EV Adoption In Overdrive - All You Need To Know

Mohit Mittal Jan 14, 2023

The past decade has bridged the gap that used to exist in the performance of Electric Vehicles (EVs) and their Internal Combustion Engine (ICE) counterparts. In fact, EVs perform better than ICE vehicles in terms of transport policy goals like energy security and reliance on crude oil. This is why EVs are emerging as the preferred technology for the future of mobility. The economics of EVs have also improved over the past few years, with advancements in technology (especially in battery), expected to further reduce costs. These benefits are aside from the innumerable environmental benefits provided by EVs. Electric vehicles significantly help in reducing carbon emissions and lower carbon footprint.

As the fifth largest automotive market in the world, it is natural that EV adoption is in overdrive in India. Over 3,30,000 EV units were sold in 2021, accounting for a growth of over 168 per cent since 2020. Last fiscal year witnessed a cumulative EV sale of ~473K units across segments of e2W, E-rickshaw, e3W passenger, e3W cargo and e4W Small Commercial Vehicle (<3.5T).

To make the situation even more lucrative for the stakeholders, this number is projected to grow manifold over the next couple of years, and this trend will be prominent in the 3W segment. The EV penetration for 2W, 3W cargo and SCV is expected to cross 20 per cent, 50 per cent and 20 per cent respectively in next 4-5 years. According to our estimates, new-age EV players are expected to have a higher share in 3W cargo due to better products and higher acceptance amongst target customers.

However, there are multiple variables to consider before the EV ecosystem becomes sustainable in India. As of now passenger cars and buses account for a small percentage of the total EVs in the market. Moreover, the overarching challenge of equipping the country with the necessary charging infrastructure cannot be ignored. But despite all these challenges the EV ecosystem in India is evolving in full swing and the future looks promising. Let’s discuss this in a bit more detail.

Government Initiatives Encouraging EV Adoption

Central and state governments have undertaken several initiatives that promote the demand and supply of electric vehicles through discounts, incentives, and a bunch of other benefits.

> National Electric Mobility Mission Plan (NEMMP)

The National Electric Mobility Plan (NEMMP) initiative was launched by the Government of India in 2013 to achieve national fuel security. This plan provided a roadmap for faster adoption of electric vehicles in the country and aimed to save 9500 million litres of crude oil which amounts to Rs. 62,000 crores.

This initiative projected to invest close to Rs. 1,400 crores to accelerate R&D efforts and develop the necessary infrastructure to enhance the uptake of electric vehicles.

> Faster Adoption and Manufacture of Hybrid and Electric Vehicles Scheme (FAME India)

FAME India was launched as an initiative, under the National Electric Mobility Mission Plan, to promote electric and hybrid vehicles in India. Under this initiative, subsidies are provided to manufacturers and infrastructure providers of electric vehicles to enhance electric vehicle production and the creation of electric transportation infrastructure. Under FAME Phase II, nearly 4.5K EV stations were sanctioned to establish necessary charging infrastructure for electric vehicles.

> State EV Policies

Around 50 per cent of Indian states have EV policies supporting electric mobility. These policies include monetary subsidies on EV purchases, exemption from road tax, vehicle registration fees, and low loan interest rates on EV purchases.

Aside from this, it also includes initiatives for public transportation and last-mile delivery providers to purchase electric vehicles in larger quantities. Last, but not least, EVs and their battery production infrastructures, charging infrastructure, and scrapping centres are also being developed under this policy.

Innovations to Reduce EV Charging Infrastructure Dependence

Aside from these government initiatives, another factor that is contributing to the growing adoption of electric vehicles is the impressive innovation in the charging infrastructure. The EV charging infrastructure is innovating at a fast pace and attracting new investments. While some of these innovations are already enhancing the EV charging experience, others are all set to revolutionize this space in a matter of years.

> Battery swapping

Battery swapping allows an EV user to swap a depleted battery with a charged battery at the swap station and keep the vehicle running. This technology is especially beneficial for fleet operators as it helps reduce range anxiety, avoid long charging time and decreases their dependency on charging infrastructure.

> Smart EV Charging

Smart EV charging is a technology that delivers safe, reliable, renewable, and cost-effective energy to EVs. It works with the help of back-end software that collects data from electric vehicles, the grid, and the network chargers. This data is leveraged to optimize EV charging, integrate energy from renewable sources, and minimise the impact on the grid. State-of-the-art algorithms are put to use to distribute affordable energy without compromising local energy or EV charging.

> Self-Healing Algorithms for EV Charging Management

Self-healing algorithms that are built into an EV charging management platform have the ability to fix up to 80 per cent of the software-related operational challenges. Real-time issue discovery and automated self-repair maximize chargers’ uptime and optimize the charging experience.

