Climate Clock Podcast: Mercedes-Benz India CEO reveals how enviornment-friendly EVs are and much more

In episode four of the Climate Clock Podcast, CNBCTV18's Sonal Bhutra gets in conversation with MD and CEO of Mercedes-Benz India, Santosh Iyer, to learn more about the EV revolution, how much time will it take for electric cars to match the number of non-EV cars on roads, the mining of critical minerals and should your next buy be an EV? Tune in to find out more.

Sonal Bhutra: Electric vehicles is the buzzword, the future of green mobility as they say. But what are the parameters here? Why are companies focusing on it? And would this really be the greener alternative to the traditional vehicles? Are they really clean? There have been a lot of myths floating around as well. So we'll get you a deep dive on the electric vehicle market with one of the biggest manufacturer - we have with us, the MD and CEO of Mercedes Benz, Santosh Iyer with us on the Climate Clock podcast.

Sonal Bhutra: Mercedes Benz has launched a series of electric vehicle models. I just want to understand, practically, are we closer to the era where electric vehicles (EVs) on the road would be more than the traditional vehicles?

Santosh Iyer: So I think the total number of EVs on the road will still take time, because there's a lot of pending population. We have been selling combustion engine for so many years. So for EVs to overtake will take at least 10 to 15 years, if not less. But in terms of new car sales in India, 1 to 1.5% of the cars sold are EVs, and when you talk about the luxury segment it is around 5%. So that's a big shift in terms of new car sales coming in and trying to replace the combustion engine. If you want to meet the very tough emission norms of the future- you have to almost go through zero tailpipe emission- so driven by legislation and then combined with consumer interest, and manufacturers like us who believe in a sustainable future, I think a combination of all three should accelerate much faster.

Three years back in 2020, when we launched the first EV, I was asked the question, why are we launching an EV in India? Today when we launch an EV, that question is no longer there. Now, they are asking what is your percentage, how far the EV will go, how fast it will accelerate? So, I think the maturity is coming in, but there is still a bit of way to go.

Sonal Bhutra: So is it more difficult to sell an EV in the times that we are in versus a traditional engine car?

Santosh Iyer: No. For two reasons- first is if you ask any customer and when I meet a lot of people, they all say Santosh, my next car is an EV. So I'm happy because now EV is the future. But then when I ask them why not today because there are reasonable options at the top end and the midpoint of the spectrum? Then there is a list of myths coming out. The second point is the price point. EVs are more expensive compared to combustion engines. Although, in the total cost of ownership EVs are better because you don't have to start filling fuel and electricity is much cheaper. But the initial purchase price being higher, that puts people to says should I postpone? So these two elements actually don't make it very easy for adoption. It needs a lot of education for customers, but once somebody is in an EV, we have hardly seen them going back to combustion engines. They're big converts, not only from the driving and the overall feel, and they feel more responsible, also going into an EV.

Sonal Bhutra: Do you think electric vehicles and traditional vehicles they will have to coexist? Is that coexistence important as well in the world that we are living in?

Santosh Iyer: Not really, I think electric technology has already come of age. So now for EVs it's a matter of time, based on the consumer acceptance and also the infrastructure and all the other elements, I think we should be able to transition to 100% EV ecosystem.

As a company, we have said that by 2030, we will be putting the company into a position to be 100% EVs, wherever markets allow and 2030 is not far off, we are talking about six to seven years from now. The final target picture is not EV, the final target picture is carbon neutrality. And here we have said that we have an Ambition 2039- we would be one of the first automotive OEMs to go into a carbon neutral production, not only production, but the entire value chain when it comes to cars. And that's something a big step and we should achieve 50% of this goal by 2030. So we are not actually postponing, we are preponing targets. And if you compare that with the EU, which says 2050 or India with a goal of 2070, I think as a company, Mercedes Benz has set itself up for a very ambitious carbon neutrality goal.

Sonal Bhutra: In that case, there are a couple of things that we need to take care of as well. You spoke about how you'd be carbon neutral before what you have targeted, but an entire supply chain goes into that. We have been talking about lithium, cobalt, nickel, a lot of these materials which are critical minerals which are used In the production of battery, which is ultimately used in an EV, is that something which could be a tricky situation because we are dependent on imports for that, right?

