Evolving Scenarios And Policy Push To Strengthen India's Position To Become Global EV Leader

Dr. Amitabh Saran Jul 28, 2021

India is scaling up efforts to achieve its sustainable targets, become self-reliant and create a conducive ecosystem for a swift transformation of the automobile industry to clean energy. The government’s much-needed push for an electric future with strict emission regulations, incentives and subsidies for consumers and manufacturers, and a clean roadmap are strengthening India’s position as a leading electric vehicle (EVs) manufacturer in the global market.

The country which was the seventh-largest manufacturer of commercial vehicles in 2019 has improved its position to become the fifth-largest automobile manufacturer in 2020 with 3.49 million units, as per industry reports. The domestic automobile production increased by a promising 2.36% CAGR between 2016-20 with 26.36 million vehicles being manufactured in the country in FY 2020. A large part if this number is in the 2-wheeler category with India at pole position in the world. Leveraging the huge potentials, domestic and foreign OEMs have already entered the market with their electric vehicles and have announced ambitious targets.

The EV market in India is expected to grow at a CAGR of 36% to Rs 50,000 crores by 2025 (according to Energy Storage Alliance estimates). In the coming days, the segment will surely witness launches of many long-range and powerful road-ready EVs, for both passenger and goods mobility, that will be suitable for inter-city or even inter-state connectivity along with last-mile delivery of food, FMCG and E-commerce. A nationwide charging infrastructure that has remained a major roadblock in EV adoption is now also being developed rapidly to create a favorable environment. Under the FAME-2 scheme, the government has already installed 350 new EV charging stations across the country in cities like Chandigarh, Delhi, Jaipur, Ranchi, and Agra. These developments will open the sector for investors, manufacturers, and operators, as new business models emerge.

Additionally, there was an announcement by the Department of Heavy Industries and Public Enterprises of a 50% increase in incentives for electric two-wheelers to ₹15,000 per kilowatt-hour from ₹10,000 per kWh. As per the new rules, the cap on incentives will be limited to 40% of the total price compared to the earlier cap of 20%. It has also mandated Energy Efficiency Services Ltd (EESL) to procure 3 lakh electric three-wheelers for different uses. These decisions will drastically help the manufacturers to reduce the cost of electric models by Rs 10k-20k making them achieve price parity with fossil-fuel variants.

Many technologies and automobile companies are now showing huge interest to invest in India's burgeoning EV market. Recently, the country has efficiently scaled up battery manufacturing under the Make in India initiative that is bolstering its position as an important player in this segment globally. India will soon become the hub of battery manufacturing and the increasing interest from foreign investors will pave the way for all-round growth.

The FAME II stimulus has been helpful in the growth of organized 3-wheeler EVs as it reduces the high sticker-price of 3-wheelers that run on Li-ion batteries. The cost difference between the commonly-in-use lead-acid battery and the more advanced Lithium-ion is usually between INR 100,000 to INR 200,000 for a 6kWh – 12kWh battery. But the incentives under FAME II on Lithium-ion battery EVs reduce this price difference quite effectively. FAME II also gives price parity with Diesel alternatives, with tremendous savings on the operational side (70+%). At present, the last-mile delivery sector in India is heavily dependent on conventional ICE models and looking at these opportunities, EV manufacturers are significantly increasing the production.

The Government of India aims to achieve 100% electrification of public transport by 2030. Apart from the FAME II subsidy, various schemes and tax exemption policies have been launched by both the Central and State government(s) to promote EVs. At present, the stakeholders are also envisioning robust strategies for self-reliance and localization. The government has rolled out PLI schemes to increase the confidence of li-ion manufacturers. In addition, the move to allow 100% FDI under the automatic route in the automobile sector will further expand the horizon of growth to shape up an optimistic future for the Indian auto sector.

The rise of conscious consumers and the soaring prices of petrol and diesel are also catapulting the demand for EVs as compared to IC engine-powered vehicles. Buyers now find it more logical to go for an EV option, while getting a better user experience. Such positive indicators are setting high targets for the Indian EV market and more efforts will soon be necessary to bridge the gap between supply and demand. India, with a young and dynamic workforce, innovative business leaders and a competitive manufacturing sector, can grow leaps and bounds in the EV segment for sustainable growth and also create a multiplier effect on the economy.