How India's EV strategy must change: Put customers first, technology next

India's EV slowdown is rooted in weak customer insight and how new ideas are adopted

The relatively slow penetration of the EV sector in the Indian automobile market is not an industrial policy problem. It is not about lack of capital nor government incentives. The root cause is that the industry is missing insights into the person it is intended for — the customer — and how he adopts a new idea.

 

This is a classic diffusion-of-innovation challenge.

 

When we contrast the growth of EVs in China and India, it seems odd that though both countries have been pushing EVs over the last decade, penetration of EVs stands far apart. China now has 38% EV share in four-wheeler sales and 35% in two-wheelers. India is at 2–3% and 5–7% respectively. That’s a big distance apart.

 

 

This is often explained away as China will “do” anything faster than anyone else. Let’s step away from that “logic”. Let’s ask, instead, why penetration in India is low and still relatively slow, despite the priority given to its growth.

 

The first mistake is to figuratively put the “onus” of increasing EV penetration on government policy and on incumbent auto industry players.

 

From policymakers, the demand has been for subsidies to reduce the price of EVs to spur mass adoption. The government, of course, should play a role by removing hurdles in EV expansion and providing supporting infrastructure. But for the industry to rely on subsidies assumes that price is the key problem to adoption. That assumption deserves scrutiny.

 

As far as depending on incumbent auto players to lead a massive EV transition goes, that flies in the face of business sense. Incumbents inherently have a conflict between maximising returns on their massive investments in ICE (internal combustion engine) cars versus moving to the future technology of EVs. They would naturally prefer a gradual shift rather than a disruption.

 

The real onus for gaining rapid penetration is on new entrants, whose sole focus is disruption through EV growth. Here lies the second issue. Most new EV players have not adequately understood how innovations scale, or they have not executed accordingly.

 

Here’s the thing… consumers don’t usually adopt an innovation en masse. They have different mindsets in terms of risk and involvement. The first ones to move — “innovators” — have a natural desire to take the plunge and try new things. They are driven by novelty, being cool and simply being the first to try something different. Price is not the main consideration; being different is. Tesla initially succeeded in the US not by being cheaper, but by positioning its EV as technologically superior, aspirational and radically different from conventional cars. It accelerated faster, was quieter and significantly more user-friendly in some “cool” ways. It wasn’t a car that happened to be electric and cheap to buy or use. It was magical, even if imperfect in some ways.

 

The first iPhone was like that as well. It had severe problems, now forgotten. Innovators came on board because it was different and unique.

 

Once the innovators validate the new category, the next cohort — “early adopters” — jump in. Often seeing themselves as opinion leaders, they want to have the “cool” status but don’t want to take the social (and technical) risk of jumping in first. They need reassurance both of category validation and usability. This is when features like the spread of charging stations, range reliability and service support become important, along with cool and unique design.

 

Once the early adopters validate the category, the majority flow in. Now economics, pricing, resale value, etc become more important — what is sometimes called “value for money”.

 

History teaches us this. The rapid penetration of the car in the early 1900s is attributed to the low-priced Ford Model T. But Ford came in after several other cars had been around for a decade. These cars were expensive and imperfect, but so distinctive and “cool” compared to the horse-drawn carriage! “Innovator” and “early adopter” buyers had validated that cars were “the way to go”, thus paving the way for the low-priced Ford Model T for the majority.

 

In India, when TVs were penetrating the market in the 1980s, Onida wasn’t the cheapest brand. Despite that, with the tagline “Neighbour’s envy, owner’s pride”, it became a leading brand.

 

To accelerate initial penetration of EV cars, new entrants must ensure and market “coolness” and design superiority more than price and economics. In fact, excessive emphasis on economy and price risks putting off exclusivity-seeking innovators and early adopters.

 

These players need to understand Indian consumers and their attitudes towards risk, status and distinctiveness, not just economics. And design their cars and their marketing accordingly. They must know which ones will want to lead, who wants to flaunt and who wants to follow. It’s about behavioural waves, not pricing curves.

 

The move to electric will happen. How fast depends on several factors. Among them is how the penetration is orchestrated, based on how ideas are spread — and keeping what customers value, not price subsidies, at the centre.

 

---

(The author is managing partner, RedVent Strategy & Design)

 

Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper