As the world is continually advancing towards automation, digitalisation and electrification, we hear phrases such as “Electric vehicles are the future” often tossed around  –  and we tend to invariably agree. After all, they do away with petroleum-based fuels, are cost-effective in usage, require low maintenance and emit no greenhouse gases – sounds like a mix of all the right components to drive a surge in popularity, right? So, where does India stand in this regard? And, more importantly, where is it heading?

To answer these questions, a good place to start would be to examine our targets, incentives and attitudes before we speculate. India has a vast domestic market to cater to, therefore relying on the conventional modes of fuel-intensive mobility is far from sustainable. In an effort to address this, federal policymakers are developing a mobility option that is “Shared, Connected, and Electric” – NITI Aayog has EV targets of electrification of  70% of all commercial cars, 30% of private cars, 40% of buses, and 80% of two-wheelers and three-wheelers by 2030. But, with 9 years to go, are we on the right course to meet this goal? 

There has been much discussion around the feasibility of this target, and it has not been free from scepticism. However, recent strides have fueled a revival in momentum – mitigating these apprehensions to an extent and bringing India closer to meeting a goal that at first glance may have seemed entirely unattainable. But, before we dive into assessing our progress, it’s worth considering the significance of EVs, in the bigger scheme of things.

So, what does India gain from the deployment of EVs?

 India stands to benefit from many angles by making this shift. For starters, our relative abundance of renewable energy resources and availability of skilled manpower in the technology and manufacturing sectors puts us at an advantage with respect to the environmental aspect of adopting electricity-powered vehicles – because as we simultaneously adapt to both cleaner energy sources and electric vehicles, we get substantially close to delivering on our part in the global climate change mitigation and sustainability efforts. 

In fact, India has been at the forefront of aligning its policies with its pledge to the Paris accord on climate change, signed in 2016. The accord aims to propel initiatives to limit the global temperature rise to 1.5ºC above pre-industrial levels, alongside developing the ability of countries to deal with the impacts of climate change. Now, the energy sector contributes 73% of GHG emissions globally, with transportation accounting for 15 per cent of total emissions – in India too, transportation has a similar share. Indian transportation sector accounts for one-third of the total crude oil consumed in the country, where 80% is being consumed by road transportation alone. It also accounts for around 11% of total CO2 emissions from fuel combustion. Sustainable transportation is therefore the need of the hour –  and electric vehicles may just be the solution. Studies have shown that electric vehicles can significantly bring down pollution levels and thereby ensure deep decarbonization in the transportation sector, helping lead India to a zero-emission status, along with reducing our dependence on crude oil imports, thus making us more self-reliant. To lay out a roadmap, however, we need to first analyse more thoroughly what the problems currently are. 

 The question arises; where do we currently stand with respect to this shift?

Though the Indian government first announced 100% electrification in transportation by 2030, realising the non -viability of such an ambitious goal, it has now set slightly easier targets to meet. The National Electric Mobility Mission 2020 has succeeded in creating major policy discourse on Electric Mobility among all stakeholders, but numerous hurdles still remain. 

The EV problem summed up :

BARRIERS TO ELECTRIC CHARGING INFRA	BARRIERS TO ADOPTION OF EV’S
1.      Uncertainty around EV penetration in India 2.      Lower capacity utilization 3.      High cost of finance 4.    Land identification and allocation Issues related to administrative clearances 5.      No mandate for Discom to develop charging infrastructure	1.  Insufficient charging infrastructure 2.  High cost of EVs and dependence on imported batteries 3.  Absence of adequate financing support 4.  Lack of public awareness

From the above points, it is clear that problems relating to the inadequate ecosystem, cautious manufacturing and consumer hesitancy are inextricably linked. It can be said that the ‘EV Problem’ is akin to the classic chicken-egg problem and existing policies have not adequately addressed this issue.  

As EVs are at a nascent stage, policy and regulatory measures are crucial to providing the necessary push to the development of the electric mobility ecosystem. Various government schemes have been launched under the aegis of The National Electric Mobility Mission Plan.  The Fast Adoption and Manufacture of Electric (and Hybrid) Vehicles (FAME) is probably the most significant program.  

