India's EV dilemma: Prioritize investing in vehicles or charging infrastructure

• By 2030, India aims for 30% of newly registered private vehicles to be electric.
• According to Bain & Company, less than 2.5% of the 4.2 million passenger vehicles sold last year were EVs.
• To achieve its goal of widespread adoption of electric vehicles by the end of the decade, the government must prioritize enhancing India's charging infrastructure, according to industry experts.

Carmelita Fernandes, a resident of Pune, India, was thrilled to switch from her usual car to an electric Tata Nixon in December 2021. The car was highly rated and had a booming market in India at the time, she stated.

Two years and a half after the change, Fernandes has a change of heart: "I won't purchase an electric vehicle again."

In the first five months of owning her car, Fernandes experienced a battery failure that left her stranded halfway through a 180-kilometer (111 miles) drive from Pune to Mumbai, both cities located in the western state of Maharashtra.

Fernandes lamented that her 1.4 million Indian rupee ($16,700) EV SUV battery depleted faster than expected, with a 40% charge only lasting 5km instead of the expected 40km.

"I won't be able to use the EV if I can't drive for four to five hours from Mumbai to Pune. It'll be impossible to travel to cities like Goa, which are 600km apart," she said to CNBC.

The transition from internal combustion engine to EV cars in India is hindered by "Range anxiety," which is a significant challenge, according to analysts.

Despite the ambitious goal of having 30% of newly registered private cars be electric by 2030, only around 2.5% of the 4.2 million passenger vehicles sold last year were EVs, according to Bain & Company.

While charging infrastructure in India's electric vehicle market is not yet fully developed, companies are hesitant to invest more until there are more vehicles on the road. However, potential electric vehicle buyers prioritize the availability of more chargers on the road before making a purchase.

Chhibber told CNBC that it's a chicken-or-egg dilemma regarding the order of priority.

In August 2023, Tata Motors held a 72% market share in India's electric vehicle (EV) market, with MG Motors following closely behind at 10.8%. Mahindra & Mahindra, Citroen, BYD, Hyundai, and Kia also have a presence in the market, according to data from Canalys.

Increasing charging capacity

To achieve its goal of widespread electric vehicles by 2030, the government must prioritize enhancing India's charging infrastructure, according to industry experts, as shared with CNBC.

India has the world's second-largest road network, covering 6.3 million kilometers.

Despite having around 12,100 public EV car chargers in the world's most populous country as of February, this number is still significantly lower than the 1.32 million chargers required by 2030.

Mihir Sampat, a partner at Bain & Company in Mumbai, stated that companies are reluctant to expand their infrastructure due to the fear of underutilization.

"According to Sampat, the economics of running a charging point station are primarily determined by the utilization of the chargers. To achieve optimal utilization, chargers should be located in areas with a high population of electric vehicles."

In India, there are approximately 200 electric vehicles (EVs) per commercial charging point, compared to about 20 in the U.S. and less than 10 in China, according to a Bain report from December last year.

During her trips from Bombay to Pune, Fernandes would stop at the Khalapur Toll Plaza on the Mumbai-Pune expressway to charge her EV. However, she found that the chargers had to be booked in advance, otherwise, she couldn't use them in a timely manner.

""Sometimes, I had to wait more than two hours for my car to charge, which led me to use more power and drain my battery while searching for a charger," she stated."

To increase the number of EV chargers in intercity usage near shopping malls and office buildings, the Indian government needs to focus on infrastructure development, according to McKinsey's Chhibber.

Other setbacks driving consumers away

Apart from the absence of charging infrastructure, high costs and limited model options are also hindering EV drivers from switching to electric vehicles, according to analysts.

India's largest car manufacturer, Maurti Suzuki, will only release its first EV car model next year. In comparison, Tata offers five EV car models, and MG Motors offers two, according to their websites.

Chhibber stated that customers are resisting the transition to EVs and are delaying their decision until new products and a broader range of options become available.

Sampat of Bain & Company stated that India's four-wheeler market is highly price-sensitive, and companies must create low-cost EVs that are equivalent to ICE vehicles in order to succeed. He emphasized that the first step in achieving this is to reduce the cost of batteries.

Tata's Punch, a popular ICE SUV, starts at 612,900 Indian rupees ($7,300), while its EV counterpart has a starting price of 1.1 million Indian rupees ($13,100).