Soma Tah
With increased policy and financial supports for the EV manufacturers and buyers, India certainly has sped up the efforts for mass adoption of EVs. But more than anything, it needs to bridge the gap between Intent and Execution first.
Over the past decade, India took baby steps towards embracing Electric Vehicles (EV) mainstream but to little effect. Although being considered as an emerging market for EVs, the adoption of EVs is still very low in India for significantly higher upfront costs than internal combustion engine (ICE) vehicles, coupled with the lack of Charging Infrastructure and subsequent Range Anxiety, and Reliability issues.
As per the Society of Manufacturers of Electric Vehicles (SMEV) reports, only 1.56 lakh EVs were sold in India in FY2020 as against 1.3 lakh units in the previous fiscal- which is a nominal fraction of the total vehicle sales in India every year.
However, considering the alarming level of air pollution especially due to the carbon emission in the transportation sector, India has certainly sped up the efforts in this regard of late by increased policy and financial supports, as well as by ramping up infrastructure to incentivize automakers and buyers further.
Government Pushing transition to Electric Mobility
Government’s push for EVs has always played a key role in facilitating EV adoption in India. For the faster transition to electric mobility, the government laid down the principles and strategies under the National Electric Mobility Mission Plan 2020 (NEMMP 2020) in 2013 and launched the FAME scheme (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India) in 2015.
India has also set an ambitious target of achieving 30% new EV sales by 2030 by pledging to the global Clean Energy Ministerial (CEM) EV initiative and participating in its EV [email protected] campaign.
Data Source: Frost & Sullivan, McKinsey, IHS
The central government has also asked the states to frame their EV policy and provide additional fiscal and non-fiscal incentives to manufacturers and buyers. According to reports, at least 10 states and union territories have published draft EV policies or notified final policies detailing fiscal, non-fiscal and other incentives.
Last year, the government announced a financial outlay of Rs 10,000cr for three years till 2022 under FAME II scheme. Out of the total sanctioned amount of Rs 8,596cr for incentives, Rs 1,000cr has been earmarked for setting up charging stations for EVs in India. The government will offer incentives for electric buses, three-wheelers and four-wheelers to be used for commercial purposes and will cover two-wheelers. Besides, FAME II will offer incentives to manufacturers focused on developing EVs and its components and for localizations also.
Besides four-wheelers, the government has also decided to focus on two-wheelers, and three-wheelers as well, where sales are generally much higher. To ensure a rapid transition to electric mobility, Niti Aayog, last year has proposed to have only electric three-wheelers operating in the country by 2023, and only electric two-wheelers by 2025.
OEMs focus on improving Battery and Range
EVs, now, are at a tipping point globally as automakers and OEMs have been putting their skin in the game too with an aggressive launch pipeline. Strong policy and innovation tailwinds, along with continuous improvement in EV and battery technology, as well as in the range and performance of EVs are helping OEMs scale up and launch more affordable and superior products. As per industry estimates, there are nearly 150 new launches lined up from large global OEMs over the next three years – twice as many as the previous five years.
New product launches, even in the affordable category have now a minimum range of 250Km and respectable top speeds – pegging them well in terms of performance compared to ICE. By 2030, Battery EVs are assumed to reach an average driving range of 350-400 km corresponding to battery sizes of 70-80 kWh, projected IEA reports.
Also, the Lithium-ion battery costs have decreased by more than 85% since 2010- which is helping to transform the economics of EVs to a great deal. OEMs have predominantly preferred to rely on the battery suppliers, but now are working towards making their own batteries and/or procure cells locally.
GM this year revealed details of its new Ultium Batteries based on a proprietary low cobalt chemistry for the lithium-ion cells that helps reduce the cost and improve the performance of the battery.
At Tesla’s Battery Day event, Elon Musk disclosed the company’s plans to reduce the battery designing and manufacturing cost of its battery. The new tabless battery cells, and changing the materials inside the cell should allow Tesla to halve the price per kWh and help it build a $25,000 electric car, said Musk. Tesla also plans to build a new cathode plant to reduce supply chain costs and simplify cathode production.
Accelerated rollouts of Charging Infra
Creating a robust EV charging infrastructure is one of the key prerequisites for faster adoption of EVs in any country, but lack of charging-infrastructure investment (public or private) continues to remain one of the persistent challenges for EV adoptions in India making the users exasperate further with range anxieties.