Broadly, the frame-work for NEMMP has been :

1. Permissive legislations: Legislations to allow usage of electric vehicles in various areas
2. Operational regulations: Use of legislation framework and regulations aimed at setting safety regulations, emission regulations, vehicle performance standards, charging infrastructure standards, etc.
3.  Fiscal policy measures and Trade related policies for shaping the market, imports and exports.
4. Manufacturing policies aimed at encouraging investments. Specific policies aimed at incentivizing manufacturing and early adoption of electric vehicles through demand creation initiatives
5. Schemes and pilot projects for facilitating infrastructure creation
6. Policy for facilitating research and development

Here is a brief outline of FAME:

Phase I

• Initially launched for over a two-year period starting from FY 2015-16 to FY 2016-17 with an overall outlay of INR 795 Cr. The scheme was later extended four times for six months each with an additional outlay of INR 100 Cr.
• The funds were used to provide direct subsidies to the EV buyers. Along with direct subsidy, grants for specific projects under pilot projects were sanctioned. Also, R&D/technology development, and public charging infrastructure components were sanctioned under the scheme too.
• However, only 41% of its overall outlay of INR 895 Cr was utilized.
• Although the FAME I scheme failed to utilize sanctioned funds, it has provided the stepping stone for the uptake of electric mobility in the Indian market. The scheme was successful in creating awareness and momentum for electric mobility in the market.

Phase II

• In March 2019, the MoHI&PE notified FAME –II scheme with an increased layout of Rs 10,000/- crores, which includes a spillover from FAME-I of Rs 366 Cr.
• Period for Phase 2 of the FAME scheme was from FY 2019- 20 till FY 2021-22. FAME II aims to leverage the buzz created by FAME I to create a platform for the EV industry to take off in the country.
• The scheme is focused on promoting demand – 86% of the outlay is reserved for demand incentive. Creating demand is indeed a significant aspect of the EV deployment – not only do consumers tend to be averse to making changes but even if they overcome the psychological factor hampering the shift to EVs, any potential growth in demand will diminish if it’s not sufficiently catered to.  

Apart from this, the government has tried to liberalize the charging infrastructure market significantly. It has de-licensed the charging infrastructure business and specified guidelines and standards for charging infrastructure for electric vehicles, thereby ensuring a roadmap for the development of charging infrastructure. Additionally,  it has introduced various financial incentives to reduce the upfront cost of EVs and charging infrastructure.

While the Government has certainly  taken crucial steps towards faster adoption of EVs, sales penetration stands nowhere near the planned target level. Interestingly the Electric Vehicles fall under the ambit of 7 Union Ministries. These include:

•         Ministry of Heavy Industries and Public Enterprises (MoHI&PE)
•         Ministry of Road Transport and Highways (MoRTH)
•         Ministry of Power
•         Ministry of Housing and Urban Affairs (MoHUA)
•         Ministry of Finance
•         Ministry of Environment, Forest and Climate Change
•         Ministry of Science and Technology

Owing to the federal structure of India, however,  state governments have major sway in matters of mobility. But, in addition to the union government initiatives, only the following 13 Indian States have notified their EV policies thus far: Delhi, Uttarakhand, Uttar Pradesh, Madhya Pradesh, Maharashtra, Telangana, Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Meghalaya, West Bengal and Gujarat. The said policies include consumer incentives such as financial subsidy on purchase, exemption from road tax, low interest rates and initiatives for bulk purchasing of EVs for the public sector, personal and public transport entities, as well as infrastructure development for battery and vehicle manufacturing, charging infrastructure, and scrapping centres. For example, Delhi, which at present has the best EV incentives,  matches the subsidies provided by the central government with Rs 5,000 per kWh of battery capacity, up to Rs 30,000 + registration and road tax exemption for two-wheelers and Rs 10,000 per kWh of battery capacity, up to Rs 1.5 lakh + registration and road tax exemption for cars. There are currently 72 charging stations listed on the Delhi government website, making it one of the best places to own an electric car or two-wheeler in the country. However, it’s worth noting that facts and figures on paper may not always give a clear picture of ground realities. For instance, not all of these 72 charging stations are currently functional.

