COVID-19 Impact on Electric Three Wheeler in Automotive Industry
COVID-19 and the lockdown have certainly decelerated down the business and economic pace across sectors. People have become more aware about the status of clean energy and environmentally friendly alternatives as a result of the COVID-19 pandemic and lockdown. The main customers for the electric three wheeler market are in Asia and South East Asia. It has also had an outcome on the EV market with NEV sales in China, the world's largest EV hub, reaching an all-time low. When the lockdown was announced, the Indian auto industry which was already dealing with the BS-VI emission norms deadline was dealt a double blow. India, the world's fourth-largest market has ground to a halt with all manufacturing operations halted under the guidance issued by the government. The pandemic has caused extensive disruption to supply bases, assembly plant closures and a further shift to declining consumer demand. The reliance on Chinese imports, recent Bharat Stage VI Regulations (emission standards established by the government to primarily regulate the output of air pollutants from petrol and diesel vehicles) and restrictions on migrant laborer movement have all contributed to this situation.
The China being the epicenter of COVID-19 virus had put on hold the various businesses operating segment leading to a downfall for the sale in three wheeler electric vehicles. People have also become more cost conscious as essential items have become more important. The electric three wheeler companies have been working hardly for its consumers during the lockdown period. With deliveries and lease becoming dangerous during the pandemic and the lockdown, the maker walked up and made sure deliveries of fundamentals were done. In a nutshell, all of these factors would lead to an increase in the demand for EVs because they provide environmentally friendly alternatives as well as lower delivery costs.
For instance,
- The Indian automotive sector was already struggling before the COVID-19 crisis. During 2019, it has experienced an 18% decrease in overall growth.
IMPACT ON DEMAND & SUPPLY CHAIN
During the short term, there could be trouble in fund raising for start-ups in flexibility and battery compound segment. However, M&A fund raising actions are likely to pick-up in intermediate and long term considering these start-ups are vital for developing the EV sector.
The demand for three-wheelers for passenger transportation will remain low for the next two to three months owing to lower movement of people in urban areas, a lack of preference for shared mobility and the non-operation of mass transit such as metro and trains which typically required three-wheelers for the last mile.
However, due to increased demand for e-commerce delivery, there is a significant increase in demand for three-wheelers designed for cargo, particularly electric ones. Electric three-wheelers are being introduced into cargo operations by e-commerce companies and their logistics divisions.
As people become more homebound in the "new normal," there is a greater mandate for home delivery of all from groceries to essentials to non-essentials which is driving up demand for e-cargo fleets.
The people have become more aware of the importance of clean energy and environmentally friendly alternatives as a consequence of the COVID-19 epidemic and lockdown. People have also become more cost conscious as essential items have become more important.
COVID-19 had the greatest impact on three-wheeler sales which fell from 140,683 units in fiscal 2020 to 88,378 units in fiscal 2021. Two- and four-wheelers, on the other hand, bucked the trend, registering impressive growth during the year, albeit from a small base.
The COVID-19 can have both favourable as well as unfavourable bearing on the EV segment with short to mid-term favourable bearing includes recent BSVI regulations increasing costs of petrol and diesel vehicles making EVs possibly slightly more attractive, shift from the practice of public transport and shared mobility resulting in flow in demand of two-wheelers counting EV. Increase in demand from the rental/subscription model for EVs may also be conceivable. Whereas, in long-term, the favourable conditions include shift in consumer mindsets toward eco-friendly vehicle models.
STEPS TO BE TAKEN BY THE VENDOR TO BOOST THE SALE
The EV vehicle maker has to form business partnership with leading e-commerce companies such as BigBasket, Ecom Express, Udaan, MilkBasket among others that can help in providing electric mobility stack as a service. Fleet owners and ecommerce players have understood the benefits of EV for their inter-city movement.
In order to meet the augmented demand for last mile deliveries, the vendor should work on the software capabilities of the automobile on the backend to enhance the capabilities of the battery pack with controller to enable better range and load bearing capacity for the vehicles. Further, with essential practices of social distancing, the company realized that fleet owners will now need connected vehicles to manage their fleet. The company has been working around adding several software features on the backend that helps the fleet managers to rationalize their operations and be prepared for eventualities. The vehicles should be in-built with new features for optimizing fleet operations with real time updates, updates on battery operations and preventive maintenance.
The lack of retail finance is a factor that had undesirable impact on sales for electric three-wheelers. Due to COVID-19, many financiers supporting electric three-wheelers (E3Ws) faced problems in the recovery of the loans prolonged, as the passenger 3W undertaking had halted or radically reduced during the lockdown. In fact, last-mile connectivity for public transportation such as metro trains and buses has been a key driver of demand for e-rickshaws and when public transport had been closed, this has harshly impacted the movement of E3W and salaries of the drivers. As a consequence, financiers have been in “recovery mode” and reluctant to extend new loans. Therefore, the role of financing should be the priority to boost the sale by the vendor.
CONCLUSION
COVID-19 though ravaged the automotive market in an unprecedented manner during April 2020 which was possibly the first time in history, car manufacturers clocked 'zero sales' but had some silver linings. In many ways, the valuation of EV start-ups could become more attractive in the short term compared to pre COVID-19 era.
The major auto players have announced increase in expenditure on the EV segment. While COVID-19 might impact the lending competence of financial institutions in the short- to mid-term, funding from strategic tie-ups and investments could possibly increase to attain the pre-set goals and targets. The pandemic has caused extensive disruption to supply bases, assembly plant closures and a further shift to declining consumers demand. The reliance on Chinese imports, recent Bharat Stage VI Regulations (emission standards established by the government to primarily regulate the output of air pollutants from petrol and diesel vehicles) and restrictions on migrant laborer movement have all contributed to this situation.