Also, different charging techniques and infrastructure requirements for different vehicle segments e.g. 2Ws, 3Ws, 4Ws and passenger cars just add further to the problem. Hence, the government and automakers are forced to explore multiple charging options such as conventional charging stations having both slow and fast chargers, home charging points, and battery swapping stations, etc.
Home charging points will continue to dominate in the electric 2W and 3W segments, however charging stations with fast chargers would be required to drive the adoption of passenger cars in India.
“The government is already supporting charging infrastructure under FAME II. Additionally, government intervention would be required to establish partnerships between state-run agencies, PSUs, private organizations, and aggregators to set up robust charging infrastructure across the country. More importantly, similar to developed countries, the Indian government should continue providing incentives and subsidies to charging infrastructure providers until the critical mass is attained,” suggested Seshasayee Tatineni, Senior Research Analyst, Mobility Practice, Frost & Sullivan.
Launching its EV policy, Delhi government said it will work on the accelerated rollout of charging infrastructure collaboratively with private partners. The government plans to set up public charging and battery swapping stations at prominent locations in the city. In addition to slow and fast public charging stations, setting up charging facilities in restricted public spaces such as malls, office complexes, group housing societies, hotels, education institutions, hospitals etc. has also been identified as a priority.
West Bengal Housing Infrastructure Development Corporation (WBHIDCO), meanwhile, has also taken significant strides towards fulfilling its electric mobility target by setting up a network of fast-charging stations in New Town, Kolkata in partnerships with Energy Efficiency Services Limited (EESL), Lithium Urban Technologies and Fourth Energy Partner. Lithium’s charging station is being considered as the largest EV charging facility where 25 EVs can park side-by-side for charging.
“The New Town Kolkata Development Authority (NKDA) has also revised its rules and made it mandatory to set aside EV charging space in the parking lot of commercial or big residential plots. Generally, one parking space for every 150 sq. m of total floor area is mandatory, wherever a property is developed or redeveloped, as per current regulations. Now we have also made it mandatory to earmark 2% of the car parking subject to the minimum of one for setting up EV charging,” said NKDA and WBHIDCO chairman, Debashis Sen.
The new guidelines by the Ministry of Housing and Urban Affairs (MoHUA) have also mandated residential and commercial complexes to allot 20% of their parking space for EV charging facilities.
“Currently, we are moving forward with a viable approach by entering cities and developing their charging infrastructure. We install fast-charging stations across all of our dealerships and even provide roadside charging to ensure a seamless public charging experience for our customers,” said Rajeev Chaba, President & MD, MG Motor India.
“From experience in markets where EV adoption has been higher, the charging of EV happens at home almost 85% of the time. If we look at the Indian market then this percentage will turn out to be even higher. However, the charging capacity installation comes with its share of challenges and hence, we feel that customers need help in this area. MG conducts free-of-cost EV charger installations at the homes of all of its customers,” added he.
Addressing Ownership Cost concerns
India has always been a price-sensitive market. Hence, the higher upfront cost of EV ownership than fossil-fuel vehicles continues to be the biggest barrier to mass adoption of EVs.
Policy Incentives: EVs have always been more expensive than their ICE counterparts, mainly due to the higher cost of the battery. The Ministry of Road Transport’s recent announcement allowing EVs to be sold and registered without the battery will certainly reduce the upfront cost by 30%-40% and encourage new business models such as battery swapping, which prove to be cost-effective for customers. While this policy may be well received by electric 2W and 3W manufacturers and customers, it is highly unlikely to work for passenger cars in India, doubted Tatineni of Frost & Sullivan.
“More than the incentives or lack of charging infrastructure, it is the lack of affordable yet reliable EVs in the Indian market that is affecting the sale of EVs in the country. The government to focus more on motivating traditional vehicle manufacturers to launch electric products by incentivizing and supporting them in component localization and not just providing incentives to the customer. We have to realize that electric 2Ws and 3Ws have grown in the last 2-3 years without the support of government regulations or incentives,” he suggested further.
