A few days ago, the Government of India threw the electric car-making race wide open by announcing almost Rs 34,000 crores in incentives for companies to set up advanced battery manufacturing facilities in India. The government is actively trying to promote the use of electric vehicles and cut down the dependence on oil in the upcoming years.
The draft that was prepared by NITI Aayog was overseen by PM Narendra Modi, who later said that adoption of electric vehicles could help India slash its oil import bills by $42 billion by 2030. As of the publication of this article the final draft is still undergoing changes and will be submitted for ministerial review in the next few weeks.
The Indian context
Historically, mobility and fossil fuels have been inseparably linked, with electric vehicles being successful only in a select few markets. However, over the last decade, a collection of circumstances has conspired to create an opening for electric mobility to enter the mass market. Those forces include – climate change, adoption of renewable energy, advances in battery technology, energy security etc. to name a few.
As a result, developed economies such as the EU, the USA and Japan as well as developing economies such as China and South Korea have all included EVs in their policies to lower their carbon emissions while providing convenient and cost-effective mobility. India is the latest addition to this list. While India is very similar to other countries that have adopted EVs, our country has a unique mobility pattern which other countries do not share. An EV policy for India must be tailor-made to the country’s particular needs.
While vehicle growth in India is rapid, ownership per 1000 population has increased from 53 in 2001 to 167 in 2015. India uses a large variety of motorised transport on roads and its auto-segments are quite different from that of most of the world. Based on the last six years of sales data, the vehicles on Indian roads are estimated to consist of:
- Two-wheelers: 79% of the total number of vehicles.
- Three-wheelers: 4% of the total number of vehicles.
- Buses and large vehicles like trucks: 3% of the total number of vehicles.
- Four-wheelers (cars under 10 lakh): 12% of the total number of vehicles.
- Premium four-wheelers (cars above 10 lakh): 2% of the total number of vehicles.
This presents India an opportunity to take a leadership role in the electrification of small vehicles. The shift to EV lays the foundation for the next generation of industrialisation that focuses on the development of electric vehicles that can not only meet domestic demands but can also cater to global needs. Focussing on EVs can also accelerate India’s push for achieving its Sustainable Development Goals (SDGs) by 2030, and this brand-new initiative by the government will go a long way in making that possible.
Numbers that matter
According to NITI Aayog, India plans to retain its import tax rate of 5% for certain types of batteries, including batteries for electric vehicles, until 2022 but will increase it to 15% thereafter to promote local manufacturing.
Although India is keen to reduce its oil dependence and cut down on pollution, our efforts to promote electric vehicles have been impeded by a lack of investment in manufacturing and basic infrastructure like charging stations. For a country that happens to be the second-most populous nation on the planet, our country just saw 3400 electric cars being sold last year, compared to sales of 1.7 million regular passenger cars.
Also, it’s worth mentioning that China accounts for 80% of the world’s lithium-ion cell production. Which is why when it comes to battery tech, India has introduced stricter investment rules for Chinese companies. Additionally, India has slowed down the approval process of some Chinese investments in India after the deadly clash between the two countries in June. This landmark policy could therefore benefit battery makers such as South Korea’s LG Chem and Japan’s Panasonic Corp as well as automakers like Tata Motors and Mahindra & Mahindra that have started building Li-ion batteries and EVs in India.
Although the draft did not offer any estimate of how many electric cars are expected to be on the road by the end of this decade, it estimates that the annual demand and market size – which is currently less than 40 gigawatt-hours and worth just over to $2 billion — could grow to 260 gigawatt-hours and more than $14 billion in ten years. We might be on the cusp of a new automotive era, and exciting times may be in store for everyday consumers.
What lies ahead
A few years ago, auto industry experts expected 2025 to be the turning point. But technology is advancing faster than expected and is poised for a quantum leap in the upcoming years. Elon Musk made an announcement recently at Tesla’s ‘Battery Day’ event where he said that new-age batteries that would allow electric cars to travel significantly farther without adding weight will be available for sale in the next few months. The technology exists and is getting better and better with each passing day.
India has a lot to gain by converting its Internal Combustion Engine (ICE) vehicles to EVs at the earliest. As a result, its oil-import bill will reduce considerably. ICE vehicles are a major contributor to pollution in cities and their replacement with EVs will definitely improve air quality. India has over 170 million two-wheelers, and even if a quarter of them were to travel together in a four-wheeler, and that too an electric one, the benefits would be immense.
There is a real possibility of all this happening in the next five to seven years. This would, however, require innovations, a policy regime that encourages access to the latest technologies and a concerted effort by the Indian industry to achieve economic breakthroughs to make EVs cheaper and accessible for Indians of all backgrounds.