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INDIA’S ELECTRIC REVOLUTION: THE TRACK TO TRANSITION

6 Mins read

Introduction

With the second largest road network in the world, vehicular transport by road is one of the main modes for goods and passenger movement in India[1]. Road transport is reported to contribute nearly 123 million tonnes of CO2 emissions in India[2]. As part of its commitment towards clean and sustainable development, India has signified its intent on hastening its adoption of zero-emission vehicles during the COP 26 United Nations Climate Change Conference[3].

While this, along with the launch of the E-Amrit portal[4] are recent initiatives, the development of sustainable mobility in India has been an area on which the Indian Government has been steadily working for over a decade. In 2010, the Indian Government had through its Ministry of New and Renewable Energy introduced the Alternate Fuels for Surface Transportation Programme pursuant to which support through financial assistance/subsidy was introduced to boost the adoption of vehicles driven by alternate fuel technologies such as electric and hybrid electric technologies[5]. Further, the National Mission for Electric Mobility was conceptualized in 2011 with a view on encouraging adoption of electric mobility and local manufacture of electric vehicles[6].

Thereafter, the National Electric Mobility Mission Plan 2020 (NEMMP) has been introduced[7], marking one of the most significant initiatives of the Indian Government to encourage proliferation of hybrid and electric vehicles. Under the aegis of the NEMMP, the Ministry of Heavy Industries launched a scheme for the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME), the second phase of which is ongoing and has been extended until 31 March 2024[8]. Further, recognising the criticality of adequate charging infrastructure for the proliferation of electric vehicles in the country, the Ministry of Power, Government of India has clarified that the charging of batteries for electric vehicles through charging stations is not subject to license under the Electricity

[1] Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Status quo analysis of various segments of electric mobility and low carbon passenger road transport in India, February 2021 available at < https://www.niti.gov.in/sites/default/files/2021-04/FullReport_Status_quo_analysis_of_various_segments_of_electric_mobility-compressed.pdf> accessed on 1 February 2022.

[2] International Energy Agency, “India and IEA hold workshop on EV charging infrastructure”, 13 December 2019, as accessed at https://www.iea.org/news/india-and-iea-hold-workshop-on-ev-charging-infrastructure on 1 February 2022.

[3] Department of Transport and Department of Business, Energy & Industrial Strategy, Government of the United Kingdom, COP26 declaration on accelerating the transition to 100% zero emission cars and vans, as accessed at https://www.gov.uk/government/publications/cop26-declaration-zero-emission-cars-and-vans/cop26-declaration-on-accelerating-the-transition-to-100-zero-emission-cars-and-vans on 1 February 2022.

[4] Press Information Bureau, Government of India, “India Launches E-Amrit Portal on EVs at COP26”, 10 November 2021 as accessed at https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1770670 on 1 February 2022.

[5] Ministry of New and Renewable Energy, Government of India, Administrative Approval bearing number No.6/4/118/2010-BETDG issued on 12 November 2010.

[6] Press Information Bureau, Government of India, “Setting up of National Mission for Electric Mobility”, 31 March 2011 as accessed at https://pib.gov.in/newsite/PrintRelease.aspx?relid=71403 on 1 February 2022.

[7] Department of Heavy Industry, Ministry of Heavy Industries & Public Enterprises, Government of India, National Electric Mobility Mission Plan 2020.

[8] Department of Heavy Industry, Ministry of Heavy Industries & Public Enterprises, Government of India, Notification dated 25 June 2021 bearing numberS.O.2526(E).

Act, 2003[1] and also published revised guidelines and standards for charging infrastructure for electric vehicles[2]. The National Mission for Transformative Mobility and Battery Storage has also been launched with a view on driving end to end strategy and policy implementation to boost electric mobility in the country[3]. Further, various States in India, such as Karnataka, Delhi, Maharashtra, Tamil Nadu and Gujarat have also released State-level policies to promote and incentivise the development of electric mobility.

[1] Ministry of Power, Government of India, ‘Clarification on charging infrastructure for Electric Vehicles with reference to provisions of Electricity Act, 2003’ as issued through letter bearing number No.23/08/2018-R&R dated 13 April 2018.