FINANCING EVs

India’s EV ecosystem has thus far focused on overcoming adoption hurdles associated with technology cost, infrastructure availability, and consumer behaviour. However, end-users still face several challenges, such as high-interest rates, high insurance rates, and low loan-to-value ratios. There is a need to tackle the barriers within EV finance in a structured manner.

To address these challenges, NITI Aayog and RMI have identified a toolkit of 10 solutions that financial institutions such as banks and non-banking financial companies (NBFCs), as well as the industry and government, can adopt in catalysing the required capital.

The 10 solutions recommended in the report include financial instruments such as priority-sector lending and interest subvention. Furthermore, a developed and formal secondary market can improve the resale value of EVs and improve their bankability.

Recommendations beyond finance include digital lending, business model innovation, fleet and aggregator electrification targets, and the creation of an open data repository for EVs.

In addition, the Union Cabinet recently approved a Production-Linked Incentive offering Rs 26,058 crore, over a period of five years.  The idea is to promote technologies that have underutilised potential that can be availed simultaneously along with the FAME scheme, PLI scheme for advanced chemistry cell (ACC) and others. The scheme is likely to boost development of the currently incomplete EV supply and value chain apparatus, further incentivising EV manufacturing. A PLI scheme of this magnitude, combined with other existing policies also provides a strong financial incentive for luring investments, which according to government estimates could be about Rs 42,500 crore. Moreover, by creating employment (around 750,000 jobs) it will also attract more engineering and administrative talent towards EV start-ups and manufacturers looking to shift to this sector. 

Schemes like FAME, the PLI and other subsidies – in conjunction with various state incentives have certainly made it easier to purchase EVs and develop EV infrastructure. However, there is still plenty of room for improvement in terms of schemes, if we are to actualise the envisioned reality of EVs in India.  For example, according to Sohinder Gill, Director General of the Society of Manufacturers of Electric Vehicles, schemes focusing on streamlining the supply chain will “strengthen the manufacturing ecosystem and build a self-sustaining framework for the e-mobility industry”. India could perhaps also take inspiration from its global counterparts and the EV policy measures they have implemented. 

International Scenario – Global Best Practices

As far as a large-scale shift towards EVs is concerned, Norway is the global leader with a 75% share of plug-in electric vehicles. Some of its most successful policies include an exemption from annual road tax from 1996 to 2021 (reduced taxes from 2021), a maximum of 50% of the total amount on ferry fares for EVs, an upper limit of 50% of the parking fee price for EVs, access to bus lanes, no purchase/import taxes and exemption from 25% VAT on purchase.

 Following the UNEP Emissions Gap 2020 report, which projected a shortfall of about 60%  in emission between country commitments and the Paris accord target, New Zealand and several European countries are now stepping up their commitments on emission gases. Inter-alia, New Zealand has said that it would give $8,625 off a new electric car, or $3,450 off on a used electric car, to promote the trend of EVs in the country.  

In a pioneering effort, California even proposed a zero-emission vehicle (ZEV) sales requirement in 2020 for heavy-duty trucks and the Netherlands, as well as numerous other countries are also implementing zero-emission commercial vehicle zones – such policies will further encourage EV deployment. 

 

When comparing against global efforts, however, practical viability ought to come into play in considering what would and wouldn’t be pragmatic to implement in India, and our vast population is, of course, another significant factor to consider.  China, for example, by far outperforms other countries in terms of unit sales, but electric cars still only account for about 6.2% of its passenger car sales.  Owing to their vast populations, the likes of India and China, despite having sufficient human capital to shift to EV production, will find it challenging to achieve a high number of EVs per capita that matches leading countries – the process will be very gradual and is only in its embryonic stages in India, but is certainly well underway.  According to a study by CEEW Centre for Energy Finance, the EV market in India will be a US$206 billion opportunity by 2030 if India maintains the momentum that it’s now gaining (with projected CAGR of EV market at 36% till 2026, according to IESA estimates), but it would require an investment of over US$180 billion in vehicle production and charging infrastructure. In addition to in-home charging points, India would also need a network of 29 lakh public charging points by FY30 –  from the present number of around 1,800, as well as an annual battery capacity of 158 GWh by 2030. While these figures do present a challenge, they’re still lucrative avenues for investment. For example, expanding annual battery capacity would create an additional investment opportunity of Rs. 20,600 crore in the coming decade, thus boosting the economy as well as helping the country advance towards sustainability goals. 

