Electric vehicle startups hit hardest by virus outbreak

The Covid-19 pandemic’s fallout is likely to hit electric vehicle (EV) startups the hardest, according to a new report, as they had invested heavily on growth but have hardly been generating any cash.

EV sales, like sales of traditional petrol and diesel-powered automobiles, are expected to remain subdued in the current fiscal year, and startups and small and medium enterprises that make up most of the sector “will struggle for survival”, according to the report on the state of the EV sector by Avendus Capital.

“A significant portion of the EV industry in India is represented by SMEs and start-ups. The Covid-19 lockdown is expected to affect this part of the industry the most,” it said.

Traditional manufacturers that have entered EV sector are also expected to turn away from the segment — which makes up just 0.01% of India’s auto market — and focus on reviving sales of traditional internal combustion engine (ICE) vehicles in the short term.

This would mean fewer new launches in the EV segment as manufacturers work to restore sales of their “bread-and-butter” ICE products.

Sales of three-wheeler and four-wheeler EVs will remain low, as consumer preference will shift towards personal mobility in the short term, hurting the market for cabs and auto rickshaws, which was expected to adopt EVs faster than retail consumers.

However, the two-wheeler EV segment could benefit from the pandemic, the report added.

“EV purchase decisions are influenced more by the value proposition rather than only on comfort or leisure. To that extent, the impact of reduction in discretionary consumer expenditure is less likely to affect EVs than ICE vehicles,” the report said, adding that the share of EVs in India’s two-wheeler market could increase in the current fiscal year.

Moreover, it said that while the pandemic might have pushed back EV sales targets by a year, the proposition for shifting to such vehicles could get stronger once the outbreak blows over.

E-commerce, which is expected to grow due to the pandemic, is being seen as a big adopter of the technology, as is the commercial vehicle segment, which could make the jump to EVs quickly once the market for mobility starts to grow.

“FY22 was expected to be the inflection year for the Indian EV industry. In the context of Covid-19, the inflection point is likely to get delayed by a year. But the EV transition post the inflection point will be faster and the industry is expected to stay on track to achieve the FY25 penetration levels,” the report said.

Electric vehicle startups hit hardest by virus outbreak Electric vehicle startups hit hardest by virus outbreak Reviewed by TechCO on 7/11/2020 Rating: 5

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