Santosh Iyer: Let's look at combustion engines- right from steel, to the entire combustion engine manufacturing, foundry processes there, the fuel that we are using is again a fossil fuel which we are extracting and then using it and there are similar arguments against the EV as of now, you have to extract rare earth minerals like lithium cobalt, but the difference between combustion engine and EV and this is the tipping point, at the end of 10-20 years, the batteries can be repurposed for storage, at the end of another 10 odd years if the batteries are not now suitable for repurposing, even today, we are able to recycle 96% of those rare earth minerals to make a new battery. That means the cobalt, the lithium, all those rare earth minerals 96% of them can be recycled and used, which is not possible in a combustion engine.

Today, you dismantle the car, secondly, the fuel that you're burning is gone any which ways and there is no value left. So the circularity when you compare an EV to a combustion engine, the circularity is significant. And what we say is, you have to mine your own car at the end of 15 years to make the new car. Whereas in the current traditional model, you will have to continue to mine steel, continue to get new foundry material. So there has been a lot of study on what time it takes to be fully carbon neutral. It's a big task for sure. But we are there and 96% is not a future data, it is possible today and we do that in our factory back in Germany. The battery if it goes back for any reason, we are able to extract 96% of that and again make a battery out of it.

Sonal Bhutra: Okay, that is so interesting because there have been a lot of myths around EVs are not that safe, or I would say environment friendly because there's a lot of mining. So you are saying that whatever is mined is basically put back to use and that can be used again, in order to ensure that there is circularity when we use EVs.

Santosh Iyer: Exactly. I think we are still in the tipping point, a lot will further develop but it's the same chicken and egg story. You can wait for everything to happen and then transition or at some point of time we transition. We transitioned into mobile phones when even today you don't have the best network in many places. I know personally where to make a call and where not to make a call while going home because I know there will be a drop. So we have learned to live with it, we have learned to live with an infrastructure which is not there but it is a huge positive use for us - a mobile phone that we use. Similarly EVs, I think if we really care for the environment, Covid was a very clear statement that when there were no cars on the road, all those birds coming out, clean air, you would have seen those Instagram reels and stories, people saying wow, so I think we don't need any laboratories to prove us that automobile is a source. We being an OEM can shun away responsibility or we can be responsible to say fine, there is no immediate alternative to shift, but we have to shift, we have to shift to greener zero emitting vehicles, which is EV as of today. Maybe there are better technologies in the future and therefore I don't want to say now that the future will only be EV. Maybe in 2050 or 2070 there are new developments. Mercedes Benz invented the car 138 years back, we continue to invent it till today. And we feel even tomorrow we will reinvent, but today EV is what we feel is the solution at least for the next 15 to 20 years till the time we find more solutions.

Sonal Bhutra: There is no dearth of innovation and you've proved it time and again. So in that case, what is EV as a percentage of your overall portfolio sales right now? You spoke about how your targets will be when it comes to decarbonisation, but five years down the line, what will EV contribute to your overall sales?

Santosh Iyer: So globally, we are already at around 20% When you compare EVs and PHEVs and all those battery related technologies and cars and we did just a huge number of cars January to September. In India we are still 4-5%, It's still nascent. One way to look at is we are better than mass market which is at 1-1.5. But I think there should not be a rush for numbers at this stage. What you need is the customer education to ensure that once they shift to an EV, we need to ensure they are in the ecosystem, we need to ensure charging is available when they are doing intracity. A lot of customers today are buying it for in-city use, still fearing not to travel intercity but we have to set up charging. For example Bombay to Goa, now I have a fast charger in Vashi, I have a fast charger in Pune, one in Kolhapur, one in Goa. So, one need not plan travel. They can fearlessly take the car anywhere else. And I think these things also we should focus on and the numbers is an outcome. I think at a point of time when you have the full product portfolio coming when you have the right price points as well - then also on the policy side, for example Maharashtra is a forward looking state. So it has a zero registration tax. Generally it's 15-20% on cars but in Maharashtra it's zero. But you go to Telangana they have already 18% tax on EVs, you go to Gujarat, there is 12 to 18% tax on EV. So I think the policy on taxes also once it becomes consistent, cost of ownership is there. The green number plate, as you said, is a great initiative by the government. This will accelerate transformation. So we have to be patient, we have to work on our basics, getting the right products, getting the right charging infrastructure, educating the customer, and I'm sure volumes will follow.

Sonal Bhutra: Okay, so that's a great approach also. So you spoke about how people are thinking. Okay, my next car would be EV. So range anxiety, whether once I get into the car, I don't know how far it will go once I charge it. So some aspects of charging, how long does it take? And they also have the idea that once I charge it, if I don't use it, battery will die down. Is this something that happens?

