Electric Vehicle Era has Begun, Why it Matters to Us?

The wheel was invented almost 5500 years back and it has been considered as one of the most important inventions of all time. Wheels helped humans not only to move much faster but carry heavy loads for transport. This led to more human interaction, exchange of ideas, and finally more trade. All these things brought prosperity.

Talking about prosperity, today developed countries have 600-800 cars per 1000 population while developing countries like India have 22 per 1000 population.

When we talk about Car, usually Internal Combustion Engine (ICE) Vehicles comes to our mind (Petrol & Diesel) and we think Electric Vehicles (EVs) are recent phenomenon but do you know, EVs were introduced before ICE?

The journey of Internal Combustion Engine Vehicles (ICE) can be attributed to Carl Benz’s invention of Motor Wagon in 1885, while initial Electric Vehicles were introduced almost 5 decade before ICE. In 1828, the Hungarian Ányos Jedlik invented an early type of electric motor, and created a small model car powered by his new motor and subsequently Scottish Inventor Robert Anderson also invented a crude electric carriage. Those were non-chargeable primary cells, but finally in 1881, French engineer Gustave Trouve made the world’s first full scale electric Car.

In fact, in the early 1900s, Electric Vehicles were selling double that of ICE. Then the question arises, how EVs got into oblivion within 2 decades.

Probable reasons why EVs lost against ICE:

• Low range: In the early 1900s, Electric Cars had low range (50-65 km). Rapid road construction urged people for long travel, which was not possible with Electric Cars

• Lack of Charging Stations: Absence of Electricity outside the city made Electric Car owners to carry spare Electric batteries which made vehicles heavier. (Lack of charging infrastructure was a challenge also at that point in time)

• Starter Motors Introduction: ICE Cars required hand cranking which was very difficult, but with Starter motor introduction in 1912, the problem was solved

• Fossil fuel supply: Due to widespread Petrol discovery and availability, prices of Petrol dropped hence ICE further gained momentum after 1912

Mass Production: Due to mass production of ICE Between 1913-1918, the price became less than half of Electric Cars. (Ford Model T impact)

Let’s move fast forward to current times. In 2020, Electric Cars contributed 4.6% of worldwide Cars Sales while the same figure for India is just 0.25%. China sold approximately 300 times more Electric Cars than India. (12 lakh EVs sold by China against 4000 by India in 2020).

Indian government has set a target of 30% Electric Car Sales penetration in 2030.

Why Government of India is insisting for EV adoption? The main reasons are:

• Air Pollution: As per various reports, among top the 30 most polluting cities in the world, 22 are from India. Unfortunately, Delhi is being tagged as the most polluted capital in the world. Though there are many factors behind the pollution but automobile is most talked about

• Oil Import Bill: India imports approximately $100 Billion worth of Crude Oil which is expected to double in coming 6-7 years. That’s Rs 7500000000000. Imagine this much money goes out of the country every year and what comes is a liquid which turns into smoke after some kilometer of vehicle running

• EV Manufacturing: The world is moving towards EV. India has successfully made herself small Car production hub, now incase India is left behind in EV race, there can be potential manufacturing loss

Challenges behind EV adoption:

• Higher Cost: Currently EVs are around 50%-60% costlier than ICE

• Lack of Charging Infrastructure: Lack of public charging is worrying potential buyers

• Refueling/Recharging time: It takes ICE engine to get full tank fuel within 5 minutes, but fastest charging solutions in India might take hours to fully charge the battery

• Battery Safety: People are worried about safety concerns with batteries (especially in flood like situation, etc)

• Resale Value Concerns: EV resales value is still not known

• Home Charging Concerns: Many customers don’t have dedicated parking lot, hence home charging might be difficult

Despite so many challenges, why EV Sales would exponentially increase in the future:

• Batteries are getting cheaper: Battery prices have dropped more than 90% in last one decade, thus there is trend of EV price reduction

