EVs are burning. But what about the future of EV stocks?

But this is not the first electric vehicle to catch fire in India.

In the past few months, several incidents of sudden fires of two-wheeler electric vehicles have been reported.

These EVs were manufactured by Ola, Okinawa and Pure EV.

However, it was a first from a reputed Indian automaker – Tata Motors.

Tata Motors is one of Top EV Companies in India. The company has over 70% market share in passenger EV sales.

The group is also engaged in building an ecosystem called Tata Universe, which will leverage group synergies.

In this ecosystem, several Tata companies are coming together to provide electric vehicle solutions to consumers to improve EV adoption in the country.

What caused the fire?

Not much is known about the Tata Nexon incident, but is being investigated by the company.

Tata Motors said in a press release,

“We will share the detailed response after thorough investigation. We are committed to the safety of our vehicles and their users.

This is the first incident after more than 30,000 electric vehicles have covered over 100m km across the country in almost 4 years.

In the case of Ola, Okinawa and Pure EV, sources claim that it may have resulted in short-circuiting due to ‘negligence in charging the vehicle’.

Now accidents happen all the time, but all experts point to a common element between all these vehicles – the lithium-ion battery.

EVs are powered by lithium-ion (Li-ion) batteries. These batteries can typically store 150 watt-hours per kilogram compared to lead-acid batteries, which store only 25 watt-hours per kilogram.

While this is its biggest advantage, it can also destabilize them in some situations. They work best within a safe operating range.

There are many instances where Li-ion battery operated devices or vehicles have gone up in flames.

Samsung’s Note 7, and Tesla’s Model S are two examples of devices that use Li-ion batteries that have suddenly caught fire in the past.

What does this mean for the future of electric vehicles?

Comparatively, the number of EVs caught fire is still small compared to the number of units sold.

According to industry data, EV sales were highest at 429,217 units in FY 2022, up 218% from 134,821 units in FY21. This too was 155% higher than the 168,300 units sold in 2020.

Despite the fires in the last few months, this trend continues. EV sales in India stood at 211,398 units during the June 2022 quarter, up 686% from 26,833 units in the June 2021 quarter.

Out of this, Tata Motors EV sales stood at 9,283. The company also reported its highest ever monthly sales of 3,507 units in June 2022.

The increase in sales can be attributed to increased availability of products in the market, higher petrol, diesel and CNG prices, state subsidies and discounts offered under FAME II.

There is also a growing consumer awareness of the need to use eco-friendly transportation.

To meet this demand, companies are investing heavily in the EV sector.

Mahindra & Mahindra is betting big on tectonic change in the automotive market and plans to invest 30 billion in EVs in the near future.

On the other hand, Exide is ready to invest 60 billion to set up a lithium-ion cell manufacturing plant in the country in collaboration with China’s SVOLT Energy Technology.

Maruti Suzuki’s parent company Suzuki Motor Corporation along with its subsidiary SMG has signed an MoU with the Gujarat government to invest. 104 billion in EV batteries.

This will help the company to localize and expand its presence in the EV space.

You see, despite the fire, the day is not far when most of the cars sold in India will be electric. In a bid to cut expenses and reduce dependence on crude, electric cars will become more of a necessity than an option in the near future.

The government’s nudge is another area that is creating opportunities for the sector.

But are EVs safe to drive?

While there are legitimate concerns about the safety of these vehicles, measures are being taken by both EV manufacturers and the government. Ola Electric, Okinawa, Pure EV and Boom Motors recalled around 7,000 after Transport Minister Nitin Gadkari warned of fines.

The Indian government also stepped in with plans to create processes for battery certification and quality control. This step has been taken to prevent such incidents from happening again.

In addition, it has created a panel of experts from Naval Science and Technology Laboratory, Indian Institute of Technology, Indian Institute of Science, Bengaluru and expert in advanced chemistry.

Another committee was constituted to examine those circumstances and suggest remedial measures.

Meanwhile, EV makers are turning away from Li-ion batteries to reduce the risk.

Some companies such as Zypp Electric, the last-mile delivery service using Hero Electric EVs, are already using alternatives such as Lithium Ferro Phosphate (LFP) batteries. The battery has a lower energy density but is relatively stronger and more stable than the more advanced lithium cell.

They could also opt for green hydrogen cells.

Green hydrogen is produced by splitting water into hydrogen and oxygen using an electrolyzer. Electricity from renewable energy, such as wind and solar, power the electrolyzer.

This could be a game-changer for EVs that rely on Li-ion batteries.

Tanushree Banerjee, co-head of research at Equitymaster, recently wrote about how a green hydrogen cell could be a great option for EVs in a variant of Profit Hunter.

You can read it here – Could Green Hydrogen be India’s EV Battery Solution?,

Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.

(This article is syndicated from) equitymaster.com,

first article