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Indian Electric Vehicle Market the Segment Riddle

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Electric Vehicle
Vijay Jaiswal

Vijay Jaiswal, Director – Automotive, Department of Industries & Commerce, Government of Telangana

The challenges and advantages of Indian Automobile market thus pose some interesting questions to firms venturing into electric vehicles. Getting the answers right may result in good initial response from the market despite the price and performance gaps of Electric Vehicles against the Internal Combustion Engine (ICE) vehicles, writes Vijay Jaiswal, Director – Automotive, Department of Industries & Commerce, Government of Telangana.

A big question for any new entrant in Indian Automobile market is to select the right segment to position itself into, one that assures of sustainable volumes and profitability. While the mass market segments are challenging in terms of margins and market share with more than two-third of players in the market fighting in this space, the high-end segments are low on volumes despite the promise luxury segment holds in Indian Automotive market.

The dynamic and evolving socio- economic nature of the consumer base in a fast-developing country like ours makes it even trickier to plan a brands future over any given segment as the dominant segment keeps shifting every 8-10 years. There is however advantage to an evolving market, where the firm can even influence customers’ ideas about a good product and get a larger canvas to innovate in comparison to a mature market.

The challenges and advantages of Indian Automobile market thus pose some interesting questions to firms venturing into electric vehicles. Getting the answers right may result in good initial response from the market despite the price and performance gaps of Electric Vehicles against the Internal Combustion Engine (ICE) vehicles. It may further help in identifying segments to avoid, segments that will invariably face a decline by the time one brings a new EV product to market.

One constant theme of the EV market will be that only serious players with agility and ability for rapid innovation in sync with customers’ expectations and segment movements will find a play in this market. Given the high capital and time involved in building native EVs from scratch, a clear understanding of market shift in future only will ensure ROI on investments in product development. At the same time, Brands relying upon fully built imported solutions will struggle to grow at the pace of the market.

One may ask that most premium products with extreme performance expectations in ICE category are imported as Complete Built Up (CBU) to India and they work just fine. Why should then an EV have a problem if it’s imported as a ready solution for Indian market. While the ICE vehicles come with more than a 100 year of evolutionary journey with almost every performance parameters stabilised against any geographical variation, EVs are still at the early stage of its development and yet to be tested against the varying performance criteria across geographies and usage conditions. Besides the additional cost due to import duties on top of the existing price premium over their ICE counterparts may make them unattractive to customers.

The discussion hereon will focus on the factor that will work for EVs at this stage of market evolution considering the emerging segments where EVs will work at certain level with its current challenges of battery technology maturity in terms of range/charging time and price. The ideas developed here however will require further investigation and validation as more clarity emerges on the market expectations from the EVs and technology readiness towards the same. Besides, the discussion will limit itself to passenger four-wheeler category as it appears to be most challenging and promising of all product categories in context of EVs.

Going ahead, Indian passenger vehicle market will have two distinct volume contributors, namely individuals and fleets. Interestingly for carmakers, individuals always were main focus while thinking products and may continue to be so. However, in recent times, fleets have gained fair prominence in specific segments, and may demand products specifically designed for them in future, on the lines of the internet meme ‘Ye bada hoke UBER banega’.

As a significant number of individual customers move away from owning the cars and towards shared cab services, two distinct markets for cars is expected to emerge, with one largely focused on shared mobility. The individuals with constraints on purchasing power and low miles covered per day will subsequently find better economics in shared mobility and will leave the entry level segments for uptake by drivers on shared mobility platforms. There will still be market for individually owned cars with people purchasing vehicles for the joy of driving and convenience of owning one. Characteristically, the buyers in the shared mobility category will focus on business aspect (like commercial vehicles) and utility, the individually owned cars will demand more of lifestyle attributes.

Within the shared mobility, driver cum owners a hint on the possible sub segments emerges from the classification of services offered by companies like OLA and UBER. Taking OLA ride categories as a tentative benchmark, one might look at a product segment that would span from Auto to MICRO and another segment that would cater to MINI.

The prime and above group might still continue to overlap with the products for the individual owner segment as is the case today. The sub segments may differ at comfort and safety level, but a good range and minimum speed to cover at least 80 percent of the use cases will be expected even for the segment serving as a AUTO and MICRO.

The sub segments in the individually owned vehicle segment may further break down on the same lines as the current sub segments in ICE vehicles. However, taking into account the recent shift of market from entry level hatchbacks to premium hatchbacks to C segment sedans (swift desire was the single largest model in year 2018) and compact SUVs, it would be wise to believe that the entry level hatchback may not be a category of choice for individual owners going ahead.

Skipping this category altogether in case of Electric Vehicles would relive the OEMs of unnecessary constraints on design and pricing. Instead, a focus on premium hatchback and above segments will allow OEMs to design contemporary products with respectable trim level and deliver the expected performance, particularly range at an acceptable price point. The price premium over an ICE reference for the semi-premium and premium segment would also induce much lesser shock to a buyer with focus on lifestyle in comparison to a buyer for entry level vehicles.

One shall also remember that there will always be some overlap between the two broad segments (fleet and individual), particularly at the entry level, but this should not distract his attention from the needs and wants of the primary customers in all cases. One would also need to develop a sound understanding of utilisation of specific trim levels for each segment in view of the customer orientation (utility or lifestyle) and to accordingly assign weightage to the tech spec values as well as features and save cost wherever possible.

Besides, any auto OEM will have to constantly remind itself of the possible market scenario and dominant segments in 2021-2022 instead of now, given the typical vehicle development duration of three to four years, starting from now. The clarity of emerging segments for specific customer type will ensure that investments are made in the growing segments and not the declining ones and also help in defining the brand position.

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