• Government Subsidy: Governments would increase taxes on ICE while giving subsidies on EVs, if price gap between EV and ICE would reduce to 20% vs current 50%-60%, EV adoption would exponentially increase

• Adverse fossil fuel price: Diesel and Petrol fuel prices might further increase in future prompting customers to shift towards EV. In Europe, now Road tax is as per CO2 emission

• Better Driving Range: Thanks to advance research, battery density is increasing and range is increasing beyond 400 km

• Advantage over ICE: EVs have better acceleration and lower maintenance costs

• Increasing Charging Infrastructure: Charging Infrastructure will increase in coming years. More visibility of Chargers would give confidence to prospective buyers.

• Sundown of ICE: Many car manufacturers have announced fully switching to EV in coming years

• Higher EV visibility: More EVs on the road would give confidence to fence sitters

What are some EV related doubts in India?

• “We don’t have enough Electricity Production in India to cater demand of EVs”

It’s not correct. For the last 5 years, India has been a power surplus country. In fact, even in 2030, when every 3rd car sold in India would be Electric, the demand of Electricity because of EVs would increase by only 5-10% which is manageable.

• “Today we are importing fuel from Middle East and America, once we shift to EV, our dependency for battery components would be on countries like China”

Yes its right but recycling of fossil fuel is not possible but luckily recycling of battery component is possible therefore if we can work on battery recycling, dependency on annual import would reduce.

• “We don’t have enough Electric Charging Stations”

‘Necessity is the mother of invention’. In coming few years, you will see that even roadside Pan Shops and Dhabas (food joints) would offer charging facility. (The success of UPI/Digital money transfer is classical example of transformation).

• “India produces more than 70% electricity by burning fossil fuels. So EVs would consume electricity produced by polluting fossil fuels then how it’s helping cause to curb pollution”

Yes it’s right. Only things is that pollution in Major Cities might go down at the cost of some remote areas where the fossil fuel based electricity is being produced but silver lining is that Government of India has pledged to produce 500 Gigawatt Electricity through Renewable sources by 2030 which is currently just 100 Gigawatt.

We will see more actions on Electric Vehicles in the coming days. Welcome to exciting times!

Thanks a lot for reading!

If you liked the article, please share with your near and dear.

Manoj Tripathi

Author of the book titled “Power of Ignored Skills”

(Disclaimer: The article is the personal view of the author. Data is an approximation to make readers understand the logic)

Reasons behind Economic rise of Bangladesh

In 2010, India’s per capita income was $1384 while Bangladesh’s was $763. So roughly it was double of Bangladesh. Now you can understand why Bangladeshis were illegally coming to India, of course for better livelihood.

 

But as they time never remains the same, today, exactly after 10 years, India's per capita income stands at $1,947 which is $280 less than that of Bangladesh’s $2,064.
Though COVID is one important factor contributing to contraction in Indian economy last year but even before COVID, many economists had forecasted that Bangladesh would surge ahead of India in coming years.

Now question arises, how Bangladesh which got independence in 1971 after sufferings brutal occupation and genocide by Pakistan came out of shadows of gloom and became a successful story of economic turnaround. 

The reason can be tracked back in same year of 1971 when United Nation announced special status to “Least Developed Country”. Out of 200 odd countries, approximately 47 countries fell under LDC countries list. The least developed countries (LDCs) are countries who exhibit the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings. In 1975, Bangladesh was included in LDC and at least on paper, still is in the list.

To support LDCs, the developed countries don’t put any import tariffs from goods produced in these LDC countries. Just to give you a context, normally EU puts around 10% import duty on ready made Garments which is not applicable for LDCs means they are exempt of any import tariff.

These kind of import tariff relaxation helped low income countries to export good at relatively cheaper rate than developing countries like India, Brazil or Thailand.