Santosh Iyer: See, the biggest culprit of an EV is a mobile phone, in my view, because whatever questions that you asked is what exactly a customer asked us. And it's because the usage, their mobile phone, battery drains by evening, you use it or don't use it, the battery is going down. In a mobile phone, after three to four years, the life of the battery comes down, the cost of the mobile therefore comes down because the battery life is not there. If you drop a mobile phone in the water, there is a problem. So you feel again, there is an issue there. Therefore, if you look at an EV car battery, it's a completely different technology to start with. You can charge a car and if you don't even use it for a month, the range may drop by a percentage point that's it. So the energy is stored, it's not it doesn't deplete at a fast pace.

Secondly, you use an EV in a traffic city like Bombay or any other cities in India, the range will be much higher, because the more you are breaking your generating charge. Actually the range depletes in highways when you're doing the other way around, it's completely different to a combustion engine where on a highway, you may get a better mileage as they say compared to a city condition. So ideally in city, you get a better range compared to even intercity travel.

Third, the life of the battery, these can last - today we give a 10 year 100,000 kilometers warranty on a battery, even after that for another 5-10 years, depending on the number of charges these batteries just last. Let's assume what happens after that, then these batteries can be sold with a very good price for secondary storage, because all these solar part - India is doing a lot of play on green energy. So, you will need batteries to store power for the night. And these are these car batteries which can be used and again there is a big life. And after that you can again recycle and make a new battery. If 96% of the battery can be re utilized for making a new battery, imagine the price and the value of the battery will not degenerate.

So, the customer apprehension that my price and the value goes down and the resale value goes down is completely non-called for and therefore we are now today giving guarantee. We are saying we will give you the same guarantee as a combustion engine after five years. So just keep that aside, start using.

The last one - a lot of people blame the infra. They say, Santosh, today a lot of energy generated is not renewable. So based on that how green is my EV? My simple answer is today by facts 42% of India's energy is from renewable sources, that's big, it's as good as Europe. There is a clear ambition to go up to 50%. There is much more ambition to go to more and more non-fossil fuel base. Again, if you wait for 100% of energy to be generated from Green, there is no target landscape and for that you need green hydrogen coming in that we supply to power plants. You need certain other things coming up. So as a responsible customer, if you really believe in sustainability, you can start using an EV even with a current power composition mix. We have done our research that if you drive an EV for 50,000 to 60,000 kilometers in the lifecycle, you are already doing better than combustion engine. So postponing it for blaming it on somebody, I think is more of a lazy approach and not taking the big step and being responsible.

Sonal Bhutra: But the range anxiety still remains also because as you said infrastructure has to develop across a lot of states - Maharashtra is good policy wise, some states might not see that much of infrastructure development when it comes to charging. But once you charge, on an average, how long can an EV go?

Santosh Iyer: We have our EQS which is top of the line and the certified range is 857 kilometers and it goes more than 650 to 700 kilometers. I'm using an EQS I do Mumbai Pune shuttle at least three to four times a month and I don't need to charge at all because for sure I have enough charge once I even go back. I have even taken the car to Goa, no issues there.

If you look at EQB's I'm saying the in between segments, they have 500-550 kilometers of range. So technically a normal Mumbai Pune use case you don't even need to charge. The biggest advantage of an EV is you can charge - the car most of the time is idle at home or in office, so if you have alternating current (AC) chargers, you can charge the car, you can actually save the trip to the fuel station and you don't need to charge it.

Now let's say you need to charge because you don't have infrastructure at home or in office, you are relying on public infrastructure, I think there is a lot of good work done by companies like Tata Power, Zeon and to name a few. These guys have set up a lot of charging infrastructure and fast charging. We have 180 kilowatt chargers installed at our dealership, you can charge the car in 15 minutes like a fuel pump. You come in and 20% to 80% charge can be in 15 minutes, which means you get 600-700 kilometers of range in 15 minutes time and then you can proceed. So it's developing- to give you some numbers India has 60,000 petrol pumps, we have already 6,000 EV charging stations. But yes, the 6,000 EV charging stations are not of high quality because some of them have low kilowatt chargers, some of the chargers are not functional, which is also a complaint by some of the customers that when they reach a charging station, it doesn't work. But it's all a matter of time, the good part is it's all coming up.

