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GS-III :
  • 04 September, 2019

  • Min Read

Economics behind e-vehicle batteries

GS-III: Economics behind e-vehicle batteries

Context

  • Shifting gears in the transition to electric vehicles (EVs), the NITI Aayog, in May this year, proposed to ban the sale of all internal combustion engine (ICE) powered three-wheelers post March 2023.
  • It also suggested that all new two-wheelers below 150cc sold after March 2025 should be electric.
  • In consonance with these proposals, the Union Budget announced tax incentives for early adopters.
  • The automobile industry had objected to the proposal and called for a practical approach to framing EV-related policies.

How are the cost structures of conventional vehicles and electric vehicles different?

  • The portion of the costs of the drive train of EVs the system in a motor vehicle which connects the transmission to the drive axles in comparison to the cost of the entire vehicle is 4% lower compared to ICE vehicles.
  • This is primarily due to less part in the electric drive train.
  • However, the battery pack takes up nearly half the cost of an electric vehicle.

How has the cost of the Li-ion battery pack cost evolved in the last decade?

  • The price of these battery packs has consistently fallen over the past few years.
  • This decrease is in part due to technological improvements, economies of scale and increased demand for lithium-ion batteries.
  • Fierce competition between major manufacturers has also been instrumental in bringing down prices.
  • The chart shows the change in the price of Li-ion batteries from 2010 to 2016. It is not clear if the battery cost can be reduced even further.
  • Given that raw materials account for 60% of the cost of the battery pack, the room for further cost reduction is rather limited.

Where does India stand on EV adoption?

  • In India, EV adoption will be driven by two-wheelers rather than cars in high numbers because India’s mobility market is driven more by two-wheelers.
  • According to the NITI Aayog, 79% of vehicles on Indian roads are two-wheelers.
  • Three-wheelers and cars that cost less than 10 lakh account for 4% and 12% of the vehicle population, respectively.
  • Two-wheelers will also need smaller batteries when compared to cars and hence the overall affordable cost.
  • India needs to manufacture Li-ion cells in-house. Now, cells are imported and “assembled” into batteries.

Are EV vehicles completely environment friendly?

  • In conventional ICEs, petrol or diesel fuels the engine.
  • However, in EVs, batteries are not the fuel; electrons supplied by the battery fuel the vehicle.
  • Presently, most of India’s electricity is generated using conventional sources.
  • In 2018-19, over 90% of India’s electricity was generated from conventional sources, including coal, and around 10% was produced from renewable sources such as solar, wind and biomass.
  • While the rate of electricity generated from renewable sources has increased over the years, more needs to be done for their adoption.

Source: The Hindu


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