> Innovations in EV Battery Technology

Needless to say, the innovations in EV battery technology are a major driving force for EV adoption. Constant efforts are in place to find an alternative to lithium-ion batteries that are currently being used. The idea is to find a solution that is more affordable, faster to charge, durable, and independent of scarce materials.

Technologies like sodium-ion appear promising and can offer incremental improvement in the area.

> Smart Battery Management

Smart battery management systems can be used to give worn-out EV batteries a new life. These systems can ‘rack and stack’ batteries to help them act as one big battery. This can be used for storing energy from renewable sources or the grid.

The technology behind these systems combines software, sensors, and hardware to repair non-functioning cells in the EV battery. This helps optimize charging and communicate with smart EV charging and energy management software.

Industry Leaders and New Entrants

Electric vehicle startups run by young entrepreneurs are sure to disrupt India’s automotive industry ecosystem. Numbers also favor startups like Ola, Ather, Revolt, Okinawa, Tork, and Log9 Materials, which are competing neck and neck against industry leaders. This seems especially more likely in the two-wheeler segment. According to information on the government’s vehicle registration portal, Vahan, registrations of electric two-wheelers crossed the 80,000 mark for the first time in August 2022.

Established legacy companies like Mahindra Electric, Piaggio, Kinetic Green, Maruti Suzuki India, Tata, and Kia are the leading e3W and e4W players in India. Further, Suzuki and Toyota have finally announced plans to launch electric vehicles in the country. Swedish luxury car maker, Volvo, has also announced that 80 per cent of its vehicles in India will be electric by 2025.

Aside from this, Lambretta is planning to re-enter the Indian market in 2023 and launch an electric scooter in 2024. This will be in partnership with the Bird Group, and Lambretta and Bird Group will together invest over US$200 million in the next five years.

Apart from manufacturing, a slew of firms is working in the ride-hailing industry, with the majority of vehicles on their platform being electric. BluSmart is one such startup. The company recently raised funding and now operates fleets of Mahindra e-Verito, Tata e-Tigor, Tata Xpres-T EV, Hyundai Kona Electric, and MG ZS Electric. The company claims to have over 2,000 EVs and an infrastructure of over 1,800 EV charging stations in Delhi NCR and is already expanding to Bangalore now.

What are the Risks Faced by the EV Industry?

As mentioned above, there are a few challenges that exist in the EV space and need to be tackled to make the EV ecosystem sustainable. One of these challenges is the rising battery costs. Surging metal costs for electric-vehicle batteries have reversed a decade-long fall that had reduced the cost of EVs to be within spitting distance of gasoline-powered automobiles.

This rise in costs has, once again, brought the discussions regarding the cost-effectiveness of electric vehicles to the surface. This issue was first highlighted when a few state governments withdrew the subsidies on EV vehicles - a benefit that discounted ₹10,000 per kWh of battery capacity, with the maximum amount being capped at ₹1.5 lakh per vehicle.

The lack of availability of loans and financing for EVs also presents itself as another roadblock. Loans for EVs are typically of shorter duration and with higher interest rates (e.g., loans on E2Ws are ~+2 - 4 per cent more expensive when compared to their ICE counterparts). Since FIs / banks are unsure regarding the quality of the existing basket of electric vehicles, and the end-of-life value for EVs (resale value) remains to be realized, financing will continue to be a roadblock for EVs (despite the availability of state / national subsidies) - there are talks to have government provided default guarantees to banks on EV loans, but this is to be confirmed.

Policy Recommendations

India is one of the largest markets for EVs in Asia, only a little behind China and ahead of Japan. If India meets its potential of 50 per cent electrification, every 10th EV sold globally could be manufactured in India making it the global EV epicentre. But the challenges stated above can prove to be a major roadblock to this growth. This has necessitated a few policy reforms that can not only tackle these challenges but also further strengthen India’s stand as a leading EV market.

The first reform can be brought about in the form of a national EV ambition that sets targets and ambitions as the cornerstone of the EV adoption policy. While recent Indian EV policy developments encourage electrification, the lack of ambition and mandates casts doubt on the rate at which the Indian government envisions the EV transition. This is what makes it necessary to set these targets.

To establish India's EV aspiration, an open-minded collaboration between businesses and governments is required. Creating an EV ambition statement should be part of a larger industry dialogue that considers a systemic transformation to sustainable mobility, such as deliberating on the role of private and shared mobility in India's transportation future, improving access and efficiency through better planning for space and public transportation infrastructure, promoting modal shifts to more sustainable options, and managing the overall transition to sustainable mobility.

Another way to promote EV adoption could be by providing subsidies for the scrappage of old ICE vehicles against a new EV. Other incentives such as road tax waivers, free EV parking, registration tax waivers, concession/exemption from road tolls, subsidized electricity for charging, and dedicated pick-up/drop points for EVs such as taxis and delivery vehicles could also prove to be a great accelerate EV adoption.