We don't have 10% car park but we have 10% of EV charging stations already at least in number terms. So I'm sure there are a lot of businessmen in India who are investing in the EV charging space, lot of startups and it's today easily possible- we have done the golden quadrilateral, we have taken the car to Khardung La Pass, we have done everything else to show that you can take the car in any part of India. The only thing is maybe I would also admit you need a bit of planning. But can't you plan a bit for the environment? That's my only question. If you want to leave this planet for your children, for yourself in a better way, can't you do that bit? That also not on a daily basis, once in a while when you're doing intercity you just need to plan and it's available in a decent way across India.

Sonal Bhutra: So in that case, what are your plans - any new launches this year or next year in the EV portfolio?

Santosh Iyer: No we just launched the EQV SUV. As I said globally there is a big demand for EV. So for us we are in a situation where the global demand outstrips a bit of supply that we have in terms of EVs and we want to introduce cars to the market where we are able to supply cars. There is no point in launching cars and then we don't have it, it only causes disappointment among customers. So we are we just introduced the EQV SUV, we are the first luxury brand to localize an EV in India. So we produce the EQS sedan in Chakan in Pune, then we have an EQB which is a seven seater EV around the Rs 80 lakh price point. I think we are we are working a lot on infra, a lot on consumer education. This month, 26th of October was World Sustainability Day, so we celebrated Sustainability Fest and we are doing driver training programs.

Guys when they buy an EV there is so much of anxiety to keep charging it, but we say it has a range. When your fuel is showing half tank you don't go to the petrol station, but here the moment the car drops to 50% they have the anxiety let me go and charge. So a lot of work happening in this month and in the future as well to educate customers and I think volumes will come it's just a matter of time.

Sonal Bhutra: Mercedes is a car which is usually chauffeur driven. In this case, are you seeing people want to drive it themselves when it comes to EVs?

Santosh Iyer: I think in Mercedes Benz also even in combustion engines, the weekends are driven by customers. The weekdays because of traffic, parking, and they also work in cars, they use chauffeurs for commute. So when it comes to EVs definitely there is more driver oriented because the thrill of driving is better, it's more hassle free. The cars are also much better in terms of noise, you can work in the car, watch movies in the car, in a much better environment compared to a combustion engine as such.

I am saying this because we make one of the world's best cars like the S-Class, which is a combustion engine, then we make the EQS as well. But we are still confident that I think EV is much more driver oriented for sure at the same time, it will take some time for EVs to be backseat oriented, because most of the technology is in the front, you have the hyper screen these cars are made more for the European and American setup where customers drive themselves. So it takes time but on the EQS we got customer feedback, we have already put a rear seat entertainment behind so that they can watch a Netflix movie when they are driving in their car.

Sonal Bhutra: So as a manufacturer, what are the biggest differences that you've seen in manufacturing an EV versus a IC engine car? Is it costlier to manufacture an EV?

Santosh Iyer: For sure, I think the total cost of an EV is significantly high because of two reasons- one is of course the battery, as we discussed a lot of rare earth minerals etc materials go into it and second, EV we are also looking from recyclability. For example, my EQS has dashboards made out of fishing nets I am using recycled plastic. Now all this is also cost though it sounds nice and cheap, but it's not because recycling also you have to invest on some of them. So to make the car more efficient tyres, for example, are very different on an EV compared to a combustion engine because of the range that you want to get and all the sustainable materials that goes into the car. So definitely the suppliers are different, the manufacturing processes are different. We call it a high voltage organisation because people who work on these cars they need to be trained differently because there's also risk while you work on these batteries unlike engines where you can work with gloves or bare hands. But in EVs you need to really be cautious a bit while you work on these cars. So, a lot of training a lot of up skilling is required when it comes to EVs.

Sonal Bhutra: So, in that case, as we were speaking about some myths that people have, I read some of them, I got a lot of questions as well. So I would like you to bust some of these myths as well. So the first one is electric vehicles are uneconomical, what do you have to say about that?

Santosh Iyer: I would say no way. Initial purchase price is higher, but in the lifecycle it is much cheaper. In terms of running costs, it goes to the workshop once in two years compared to once a year for the combustion engine. So that answers a lot.

Sonal Bhutra: EV batteries last only few years, so that doesn't help the cost?

Santosh Iyer: That I clarified, EV batteries last long, long and long because 10 years we give a warranty, you can go up to 15-20 years and after that it can be stored as recycled batteries for storage. It can be repurposed. So there is value in the battery and it lasts long.

Sonal Bhutra: The emission impacts of an electric vehicle are more than a petrol or diesel vehicle.

