Electric Mobility Future: Mapping India’s transition to EVs

Mapping India’s transition to EVs

The e-mobility segment in India has undergone a major transformation owing to a number of fiscal and non-fiscal measures taken at the central, state and industry levels. These measures have enabled the smooth integration of electric vehicles (EVs) into the mainstream mobility segment.

One of the most recent policy initiatives has been the release of the second phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. In a report titled “India’s Electric Mobility Transformation”, NITI Aayog stated, “FAME II’s intended impact and reach is far greater than the vehicles it directly incentivises. Beyond providing support for a number of vehicles over a three-year period, it aims at catalysing the market, enabling the development of a supportive ecosystem for EVs, and crossing thresholds of economic viability that can initiate mass adoption of e-mobility solutions. The scheme is bolstered by global trends and a suite of additional policies at the central, state and city levels.”

The report, prepared along with the Rocky Mountain Institute, outlines India’s progress in the EV space and the steps required for moving towards an electric mobility future. The report’s key highlights…

Key initiatives

At the central level, several ministries and departments, including the Ministry of Power (MoP), Ministry of Road Transport and Highways (MoRTH), Department of Heavy Industry, Department of Industrial Policy and Promotion, Ministry of Finance, Ministry of Housing and Urban Affairs, Ministry of New and Renewable Energy, Department of Science and Technology and NITI Aayog, have taken initiatives to promote e-mobility.

The MoP has clarified that EV charging is a service and does not constitute sale of electricity, implying that no licence is required to operate EV charging stations. Another notable step was the MoRTH’s amendment to the Central Motor Vehicles Rules [CMVR], 1989, allowing people in the 16-18-year age bracket to drive gearless electric scooters and bikes of up to 4 kWh battery size. The cabinet has also approved NITI Aayog’s National Mission on Transformative Mobility and Battery Storage, which aims to launch a phased manufacturing programme for five years to support the setting up of large-scale, export-competitive integrated battery and cell manufacturing giga plants in India, and localise production across the entire EV value chain.

At the state level, 27 states have devised strategies for transforming their mobility systems. Meanwhile, several states are in the process of formulating their EV policies. For instance, Andhra Pradesh’s Electric Mobility Policy for 2018-23 has a goal of bringing 1 million EVs and setting up 100,000 slow and fast EV charging stations by 2024. Kerala’s Electric Vehicle Policy, 2018 has a target of bringing 1 million EVs to the state by 2022. Apart from this, Maharashtra, Karnataka, Uttarakhand and Uttar Pradesh have rolled out their EV policies. Meanwhile, the other states are in the process of drafting their EV policies.

At the industry level, new and established industry players in the automotive, charging infrastructure, battery and mobility service segments are making investments and forging partnerships to develop and test new products and business models. Design innovations and testing products suitable for the Indian market have given an impetus to the electric two-wheeler segment. As per market estimates, electric two-wheeler sales almost doubled in 2017-18 to 54,800 as compared to the previous year. Recently, in March 2019, over 100 companies showcased EVs of all types at the India E-vehicle Show. To promote the assembly of EVs in India, the government reduced tariffs on imported parts of EVs in January 2019. Various start-ups and energy solution providers are also manufacturing lithium-ion batteries. Charging infrastructure is another area that has witnessed increased focus. Significant investment is being mobilised by the private sector to manufacture and install EV supply equipment infrastructure across India. Many PSUs have signed MoUs with aggregators to develop dedicated EV charging stations across Indian cities.

FAME I: Key takeaways

The first phase of FAME was initiated in April 2015, when EV business models were very niche in India. The implementation of the FAME I scheme has provided some useful insights for future design innovations.

One of the takeaways from FAME I is that for a fiscal purchase incentive to be effective, consumers need to have a range of product options in the market. When FAME I was initiated, very few EV models were available in India. Since then, a variety of EV models have been launched in the Indian market. At the 2018 Auto Expo held in New Delhi, over 50 new EVs were showcased by original equipment manufacturers such as Tata Mahindra, Hero Electric and Maruti Suzuki. Another key takeaway is that the development of charging infrastructure is essential for the adoption of electric mobility. While FAME I has provided support for charging infrastructure development, the EV segment continues to witness low uptake due to the limited number of charging stations. Another takeaway is that to drive consumer demand, it is imperative to promote EVs as a viable mobility option among the general masses. This could be done by providing targeted incentives for shared and public transport.

FAME I helped promote cleaner technologies by incentivising the two-wheeler and four-wheeler vehicle segments. However, the lack of awareness regarding incentives among manufacturers and customers resulted in limited uptake. Going forward, batteries/vehicles could be incentivised in proportion to their efficiency and range.

FAME I provided direct subsidies and incentives for the purchase of e-buses on an upfront cost basis. However, very few buses could be procured due to the limited funding. NITI Aayog has proposed the concessionaire model, under which e-buses will be procured on a gross costs contracting basis. It allows  state transmission utilities to finance e-buses based on the lower total cost of ownership as compared to their diesel counterparts.

FAME II: Potential impact

Moving into the second phase of FAME, the union and state governments have extended support for the development of charging infrastructure throughout the country, which is expected to promote the adoption of EVs. To assess the impact of FAME II and other supportive policies on the current vehicle market in India as well as its implications for oil consumption, NITI Aayog has analysed oil, net energy and net CO2 emission savings associated with the two-, three-, and four-wheeler EVs covered under FAME II. It has also estimated the potential savings associated with greater adoption levels in 2030.

As per the analysis, vehicles eligible under FAME II can cumulatively save 5.4 million tonnes of oil equivalent (mtoe) over their lifetime, resulting in cost savings of Rs 172 billion. This would result in a net reduction of 170 petajoules of energy and 7.4 million tonnes (mt) of CO2 emissions over the deployed vehicles’ lifetime. Electric buses covered under FAME II will account for 3.8 billion vehicle km travelled over their lifetime. The analysis also found that EVs sold until 2030 can cumulatively save 474 mtoe, worth Rs 15,210 billion, over their lifetime. This will result in net reduction of 14 exajoules of energy and 846 mt of CO2 emissions over the deployed vehicles’ lifetime. Further, electric buses deployed through 2030 will account for 334 billion vehicle km travelled over their lifetime.

Based on interviews with experts and projected cost competitiveness, EV sales penetration of 70 per cent for commercial cars, 30 per cent for private cars, 40 per cent for buses, and 80 per cent for two- and three- wheelers by 2030 could be attainable.

The way forward

The decline in prices, greater economies of scale, government intervention and collaborative industry action can give the required fillip to the segment. To this end, there is a need to increase customer awareness and provide access to a variety of EV options. To increase domestic manufacturing, EV research and development specific to Indian conditions must be taken up. With the help of a techno-economic analysis, new business models can be built. For example, a ride-hailing service can invest in EVs or battery-swapping stations, which allow commercial vehicles to quickly swap batteries instead of charging them.

Further, the report says that the government at the central, state and city levels will play a key role in the electric mobility transition. FAME II is a strong policy but additional actions need to be taken by the government to ensure the adoption and expansion of electric mobility. This includes the deployment of high quality advanced batteries, introduction of fiscal and non-fiscal incentives for phased manufacturing of EVs and batteries, and creation of a phased manufacturing plan. The government also needs to competitively allocate incentives, ensure finance availability particularly for commercial EVs, and raise awareness on EVs.

While initial steps have been taken to build an ecosystem that capitalises on the benefits of EVs under FAME I, considerable work is still needed to make EVs a mainstream option. FAME II and other recent policy developments are an important step in this direction, but they are not the end, they are the beginning.