To overcome acute poverty, Bangladesh focused on stitching clothes to produce ready-made garments. Back in early 1980s the economy of Bangladesh was so fragile that even shirt buttons were imported. But Multi Fibre Agreement (MFA) of 1974 which put stringent measures to control RMG market in United States impacted major global RMG manufacturers but on the other hand Bangladesh enjoyed an exemption due to its LDC status. This triggered quota hopping by industry leaders, South Korean company Daewoo’s RMG unit was the first entrant in Bangladesh and it revolutionized RMG sector there. Similarly lot of other companies made their production base in Bangladesh.

Bangladesh started becoming a serious player in garment business by early 2000s. In 2006-07, Bangladesh exported readymade garments worth $9.21 billion and Indian was just behind with $8.89 billion. In 2018-19, readymade garment export of Bangladesh reached approximately $31 billion, while that of India only $16 billion. 

Global factors helped Bangladesh as well because China which was producing almost half of world’s garment faced challenge of growing wages thanks to their booming economy. Higher wages led to shift of production to low wage countries like Bangladesh, Vietnam and Cambodia.

Bangladesh’s ability to export RMG resulted into exponential increase in economy. It’s GDP size was $103.5 billion in FY 2008-09, it has increased to $330.2 billion in FY 2019-20. In a single decade, exports have increased from $15.57 billion to $40.54 billion. Reserves have increased from $7 billion to $44 billion. The poverty rate has come down from 48.9 per cent to 20.5%. Remarkable achievement!

The textile sector contributes around 20 per cent of the country’s GDP now. The RMG (readymade garments) sector currently accounts for 80 per cent of Bangladesh’s net export. Every second T-shirt in the world is made in Bangladesh.

As per study done by Pankaj Vashisht and Nisha Rani of ICRIER in 2019: “The unit labour cost of producing a cotton shirt in the United States is around $7, India 50 cents, whereas in Bangladesh the unit labour cost is only 22 cents."

As per India economic survey 2021, It takes India 7-10 days from factory to export goods while in Bangladesh, Vietnam and China its less than a day. In last 10 years Bangladesh has become power surplus nation and at the same time Political stability is helping it. There are 4.5 million Bangladesh's citizen working abroad hence their remittance helps economy to great extent.

Not only in Ready made Garments but in Information Technology, Bangladesh is growing rapidly. Though still there is no match in IT export but let me share one data point which might signal about days to come. 

India is the largest supplier of online freelancers in the world with close to 24% while Bangladesh is at number 2 with world’s 16% online freelancers. ( just keep in mind the population is 8 times lesser than India).

 

Life expectancy is very good parameter to judge country’s economy. In 1971, life expectancy in Bangladesh was only 46.5 years, two years less than India. By 2018, life expectancy in Bangladesh had risen to 72 years, two years more than India’s.

When Bangladesh was preparing for golden jubilee of Independence in early 2021, they got news which made them happy as well as sad. Happy because due to their rapid growth, UN informed them they have been improved from LDC country to Developing country, it’s matter of proud for country which was in bad shape just few decades ago, in fact only 3 countries have progressed from LDC to developing country in last 50 years. Thus, it is brilliant achievement. 

The reason of sadness is that after 2024, developed countries would impose import duty on Bangladesh’s export items hence exporting won’t be easy to sustain the same growth story. 

Whether Bangladesh can compete in the open market with new tariffs or not, it will be interesting to watch. All I can say is 'Good-luck Bangladesh'!

But what about India, where did we lose momentum?

It is a fact that every country in the world has prospered due to their ability to export. But for last 9 years our exports have stagnated. We hardly have any Free trade agreement with developed countries to get access of their Market at competitive prices.

Our SEZs have failed, Make in India program couldn’t takeoff. I am hopeful that recently announced Production Linked Industry (PLI) scheme may be a game changer but it is in distant future.

How often you see our media talking about export growth, SEZ and Make in India challenges? I won’t blame media, “We are served what we order”. 

If we are not asking question to those who are responsible in Government, why they would be bothered to act or answer. We are not able to ask because of our unawareness about facts. If you want to see change, let's spread awareness.

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( Special thanks to my younger brother Vinod Tripathi for sharing inputs and editing this blog)