Santosh Iyer: As I said, we have done a study, even if you use the current power, which as I said 42% of India's power is from non-fossil fuel based. And if you do a full calculation on this, with 60,000 odd kilometers of running an EV over the life cycle, not in one year, but over the lifecycle, you are able to mitigate all the effects. And the EV is much cleaner to the environment. Of course, upfront it gives you zero tailpipe emissions. I will just say go to the mall car park and stand there for a couple of minutes, the emission that you get you don't feel comfortable, but if you have EVs around you then you can stand there, no issues because you don't feel it. So you don't need laboratory tests, you don't need Google research, you can test yourself and then feel the difference.

Sonal Bhutra: The last one is electric vehicles get damaged in waterlogged areas and are dangerous to charge in the rain?

Santosh Iyer: So our cars, I can talk about them, you can put them in one meter of water for half an hour, nothing will happen. So to tell about damages, even combustion engines, if you go through water flooded areas, you get a hydrostatic locks, during the monsoons in Mumbai, you have many cars, in workshops and stuff. But EV is much better because here you don't have any moving parts. In a combustion engine, it actually sucks in water, because the air filter is sucking in whereas in EV there is nothing of that sort. EVs are made to the highest safety standards. Let me tell you, three days back, we crash tested two EVs in front of the public in Germany, we showed them that two EVs colliding with each other, the occupant safety was as good or better than the combustion engine. So we got all the stars certified because there's risk of fires, there is risk of thermal runway. So we said, what better than crashing two EVs head to head in front of public? So we have even demonstrated that to remove these myths and misconceptions.

Sonal Bhutra: Right now, when you're looking at the global markets, which is one of the biggest EV markets that you're seeing, is it seen more in the US, is it Europe? Where do we stand in the world ranking?

Santosh Iyer: If I look at Europe, Europe would be still around 12%. I would say 6% odd if you take the whole continent, but if I look at Norway, it's around 80%, Sweden 32%. So there are countries within Europe which are very fast in electric transformation. Europe I think is 12%. US is at 6%, China is at 22% when it comes to EV penetration to the total sales. So different markets are at different maturity levels.

India, as I said, a mass market is around 1.5%, luxury is around 5% which is not bad. So I think it's a matter of time. As we now move forward there needs to be policy consistency. I think one of the key things even in India - the government has a 5% GST on EVs compared to 48% to 50% on combustion engines, this policy has to continue till at least 2030. Because this is one of the major advantage for customer to buy a car, the pricing is also much more aggressive in today's time. And if this continues, I think the adoption will happen faster with more education, more availability, current EV consumers swearing by their cars and recommending other EV owners.

Sonal Bhutra: You did mention that we need policy consistency, one in terms of GST that you spoke about, we do have tax sops as well for an individual in terms of a rebate of Rs 1.50 lakh if they go ahead and buy EV. Is there anything else that you think that the government should do or the existing policies as is should continue for a period of time?

Santosh Iyer: I think one of the biggest advantages that very few people know and this was told to me by one of the large tax consultants or firms in India, he said I bought it because EVs gives me 40% depreciation, compared to a 15% on the combustion engine. So in two, three years, it is off my books, and it is much better. So I think the government has done its bit with GST, it has done its bit with depreciation, because 70-80% of our customers buy it on company name, so for them, this is a great investment because they can write it off and use the asset.

The third thing is the state governments and this is where there's inconsistency between Maharashtra to Gujarat and that has a major variation in terms of on road pricing of the cars. So we are still requesting state governments to have a pragmatic view. As I said Maharashtra and Karnataka are great examples, but you have Gujarat and Telangana as not so great examples. Telangana actually had road tax concession, our penetration was 10% there already, and then they withdrew it because of lack of budgets and subsidies. So I think the government's across have to really look at it from a long term view. And as long as they commit policy consistency, it's up to us as OEMs and private sector to really push the agenda, push the narrative. Our shareholders value us being a completely carbon neutral and therefore, we have a commitment and we need to drive this holistically.

Sonal Bhutra: Apart from Mercedes EV, which is the other EV that you like, from any other company?

Santosh Iyer: I have a lot of respect for Tata’s in India. For me, the Nexon actually is really a game changer in what they are doing in India. I have driven that car, and I recommend a lot of people. At this stage sometimes they say Mercedes EVs should I - I say try because the use cases are similar. And I think that's a great product and they have enhanced it beautifully I would say.