Policy | With electric vehicles in fast lane, India needs the right spark

India is still at a nascent stage of the EV (electric vehicle) revolution, unlike some of its western counterparts, and even China. With less than 0.5 per cent of the overall automobile sales in 2019, EVs are yet to make a significant impact on the Indian market.

Yet, the growth of 53 per cent CAGR (compound annual growth rate) from 325,000 in 2017 to 759,000 in 2019 shows that there is ample underlying activity in the market. So, the right question is by when -- and not if -- would India be an EV nation?

A host of steps have been taken by the Centre to promote EV penetration, including earmarking a spend of Rs 10,000 crore during 2019-22 under the FAME-II (Faster Adoption and Manufacturing of Electric Vehicles in India) scheme. The programme has an express aim to incentivise the purchase of EVs for commercial purpose and setting up charging infrastructure, reducing GST rates for both EVs and related chargers to 5 per cent and relaxation of taxes and duties on the imported parts.

Despite these initiatives, the overall penetration of EVs was still very low in 2019. This was largely due to factors such as high upfront purchase price of EVs, non-availability of large scale public charging infrastructure, and very low levels of investments in localised manufacturing.

EV infrastructure development, local manufacturing and their parts require sustained focus from the Government to ensure any meaningful change on the ground. Subsidising is a short-term solution and only local production can bring the cost down of a new EV to an affordable level in the long term if these are to become mass transport options in India.

The announcements in the Budget have focussed on creating a demand for EVs, but there has been supporting regulation regarding supply-side efforts as well, particularly in the battery pack and cell manufacturing, which still make up a bulk of the EV cost.

Similarly, there must be sustained support from states if India wants to achieve its EV potential soon. Currently, only eight of them -- Karnataka, Delhi, Maharashtra, Uttar Pradesh, Telangana, Andhra Pradesh, Kerala, and Uttarakhand -- are making concerted efforts in this direction by putting in place EV policies.

Apart from supporting regulations for EVs, the systematic phasing out of internal combustion engines (ICEs) must be carried out. For three- and two-wheelers, the Niti Aayog has suggested a shift by 2023 and 2025, respectively, for new vehicles to be 100 per cent electric, which seems like a reasonable timeframe for implementation.

The long-term cost, including running and upfront cost, is now competitive, with conventionally fuelled two- and three-wheelers. However, in the case of 4Ws (4-wheelers), there are still challenges around the business model from the manufacturers’ side, concerns about infrastructure and mileage on the consumers’ mind. This is one area where apart from a few players, others are yet to make a big move.

Finally, India’s National e-mobility Programme aims to provide an impetus to the entire e-mobility ecosystem that includes EV makers, charging infrastructure development companies, fleet operators, service providers and the like. The Government is also looking at charging infrastructure and policy framework to ensure 30 per cent EVs in India by 2030.

As things stand, the targets proposed seem to be in sync with SIAM’s (Society of Indian Automobile Manufacturers) goal of EVs making up 40 per cent of all new vehicle sales by 2030. So, the automobile industry and the Government need to work in tandem to fulfil the ambition of being an EV nation.

Authored by (at the time of writing): 

Aryaman Tandon, Leader, Automotive Practice 

This post first appeared on money control and has been published with permission. Read the original here.

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