Is india ready for Electric Vehicles?

Recently, the Delhi Government has come out with the Electric Vehicles Policy 2020 in order to ensure that at least 25% of the registered new vehicles should be electric by the end of 2024. The Government of India has also come up with a number of policy initiatives for the faster adoption and manufacturing of Electric Vehicles. However, these Initiatives have so far had limited success.

Let us focus on the following dimensions:

  1. Need to Push for Electric Mobility
  2. Initiatives taken for Electric Mobility
  3. Challenges/ Concerns
  4. What should be done to address these concerns?

Need to push for Electric Mobility

Climatic change

India has committed to cutting its GHG emissions intensity by 33% to 35% percent below 2005 levels by 2030

Advances in renewable energy and battery technology

Lower cost of clean, low-carbon energy with higher energy densities, faster charging and long-lasting batteries.

Rapid urbanization

According to a recent study by WHO, India is home to 14 out of 20 most polluted cities in the world. Electric vehicles (EVs) can improve that scenario by reducing local concentrations of pollutants in cities. Data capture and analysis – Mobility has undergone a digital revolution. This has created possibility of a greater utilization of existing transportation assets to move towards electric mobility.

Opportunities through Improved battery technology

Advances in battery technology have led to higher energy densities, faster charging and reduced battery degradation from charging.

Energy security

EV’s will facilitate lower reliance on fossil fuel imports and at the same time reduce India’s Current Account Deficit (CAD).

Lower5Maintenance of Electric Vehicles

due to less number of moving parts.

NITI Aayog in its recent report has highlighted that making India’s passenger mobility shared, electric and connected can cut its energy demand by 64% and carbon emissions by 37%. This roughly translates into savings of Rs 3.9 lakh crores by 2030.

Initiatives taken for Electric Mobility

National Electric Mobility Mission Plan 2020

Aims to have 6-7 Million Electric Vehicles by the end of 2020. Implemented by Ministry of Heavy Industries and Public Enterprises.

National Council for Electric Mobility

Inter-Ministerial team headed by Minister of Heavy Industries to approve Electric Mobility Plans.

National Board for Electric Mobility

Inter-Secretarial team headed by Secretary, Department of Heavy Industries to recommend Policies for adoption of Electric Vehicles.

FAME Scheme (Phase II)

The Department of Heavy Industries is implementing phase 2 of the FAME Scheme (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) for a period of 3 years starting from 1st April 2019.

  • Objective of FAME Scheme :Target to achieve 6-7 million sales of hybrid and electric vehicles year on year from 2020 onwards.
  • Mandate: Demand Incentive and Charging Infrastructure.
  • Nature of Demand Incentive: The higher cost of Electric vehicles can act as prohibitive factor. Hence, the Government provides for upfront demand incentive on purchase of Electric Vehicles. This demand incentive leads to decrease in purchasing cost of Electric vehicle for the consumer. For example, to buy Electric Vehicle worth Rs 1.5 lakh, the customer would be required to pay only Rs 1.3 lakhs. The remaining amount of Rs 20,000 is later reimbursed by the Government to the manufacturer.
  • Applicability: Applicable for all vehicles (Two-Wheelers, Three-Wheelers, Four-Wheelers, Buses etc) used for both Public and Private Transportation. However, higher preference is being given for Public Transportation vehicles. Further, incentive depends upon battery capacity of vehicles. Higher the battery capacity, higher would be the demand incentive.

Challenges in the adoption of Electric Vehicles

In spite of these initiatives, the share of Electric vehicles in India has remained below 1%. This is quite low as compared to countries such as Norway where the share of electric vehicles is as high as 40%. Similarly, last year, China alone accounted for more than half of the global sale of Electric Vehicles. Some of the constraints and Challenges are:

Higher Dependence on Raw Materials

India does not have enough reserves of rare earth minerals such as Lithium, Cobalt etc. which are required for manufacturing batteries. Most of these minerals are imported from countries such as China.

Poor Charging Infrastructure

Once fully charged, the Electric Vehicles can run for an average maximum distance of around 250 km. Hence, unless the charging infrastructure improves, the demand for electric vehicles would remain lower.

Higher Capital costs

of Electric vehicles in comparison to conventional vehicles.

Lower efficiency of Electric vehicles

in terms of average speed and distance travelled.

Energy Insecurity

The Fossil fuels account for almost 65% of electricity needs in India. Hence, the higher demand for electricity to charge electric vehicles could lead to increased demand for fossil fuels.

Lack of skilled manpower

for the manufacture of Electric and hybrid vehicles.

What should be done to promote adoption of Electric Vehicles?

Revisiting FAME Scheme

India has a unique mobility pattern which is quite distinct from other countries. The vehicle fleet in India is dominated by two-wheelers which account for almost 80% of vehicles, while premium four- wheelers (costing more than 10 lakhs) account for only 2%. Hence, incentives have to be designed keeping in mind the unique aspect of vehicle fleet in India.

However, the demand incentive under FAME scheme depends upon the battery capacity. Higher the battery capacity, higher the demand incentive. Such an incentive structure tends to provide higher incentive for premium four-wheelers as compared to two-wheelers. Further,

Government’s additional

requirements on two-wheelers such as higher average speed and higher travel distance upon charging has led to absence of demand incentive on purchase of large number of electric vehicles.

Battery Swapping

The batteries account for around 50% of the Electric Vehicles and thus increase their cost. Hence, people should be allowed to purchase Electric cars without batteries. Later, the vehicle owner can fit the fully charged battery from a service centre owned by a private company. As and when, the battery runs out, the vehicle owner would pay replace the existing battery with another fully charged battery. Here, the vehicle owner would not bear the cost of entire battery, rather he would pay only for the charging. The batteries would continue to be owned by the private company operating the service centre.

Retrofitting Existing Vehicle Fleet

by enabling them to act as Hybrid Vehicles (both Petrol/Diesel and Electric).

Ensuring availability of critical and strategic minerals

such as Lithium, Cobalt etc by acquiring mines overseas. The setting up of Khanij Bidesh India Ltd. (KABIL) to ensure mineral security is a step in the right direction.

Providing charging infrastructure

The limiting factor of batteries on driving range may be addressed by developing charging infrastructure for fast charging of batteries.

Import Duty and Make in India

Finished electric cars should have highest import duty. However, components such as batteries, drive-trains etc. should have lower customs duty as compared to finished Electric cars.

GST rates

The GST rates should favour commercial vehicles in comparison to private vehicles.

Invest in Research and Development

in new approaches and technologies such as hydrogen fuel-cells, new battery- chemistries (with higher specific energy and energy densities) etc. Appropriate guidelines have to be laid down for providing tax exemption and utilisation of CSR Funds.

Added thrust on Renewable energy projecs

such as Solar, Wind etc. for charging of Electric Vehicles and to ensure energy security

Explore innovative incentives to promote Electric Vehicles

such as Doing away with Road Tax and Registration charges, Free toll, free parking, dedicated parking spaces in offices and residential buildings etc.

As discussed before, unlike other countries, the vehicle fleet in India is dominated by smaller vehicles such as Two- wheelers, Three-wheelers, shared four-wheelers (taxi aggregators such as Uber). Hence Electric vehicles policy must be tailor made to suit India’s needs and requirements. India has unique opportunity to take up leadership role in Electric Vehicles, emerge as global manufacturer and become Aatma Nirbhar. It has to leverage this opportunity through the measures highlighted above to push for electric mobility and achieve multi-faceted objectives- Addressing Climate Change and Pollution, Energy Security, Make in India and Job Creation.

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