Battery prices are falling, making EVs cheaper than CNG.
Because of falling battery costs, electric vehicles are quickly becoming the most cost-effective mode of transportation, surpassing CNG. The cost of fuel for an electric vehicle such as the Tata Nexon EV is expected to be just 1 rupee per kilometre, whereas the cost of fuel for a CNG vehicle is 4 rupees per kilometre and the cost of fuel for a gasoline vehicle is 10 rupees per km.
The rising popularity and increasing affordability of electric vehicles is posing a direct threat to CNG vehicles, according to a report by Kotak Institutional Equities.
“So far, due to relatively expensive four wheelers, the impact of EVs on CNG segment was not very significant,” said Kotak analysts Anil Sharma and Aditya Bansal in a note to clients.
“But, with EV four-wheelers now available at lower price points (Rs 8-15 lakh), and CNG’s price arbitrage reducing, we think EV adoption for lower priced vehicles will be now on fast-track,” they added.
Electric vehicles have been increasing in their popularity in recent years due to the extremely low cost of running them.
The fuel cost of an electric car like Tata Nexon EV is estimated at just Rs 1/km, compared to Rs 4/km for a CNG car and Rs 10/km for a petrol car.
However, because of batteries that cost upwards of Rs 5 lakhs, the total price of a CNG car used to come to at least Rs 10 lakhs.
This, pointed out the analysts, has changed in recent months, both due to competition, subsidies and better technology.
They also pointed out that EVs did not suffer from some of the drawbacks of CNG vehicles.
The “adoption of CNG required significant compromises – less boot space, lower distance per fill, long waiting times for refueling and even [lower] ride quality,” the analysts added.
As long as the starting price for EV cars were in the Rs 12 lakh range, only those who drove a lot – such as salesmen – used to switch towards EVs. It was believed that EV cars made sense only if you drove at least 100 km/day, or about 36,000 km/year.
Now, however, a person can break even as soon as he or she has driven a vehicle like Tata Tiago EV for the first 31,000 km, pointed out the analysts.
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