The global automotive industry is undergoing a paradigm shift at present in trying to switch to alternative/less energy intensive options. India, too, is investing in this electric mobility shift.
The burden of oil imports, rising pollution, and as well as international commitments to combat global climate change are among key factors motivating India’s recent policies to speed up the transition to e-mobility.
Growth targets of Electric Vehicle in India:
The Indian automotive industry is the fifth largest in the world and is slated to be the third largest by 2030. Catering to a vast domestic market, reliance on the conventional modes of fuel intensive mobility will not be sustainable. In an effort to address this, federal policymakers are developing a mobility option that is “Shared, Connected, and Electric” and have projected an ambitious target of achieving 100 percent electrification by 2030.
According to an independent study by CEEW Centre for Energy Finance (CEEW-CEF), the EV market in India will be a US$206 billion opportunity by 2030 if India maintains steady progress to meet its ambitious 2030 target. This would require a cumulative investment of over US$180 billion in vehicle production and charging infrastructure.
Another report by India Energy Storage Alliance (IESA) projects that the Indian EV market will grow at a CAGR of 36 percent till 2026. The EV battery market is also projected to grow at a CAGR of 30 percent during the same period.
Growth projections and government policies:
Projections:
In April 2019, Niti Aayog, the federal think tank, published a report titled “India’s Electric Mobility Transformation”, which pegs EV sales penetration in India at 70 percent for commercial cars, 30 percent for private cars, 40 percent for buses, and 80 percent for two- and three- wheelers by 2030. These targets, if achieved, could lead to a net reduction of 14 exajoules of energy and 846 million tons of CO2 emissions over the deployed vehicles’ lifetime. Electric vehicles sold until 2030 can cumulatively save 474 million tons of oil equivalent over their lifetime, worth US$207.33 billion.
Policy measures:
Federal policy:
Several fiscal and non-fiscal measures have been put in place to facilitate the adoption of electric mobility. They are as follows:
National Electric Mobility Mission Plan 2020 (NEMMP):
It was launched in 2013 by the Department of Heavy Industry (DHI) as a roadmap for the faster manufacture and adoption of EVs in India.
FAME Phase I:
As part of the NEMMP 2020, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME India) Scheme was notified in April 2015, to promote the manufacture of electric and hybrid vehicle technology. It has mainly focused on four aspects – demand creation, technology platform, pilot projects, and charging infrastructure. For demand creation, incentives have mainly been disbursed in the form of reduced purchase prices.
FAME Phase II:
Launched in 2019 for a period of three years, this scheme has an outlay of US$1.36 billion to be used for upfront incentives on the purchase of EVs as well as supporting the development of charging infrastructure. FICCI has asked for continuation of FAME II till 2025, along with short-term booster incentives to enhance demand.
Ministry of Power:
It has clarified that charging EVs is considered a service, which means that operating EV charging stations will not require a license. It has also issued a policy on charging infrastructure to enable faster adoption of EVs.
Ministry of Road Transport and Highways:
It has announced that both commercial as well as private battery-operated vehicles will be issued green license plates. It has also notified that all battery operated, ethanol-powered, and methanol-powered transport vehicles will be exempted from the commercial permit requirement.
Department of Science and Technology:
It has launched a grand challenge for developing the Indian Standards for Electric Vehicle Charging Infrastructure.
Niti Aayog:
The National Mission on Transformative Mobility and Battery Storage has been approved by the cabinet, and the inter-ministerial steering committee of the Mission will be chaired by the CEO of Niti Aayog. The Mission aims to create a Phased Manufacturing Program (PMP) for five years till 2024, to support setting up large-scale, export-competitive integrated batteries and cell-manufacturing giga plants in India, as well as localizing production across the entire electric vehicle value chain.
States/union territories policy:
As of today, 27 states and UTs have formulated strategy plans for transforming mobility to provide their citizens with safe, inclusive, economic, and clean transport options. While some states like Karnataka and Tamil Nadu have had a head start due to preplanned public policies, targeted investor incentives, as well as support infrastructure, other states too have drafted policies to stimulate market demand and create infrastructure.
Challenges faced by EV industry:
Insufficient charging infrastructure: In 2019, there were only 650 charging stations in India as against over 0.3 million in China. Lack of sufficient charging infrastructure is one of the primary reasons why customers often refrain from purchasing EVs.
High costs:
Along with the range anxiety (kms/charge), another major concern among the potential customers is the current high price of EVs. As compared to lower-end (internal combustion engine) ICE cars, electric cars in the same segment tend to be more expensive. This is mainly because of the higher cost of technology used in the EVs, which constitutes a substantial portion of the cost, not leaving much scope for other features usually available in premium cars. It is expected that in future, with increased and market competitiveness, the price factor will be rationalized to suit the price sensitivity, which in India is a primary factor influencing purchase, especially in the lower-end car segment.
Limited options:
Since it is still a budding industry in India, customers have a very limited range of products to choose from. Increased investment in the sector will make it more competitive in due time and this will help create further demand.
Lower mileage:
Since the industry is young, there is immense scope for EV. As of today, EVs in India are not cost competitive to an average customer as internal combustion engine (ICE) vehicles prove to be more cost effective.
Higher dependency on imports:
Reliance on imports of battery as well as other components is also one of the factors adding to the cost of EVs in India.
Grid challenges:
Another concern is regarding the price of charging EVs at private charging stations once EVs become mainstream. According to Brookings India, projections for 2030 show that even with a fair penetration of EVs, the increase in demand for electricity is likely to be about 100 TWh (tera watt-hours) or about four percent of the total power generation capacity. So, increasing methods of power generation are necessary to meet that growth in demand.
Key takeaways:
Ultimately, the scope of India’s EV market growth rests on availability of capital for original equipment manufacturers, battery manufacturers, and charge point operators as well as improvements to infrastructure and diversified options for consumers.
Realizing India’s EV ambition will also require an estimated annual battery capacity of 158 GWh by FY 2030, which provides huge investment opportunities for investors. Enabling policy support measures are a critical need at this juncture.
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