. Two-wheeled EV registrations in the state skyrocketed during 2019-2022 from a measly 6,150 vehicles four years ago. The growth had been fuelled by multiple factors: Mushrooming of new manufacturers and models, high petrol and diesel prices, rising awareness and a distinct advantage in cheaper maintenance costs.
Sales figures for July are awaited but are widely expected to be much lower than May. “The dip will be a setback to the EV growth trajectory, but it will be temporary. The overall growth pattern will remain because, ultimately, the manufacturer is shifting,” notes urbanist Ashwin Mahesh, who had cofounded Lithium Urban Technologies, a transport service that pioneered EVs as a viable office commute option in 2015.
Beyond a point, he says, the market is not consumer-driven but manufacturer-driven. “Once the manufacturers have made up their mind to start making electric that is what is going to be available in the market. So there will be a shift. But consumers will delay their purchase,” he explains.
The scenario will unfold this way: “Let’s say I want to buy a car for Rs 10 lakh, but then realise I have only Rs 8-9 lakh. The usual way people adjust to that is I will keep my old vehicle for six more months so that I can save another Rs 50,000 and then make the purchase. So, the EV growth curve will shift, plateau for a while, but will pick up once people have saved up to offset the higher price.”
This is key to hastening Bengaluru’s transition to a green future propelled by EVs. Vehicular emissions contribute enormously to the city’s pollution. Research by the Centre for Study of Science, Technology and Policy (CSTEP) established the city’s transportation sector as the biggest contributor to fine particulate matter (PM2.5) emissions (40 – 51%). A business-as-usual approach would triple the city’s pollution levels by 2031, the study showed,
Ultimately, subsidies will have to taper. But, as Pawan Mulukutla, Director of Energy Technology and Green Mobility at the World Resources Institute (WRI) says, it is key to understand at what adoption rate the subsidy will be dropped. “Typically, when you are hitting close to a 15% adoption rate, then you can start tapering the subsidies.”
Pawan finds a silver lining despite the drop in EV sales. “Despite subsidies being reduced, mainly for two-wheelers, the numbers were higher than last year. The drop is huge, but it was expected. It looks like the market is very sensitive and very reactive. We need to look at the July data to accurately figure out at what adoption rate we should start tapering the subsidy,” he says, indicating that the new FAME III scheme will include subsidies. “This (sales dip) is a short-term aberration.”
In 2017, Karnataka became the first State to introduce its own EV policy. The Karnataka Electric Vehicles and Energy Storage Policy (KEVESP) had one of its goals focused on Bengaluru: Designate the city as India’s EV capital, riding on its robust ecosystem for manufacturing, technological base, research and development. But, as Pawan says, a policy by itself does not lead to any miraculous change. “Karnataka has only believed in union government subsidies, not its own. Policies are only directions. They have to be supported by schemes and regulatory push.”
EVs are here to stay with or without subsidy, because of their operational advantage compared to petrol/diesel vehicles, points out R Prahlad, a senior official of the city-based Maini Group, which had unveiled India’s first electric car Reva way back in June 2001. “Today, the capital expenditure on EVs can be high but the low operation and maintenance costs completely offset the initial purchase cost. Ten years ago, we didn’t have that confidence but EV tech has matured greatly now.”
Delayed purchase decisions could see EV sales reclaim the growth trajectory. “You have to understand the customer psychology. Their decisions are also based on the hope that policies get reversed or revived. Operationally, if people have gotten used to EVs, they will buy only EVs,” Prahlad explains.
The entry of new, cheaper cars could also change the purchase dynamics. “Today, the mindset of the people is that EV is my second car. But with lower cap-ex investment, increasing battery capacities and range, this will fade off, and EV will become their first car option even for going away beyond intra-city commute.”
Despite the slow emergence of relatively cheaper cars, the market has seen muted growth compared to the now robust e-scooter industry. Ashwin attributes this to slow supply and he sees a reason for that. “Today, if Hyundai or Mahindra or Tata starts selling too many electric cars, their diesel business will get affected. So they have to ensure the customers do not abandon their old cars because that is where they have invested most of their manufacturing capability in.”
The petrol/diesel car industry is well set. He elaborates, “If you are Hyundai, you can make 600,000 diesel cars today in India, and another 300,000 for export. But your ability to make electric cars is not even 60,000. So, until you make that investment, it is not in your interest to push that too much to your customer. The transition has to be favourable to your legacy business.”
But someone like Elon Musk does not have this issue. As Ashwin puts it, “If I am a brand new manufacturer of electric cars and have never been into automobiles, then there is no need to worry about cannibalising an old business. Why have electric three-wheeler makers taken off in a big way here? They are all first-time automobile manufacturers.”
For years, the lack of a network of charging stations was seen as a roadblock to mass adoption of EVs. The infrastructure is now shaping up, although largely confined to the city. But swappable, modular batteries were seen as a game-changer, negating the need to wait till the batteries were fully charged. Swapping a discharged battery with a fully charged one would require barely a few minutes.
Yet, the system has not taken off in a big way. As Prahlad points out, there is no interoperability between Original Equipment Manufacturers (OEMs) who do the swapping. “If you put Sun Mobility’s battery, you have to always use their battery. Every OEM is fighting about the form, fit and function required to ensure this interoperability. Standardisation will also avoid monopolies.”
Modular, swappable batteries can work in trucks and auto rickshaws, but not in cars, says Ashwin. “No manufacturer will make a car in a way that the battery is swappable. He will lose control of the car if it is swappable. A swappable battery means a renewable battery. The biggest fear for an automobile manufacturer is people keeping their old cars longer, and not buying a new one.”
An independent journalist based in Bengaluru, Rasheed Kappan has nearly three decades of experience covering issues related to urban mobility, sustainability, environment. A graphic cartoonist, podcaster, video editor, and art curator, he is the founder of Kappansky and explores the linkages of art, media, and innovation through multiple creative platforms.