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Published:Tuesday, July 09, 2019 4:17 PM

Electrical Vehicle as a Threat to CNG Business

Electrical Vehicle as a Threat to CNG Business

Electrical Vehicle as a Threat to CNG Business
 
As once said by Elon Musk, Founder and CEO of SpaceX and Tesla Inc. "We will not stop until every car on the road is electric". What he meant by this is that our future stands on the brink of an electrical transcendence. There are around 1.2 billion vehicles in the world contributing to carbon emission and this number is estimated to go up to 2 billion by 2030. With carbon emission rising up to an all-time high of 37.1 billion tonnes, the need of the hour is to opt for alternative sources of living and reduce carbon emissions. On the other hand, there are about 5.3 million electrical vehicles in the world. China is currently the global leader and accounts for nearly 40% of the world’s total electric car sales followed by US. Norway leads the category of most successful deployment of electric vehicles globally with a 29% market share, followed by the Netherlands at 6.4% and Sweden with 3.4% market share.
 
India witnessed a sharp rise of 130% in EV sales over 7,59,000 units in FY19. However, the sales went down because of a new subsidy program which came into effect on April 1, 2019 and it impacted the two-wheelers especially. Currently, electric two-wheelers are going under certification process, which has altered the sales volume. Even though it seems like a futuristic concept, GOI’s focus is to turn India into a global hub of manufacturing electric vehicles. Growth of the EV segment has been steady and multiple manufactures are emerging with their products, hence, a competitive market is eminent. But there is a lack of electric vehicle charging points across India. For that, GOI is looking for places to set up battery manufacturing units and charging points across India. There are about 60,000 and more petrol pumps across India with an idea of increasing them by the same amount in the coming years, GOI is deciding to have charging stations at petrol pumps. In 2015, GOI came up with the FAME (Faster Adoption and Manufacture of Hybrid and Electric Vehicles) incentive for the promotion of electric mobility. Under this scheme, about 99,000 hybrid/electric vehicles were given direct support as demand incentives since the launch. Phase II of FAME was rolled out in March 2019. The FAME II certification are taking a longer time as it includes re-qualifications, hence the sales volume has come down. The GOI also launched a National E- Mobility Program in March 2018 to target 100% e-mobility by 2030. Although if electric vehicle sales in India has to go up, a realistic approach with government supportive policies will be needed, or else EVs would continue to remain a niche product.  
 
On the other end of the spectrum, City gas distribution (CGD) network has been the biggest downstream expansion in India, after POL retailing. The network of gas pipelines in India has seen tremendous growth in the last decade with around 40 companies operating all together. At present, there are about 4.2 million PNG connections across India including domestic, industrial and commercial connections. GOI is planning to make it 10 million PNG connections for which they have introduced stringent emission levels for vehicles and plans to develop green corridors to reduce India’s carbon footprint. Also, India has around 3 million CNG vehicles running supported by 1,500 CNG stations across the country. The expansion of CGD network is being boosted by the GOI undertaking various policy initiatives which aims at allocating 100% domestic gas for the domestic PNG and CNG segments.
 
Historical Timeline of EVs:
 
 
What the EV industry expects from GOI?
 
  • Batteries and other necessary parts are imported hence, cost of vehicles increases. Therefore, localization of manufacturing industry is the priority for e-vehicles sector in India.
  • Contribution to R&D along with infrastructural support.
  • Provide subsidies on import of vehicle parts and accessories because localization of manufacturing industries would take time.
  • Provide public spaces and easy access to charging stations.
  • Support localization of products and create a friendly homogenous ecosystem for e-mobility.
  • Conducting awareness programs will yield positive results in the long run to create a steady demand.
Comparison of EV’s and CNG vehicles:
 
In the figure, the sales of CNG vehicles are uniform and consistent in last three years. Values are quite close to each other for consecutive years. In case of EV’s, sales have been quite consistent between 2014-17. Sudden surge in sales can be seen from FY 2017-19, the reason being considered as implementation of various government policies and target-based initiatives resulting into almost similar sales number with CNG vehicles.
 
 
Challenges:
 
Well in India the implementation of EV’s would be quite a challenge for the government. NITI Aayog has been leading the EV revolution in India and has proposed a mega project on battery and cell production in India by 2025. The adaptation of BS VI standards and meeting with the goals is of prime focus for GOI. Creating awareness among people about the benefits of e-vehicles is another necessary step to be taken. Many jobs in India rely on the automobile industry and the transition might cause a turbulence of unemployment which should be dealt first. Companies should be encouraged to join this initiative in order to make the market more dynamic and interesting.
 
Pros and Cons:
 
 
Key Take-aways
 
Future of both, EV’s and CGD business seems to have a better tomorrow. CNG vehicles in India are majorly based of public transportation in metropolitan cities like Delhi and Mumbai. CGD network in the last decade had immense growth across India with CNG vehicles amounting to a total of 76600 units sales in 2018-19. The use of CNG in India started back in 1993 and in 2018, PNGRB announced a plan to extend CNG infrastructure to an additional 136 geographical areas. There has been an immense growth. Whereas, the concept of EVs are futuristic even though it possesses subsequent threat to the Gas Business. Foundation was laid in 2015 by GOI(FAME initiative) and steady growth has been observed since. During FY 2018-19, sales of EV were very much competitive to the sales of CNG vehicles. A negligible margin could be seen on the sales side of the vehicles. Focusing on the crucial points it can be concluded that both these initiatives are going hand in hand. GOI has been focusing on implementing a gas-based economy due to various reasons like the Paris accord and implementing of cleaner form of fuel in India. Whereas, constant initiatives taken up by NITI Aayog to push the EV revolution has brought immense changes in the automobile sector. Both these ideas possess threats towards each other in their respective business but altogether pushes India towards the better future. It depends largely on government bodies as well as its future policies which concept would thrive. CNG business in India is an established business in major cities, while EV business are in very initial phase. Proper implementation of EV market would take time as there is no proper infrastructure. Apart from infrastructure, awareness among people needs to grow, which is time consuming. So, currently EV business doesn’t posses any threat to CNG business, but soon with the proper adoption of EV oriented government policies and infrastructure development it has the potential to turn itself into a threat to the CNG business of Indi

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