MICRO-MOBILITY : A BOOMING INDUSTRY

Multiple business models for the uptake of EVs have evolved in the past few years to respond to the emerging needs at the EV marketplace. An optimal and sound business model would play a vital role in ensuring long-term sustainability and growth of EVs in the country. 

The ‘EV Value-Wheel’ consists of three major areas – Mobility, Infrastructure, and Energy. Mobility segment includes electric vehicle and traction battery; infrastructure segment includes charging infrastructure and battery swapping stations; and energy segment includes electricity used for charging vehicles and storing in EV batteries. Here, it is implicit that Information and Communications Technology will remain at the core of the value proposition of any business concept and will act as an enabler for any business model. 

The path-breaking impact of changing mobility models has been most visible in the Micro-mobility segment.  Micro-mobility provides travelling solutions for short distances with one or two passengers at a time, usually to cover the first or last mile of a journey. Micro-mobility includes vehicles such as bicycles, skateboards, electric bicycles, electric scooters, etc.

There are various companies operating in bike-sharing models, with different ownership structures, such as: Zypp (India), owned and maintained privately; Capital Bikeshare (Washington), owned and maintained publicly; CitiBike (New York), publicly owned but privately maintained by the company called Motivate.

 Most notably, Ola Electric, the ride-hailing firm’s electric vehicle arm, received a record-breaking 1,00,000 reservation within the first 24 hours, making it the most pre-booked scooter in the world. It sold e-scooters worth over Rs 1,100 crore in just two days, during its sale of Ola S1 and S1 Pro scooters. This is unprecedented not just in the automotive industry, but it also marks one of the highest sales in a day (by value) for a single product in Indian e-commerce history.  

Conclusion: Leveraging Technology to integrate EV’s into Smart City-design

Encouraging Electric Vehicles as a viable option for phased transportation in terms of short and long-distance trips with appropriate “Charging Infrastructure” is the precondition for a much-needed paradigm shift to sustainable transportation. 

MoHUA has also amended Urban and Regional Development Plans Formulation and Implementation Guidelines – 2014 to include the formulations of norms and standards for charging infrastructure in the city infrastructure planning.  Residential and commercial complexes will have to allot 20% of their parking space for electric vehicle charging facilities.

It must be noted that smart cities provide an excellent opportunity for making this transition possible.  They comprise different sectors such as smart building, mobility, energy systems, water and air quality, climate change, etc. Evidently, the integration of EVs here can lead to synergies with smart demand-side systems, distributed generation, and renewable energies in improving the usage of energy assets in the energy grid. This is because EVs can be scheduled to recharge when energy demand is low, thus generating cost savings for EV users. Besides, they can serve as energy storage and supply providers if they are used in bulk by an intermediary, generally denoted as aggregators.

The digitization of the power grid – and its transformation into a Smart Grid, would inevitably disrupt the existing electricity services, but would also involve a host of value-added services and act as a boost to all the stakeholders involved in the energy market.  EVs could potentially promote the development of the smart grid via two-way communications (Vehicle-to-Grid V2G and Grid-to-Vehicle G2V). 

Ultimately, EVs have enormous environmental benefits as compared to hybrids or even internal combustion engine vehicles. They can help minimize noise levels, pollution, and greenhouse gas emissions. The integration of EVs could bring substantial changes for society not only in providing transportation services but also in shifting economies from petroleum and reducing the carbon dioxide (CO2) emission from the transportation sector.

Written by: Deeplata Jha and Nirupama Banerjee