India is still at the nascent stage of the EV revolution. With less than 0.5% of the overall automobile sales in 2019, Electric Vehicles are yet to make a significant impact in the Indian automobile market. Yet the growth of 53% CAGR from 325K in 2017 to 759K in 2019 shows ample underlying activity in the market. So, the question is by when India would be able to lead in Electronic Vehicles?
Efforts by the government
A host of steps and efforts have been taken by the Union Government to promote EV penetration in the country such as earmarking an investment of INR 10,000 Crore from 2019 to 2022 under the FAME-II – Faster Adoption and Manufacturing of Hybrid and Electric Vehicles scheme for:
- Incentivizing purchase of EVs for commercial purposes
- Setting up charging infrastructure
- Reducing the GST rates for both EVs and the EV chargers to 5%
- Relaxation of taxes and duties on the imported EV parts
Despite these Government initiatives, the overall sales of EVs especially in the passenger vehicle segment did not show much improvement in 2019. This was largely due to factors like high upfront purchase price of EVs, non-availability of large scale public EV charging infrastructure, and very low levels of investments in localized EV manufacturing which would reduce the cost of EV components.
The supply side of infrastructure
EV charging infrastructure development and local manufacturing of EVs and their parts are the areas on which there must be a sustained focus from the Government to ensure any meaningful change on the ground. If EVs are to become a mass transport option in India, subsidizing is a short-term solution as in the long term only local production would be able to bring manufacturing costs down to affordable levels.
Government announcements for FAME-II have focused on creating a demand for the EVs. However, there is a need for supporting regulation regarding the supply-side efforts as well particularly in the areas of the battery pack and cell manufacturing which still make up for the bulk of the EV costs.
Support from states
Similarly, there needs to be sustained support from the state Governments if India wants to achieve its EV potential in near future. Currently, only eight Indian states; Karnataka, Delhi, Maharashtra, Uttar Pradesh, Telangana, Andhra Pradesh, Kerala, and Uttarakhand are making efforts in this direction by putting in place Electric Vehicle policies.
EV in 2W, 3W, and 4W
Apart from supporting regulations for the EVs, Internal Combustion – IC engines need to be phased out systematically. For instance, in the case of three-wheelers and two-wheelers, NITI Aayog has suggested a shift by 2023 and 2025 respectively for new vehicles to be 100% electric. It seems like a reasonable timeframe for implementation as long-term cost, including running cost and upfront purchase cost is now competitive with conventionally fuelled two and three-wheelers. But in the case of four-wheelers, there are still challenges around the business model from the manufacturers’ end and apprehensions around infrastructure and the mileage from the consumers’ side. As a result, in the four-wheelers sector, only a handful of companies could make a move to launch Electric Vehicle variants.
Long term goals
Finally, India’s National E-Mobility Programme 2020 aims to provide an impetus to the entire e-mobility ecosystem that includes Electric Vehicle manufacturers, charging infrastructure development companies, fleet operators, service providers, etc. The Government has also said that it is looking at charging infrastructure and policy framework to have 30% of new vehicles sold in India as Electric Vehicles by 2030. As things stand now, the proposed targets seem to be in sync with Society of Indian Automotive Manufacturers – SIAM’s desire that 40% of all new vehicle sales in the country should be all-electric by 2030 and both industry players and Government must work together for India to achieve its ambition of being an EV nation.
As the new-age consulting firm, Praxis Global Alliance is changing the way consulting projects are delivered, uniquely combining practitioner expertise, AI-led research approaches, and digital technologies. We have been supporting Automotive players and ancillary industries to adapt to the changing distribution landscape in India and globally. Follow us and keep track of regular insights from our work and the experiences of our leadership network, visit our website or click to connect
Image source: Pexels