Could Fires Be A Major Setback For India's Fledgling EV Industry?

The adoption of electric scooters has been growing despite a gloomy environment for the domestic automotive industry. The sales of electric scooters have grown rapidly over the last two years, even increasing almost 4-8x year-on-year. For instance, Hero Electric saw its sales grow from 1680 units in January 2021 to 7763 units in January 2022. Okinawa saw its sales jump from 725 units to 5613 units over the same period.

In contrast, traditional two-wheeler companies have been struggling with declining domestic sales. The sales of Hero Motocorp, India’s largest two-wheeler manufacturer, fell by around 20 per cent to 312,999 units in January 2022 from 398988 units in January 2023.

With catalysts such as government incentives, high fuel prices, environmental awareness, and significant subsidies in place, the adoption of EVs has only picked up in recent years. High fuel prices have only incentivised customers to move towards EVs that are becoming more affordable and away from fossil fuel-run cars. In addition, several large players have cumulatively raised billions of dollars to set up EV assembly plants in India. Some companies have decided to address the issue of range anxiety by deploying charging stations and battery swapping stations. On the other hand, several companies are moving towards adopting EVs for their vehicle fleets, given the lower total cost of ownership in certain segments. But, despite the tailwinds that would help the nascent industry grow, EVs have recently come into public attention with several separate fire incidents. A negative public image of EVs could potentially undo the industry’s progress to date.

The reason behind these fires remains to be ascertained but has brought to the fore the technical issues being faced by Indian EV manufacturers. With companies wanting to gain an early mover advantage in a highly competitive market, the time taken to develop a product and bring it to the market has been getting shorter. At the same time, all EV companies import products from China, with some not keeping a strong tab on quality and efficacy in local working conditions.

In addition, all of these companies are yet to turn a profit and are dependent on external capital. The push from investors for results, and the company’s need for results to raise more money at higher valuations, combined with competitive pressures, is believed to be a major reason behind the quality issues seen in several recently launched EVs.

The complexity of the system ultimately means that it is to be rigorously tested in various conditions to find points of weakness – a step, experts argue, that new EV companies have hastily completed. Despite the heavy PR and marketing blitz launched by these companies, users have taken to social media to complain about various technical issues they face.

However, it must also be kept in mind that vehicles that run on fossil fuels have caught fire on several occasions as well. But, there is hardly any hue and cry around those incidents. Nevertheless, it must be kept in mind that public perception would determine whether adoption would continue growing rapidly or slow down to a slower pace. An oft-cited example is the Tata Nano, which went out of production after a spate of fires marred the public perception of the product.

For the Indian government, EVs offer a solution to reduce the import bill and foreign exchange outflows. EVs are crucial for the government to reduce the dependence on a geopolitically sensitive and volatile commodity like crude oil. The urgency with which an investigation was launched for the fire incidents is a sign of the government’s focus on damage control and user safety.

But despite the recent issues, some EV companies that have managed to stay out of controversy, and have patiently developed better technology over the years, could easily stand to gain from the bad press their competitors receive.

In a market where initial cost, range anxiety, and infrastructure remain hurdles to EV ownership, worries about safety only add to the woes of the EV industry. It is imperative that companies and the government address safety issues transparently to prevent any apprehensions regarding EV adoption among the public.