Rules, input costs to make car ownership expensive in 4 yrs: Crisil study

ICE-powered vehicles to pinch more

Four years from now, whether you buy an electric SUV or an (ICE) internal combustion engine-powered SUV or two-wheeler, be ready to pay more. But unlike FY22 it isn't the EVs but the gasoline-run vehicles that will be heavier on the wallet, according to a cost of ownership study done by Crisil Research.

Buyers of electric SUVs would pay a premium of 11 per cent over the ICE SUVs by 2026 over the conventional gasoline SUVs. This would be against the minimum 23 per cent one paid at the end of FY22.

The study is based on the premise that the PV segment will continue to enjoy the incentives, on an average the consumer is holding on to a new model for at least four years and is clocking a certain number of kilometres. 

Rising petrol prices coupled with higher input costs and upcoming regulations are set to make owning the latter more expensive than what it was in FY22. It is likely to go up from Rs28.2/km in FY22 to Rs31.8/km in 2026.  

On the other hand, led by incentives from the state and central governments, battery-powered vehicles that have seen a strong run in the last couple of years, are set to make deeper inroads, according to Crisil Research.

At the end of FY22, the minimum cost of owning an e-SUV when driven for 12000 kilometres during the four-year period was Rs34.8 Crisil estimates this to increase to Rs35.2 for e-SUVs.

The expected drop in battery prices, maturing of the EV technology, higher localisation coupled with a competitive pricing, will bridge the price gap between EVs and ICE SUVs.

Crisil estimates battery prices to decline of 6 to 8 per cent annually from the current $200-220kw/hour.

“But given that batteries account for 40 per cent of an EV’s cost, the EVs will still see overall ownership costs due to an overall inflationary trend, explained Hemal Thakkar, director at Crisil Research.

The study also takes into account the upcoming new emission regulations (real driving emission) for passenger vehicles and the inflationary trend in the commodity prices. Both these factors are set to make the initial acquisition cost of ICE powered vehicles higher.

In a sharp contrast to PVs, owning an e-two wheeler is already cheaper than owning a petrol-run two wheeler but the latter is going to get more expensive.

At the end of FY22, the cost of owning a e-scooter (with all the central and state government subsidies) was Rs3.6 per kilometer as compared to Rs4.5 per kilometer, based on the assumption that on an average one holds on to a two- wheeler for a  three-year period and has clocked 12000 kilometers. By 2026 the ownership costs for an ICE scooter will cost Rs4.9 per kilometer as compared to Rs3.6 per kilometer.  

Various incentives have been fueling growth of e-two wheeler sales in India. Their contribution as a percentage to total two-wheeler sales in the domestic market has increased to 1.9 per cent at the end of FY22 from 0.1 per cent in FY19.

Close to 222,000 of them got sold during the year as compared to 24000 units in FY19 according to Crisil Research and Ministry of Road Transport & Highways. It doesn’t include Andhra Pradesh, Telangana and Madhya Pradesh, which contribute about 17 per cent sales.

On whether the recent incidents of e-scooter fires will impeded adoption to battery operated scooters, Thakkar said, this would deter buyers only in the short term till the reasons for the fire which is presently under investigation, is not known.  It won’t have a long term impact,” he said.