Sohinder Gill, CEO, Hero Electric Vehicles also agreed and believed that providing incentives and tax benefits for manufacturers and OEMs willing to increase localization levels on their products will not only generate more jobs, increase revenue, reduce reliance on imports but also massively drive down costs of EVs which then will naturally appeal more to buyers.
Priority Lending: Easy financing of EVs can prove to be extensively helpful for facilitating mass-adoption of EVs, according to Gill. “Financing of EVs is low and public sector banks can be told to undertake priority lending especially for the lower-income group customers. Most pertinent, however, from a mass-adoption point of view, would be to allow FAME II (Faster Adoption and Manufacturing of Hybrid and EV) funds for the low-speed category vehicles as well,” suggested he.
Retrofitting: EV Retrofits can also help in lowering the barriers to EV adoption, said Deepak MV, CEO & Co-founder of the EV startup, ETrio. ETrio has recently launched the country’s first retrofitted electric light commercial vehicle (eLCV). “Retrofitting provides dual benefits by decarbonizing the environment on the one hand and decongesting roads on the other. Our scientific retrofitment process makes diesel guzzling LCV into a green productive vehicle. For example, retrofitment can give Tata Ace 5+ years of life extension. Plus ETrio’s eLCV pricing can even compete with a diesel counterpart on the Total Cost of ownership and by saving almost 60% of the operational expenses, it can help in reviving the driver owner’s earnings also.”
TCO Benefits: EVs have a strong advantage as far as operating economics are considered. Further, the increase in operating costs over the life of the vehicle is significantly higher for ICE vehicles over EV. If you calculate the true cost of EVs, it will be far lesser than other ICE vehicles. The total cost of ownership( TCO) is quite comparable in the four-wheeler segment even at the current prices. An analysis done by ETrio shows the cost benefits of EVs clearly by comparing the operating costs of EVs as against Diesel vehicles. EV adoption in company operations can dramatically reduce running costs of fleets as well, it makes business sense as well considering the rising fuel prices, and the new affordable EV models coming into the market. Companies adopting EVs can also benefit from reduced emissions.
Data Source: ETrio
“Adoption of battery swapping and battery rentals as a business model will significantly reduce the total cost of ownership (TCO) for cars and will enable early adoption of EVs. As it is still early days for EVs in India, traditional ICE vehicles seem more cost-effective. However, with increasing production, reduction in battery costs and improvements in charging and related technologies, it is expected that the price of EVs will come down drastically in the coming years,” said Pawan Bhageria, President- Tata Motors SBU, Tata Technologies. However, critical components of EVs such as the battery, motors, controllers are being imported from China, low availability of battery charging infrastructure and primitive charging business model and range concerns continue to be challenges- which must be addressed for easier and faster adoption of EV in the country, added he.
Emerging areas with strong adoption potential
The World Business Council for Sustainable Development (WBCSD) in its report identified three most scalable use cases for business and fleet EV adoption in India: employee transport, platform-based ride-hailing and last-mile urban freight and deliveries.
The Indian logistics stands at USD 160 billion with road transportation contributing to a lion’s share of 65% could be a potential area for EV adoption. The announced EV adoption targets by major e-commerce and logistics incumbents make intra-city logistics especially in the e-commerce logistics space as well a potential area of EV adoption.
“As per a study, the majority of online users abandon purchase on account of the shipping cost being too high. This has forced all the e-commerce players to reduce operating costs. Further, the last mile or intra-city logistics also contribute to almost 50% of e-commerce logistics cost and the optimization of the same is the focus of the industry,” explains ETrio’s Deepak.
The decarbonizing mandates by the governments have prompted many urban mobility players to extend their EV fleet. Besides EV-only ride-hailing platforms such as BluSmart and Smart-E, EVs have also been adopted or are being evaluated by established ride-hailing companies such as Ola, Uber, Meru, Bounce, Rapido, Yulu, etc. among others.
EV-based deliveries are also gaining traction. For instance, EV100 member IKEA aims to run 60% of its home delivery fleet on electric within 3 years of operation and Swiggy has piloted the use of EVs in 10 cities in India.
Besides identifying such innovative use cases for EVs and incentivizing EV productions and adoptions, India also needs to take a more pragmatic approach towards its electric mobility mission by increasing awareness on alarming carbon emission from vehicles and on the benefits of switching to clean mobility for a sustainable future.
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