[2] Ministry of Power, Government of India, ‘Charging Infrastructure for Electric Vehicles (EV) – revised consolidated Guidelines & Standards –reg’ as issued through letter bearing number No.12/2/2018-EV (Comp No. 244347) dated 14 January 2022.

[3] NITI Aayog, E-Mobility: National Mission on Transformative Mobility and Battery Storage, available at < https://www.niti.gov.in/e-mobility-national-mission-transformative-mobility-and-battery-storage> accessed on 1 February 2022.

Key Challenges

While electric vehicles are increasingly eliciting consumer and industry interest and have been the focus of various policy measures and incentive schemes, on-ground adoption of electric vehicles in India is still remains nascent, with electric vehicles accounting for less than 1% of total vehicle sales in the country[1].

Key challenges on India’s track to transition towards electric mobility include:

  • Range Anxiety, Infrastructure and Consumer Perception: Customer confidence in the assured range for electric vehicles depends on several factors, including battery size, energy efficiency of the vehicle, charging time and availability of charging infrastructure[2]. Most of the existing charging infrastructure is concentrated within major urban areas with vast swathes of the country not hosting any charging infrastructure[3], which has contributed to consumer hesitation in transitioning to electric vehicles. Issues hampering proliferation of charging infrastructure include complications relating to acquisition of suitable land, delay in securing regulatory permits and clearances and low asset-utilization[4]. Further, on account of the limited growth of electric vehicle-segment in the country, availability of trained technicians and repair facilities for such vehicles is also limited[5].

Affordability: Upfront costs of electric vehicles in India remain substantially higher than for existing comparable models of cars powered by internal combustion engines (ICE), dampening the demand for electric vehicles[6]. This is to a large extent attributable to battery costs, which although declining over time still remains a major contributor to the overall upfront cost of electric vehicles[7]. While models such as battery swapping offer potential for cost reductions, currently battery swapping has not yet seen wide adoption in the country due to various concerns such as lack of standardization and certain risk apprehensions for original equipment manufacturers[1].

Supply Chain Considerations: While there have been policy stipulations promoting indigenous manufacture of components for electric vehicles, there is only a small cohort of indigenous manufacturers of such components and India continues to be dependent on imports, particularly from China. This not only adds to costs but also results in uncertainty and potential disruption given geopolitical sensitivities[1]. Further, raw materials for batteries such as lithium, phosphate, manganese, nickel, graphite etc. are scarce and continued availability would depend not only on India’s ability to strategically source required raw materials overseas but also on its ability to source the same through local exploration and perhaps more importantly through battery-recycling.

The Track to Transition

Holistic and comprehensive interventions are essential to drive India forward on its track to transition to e-mobility. A roadmap for phased transition from ICE-powered vehicles to electric vehicles which is evolved in consultation with stakeholders, should be developed to provide clarity and to ensure a coordinated approach on the track to transition[1].

With the continued focus on sustainability through use of public transport, procurement strategies for deployment of electric buses may be coordinated and implemented at State-level to improve efficiency and achieve scale[2] and measures introduced to incentivize faster fleet-level adoption of electric vehicles to support the phasing out of ICE-vehicles.

As mentioned above, one of the principal barriers to widespread adoption of electric vehicles in India has been the issue of affordability. Mitigation measures such as continued support through demand incentives, interventions to boost local manufacturing of components, enabling ease of access to credit for users in the two and three-wheel segment, supporting research initiatives to explore reduction of battery costs and encouraging alternative models such as component leasing, are imperative to bridging the gap in upfront cost of ownership of electric vehicles as compared to ICE-powered vehicles. Continued focus on expansion of charging infrastructure and battery swapping solutions is also required through appropriate policy measures and incentives to increase customer confidence in electric vehicles. Additionally, the development of an organized recycling system for end-of-life batteries presents an interesting opportunity for India to emerge as a major global e-recycling hub—appropriate policy initiatives are crucial to ensure that the growth in electric mobility is matched by growth and development of a sustainable and organized recycling industry[3].

While adoption of electric vehicles in India thus far has been fairly limited, the sector remains one of great potential considering the nation’s pursuit for sustainable development and energy security. Indeed, the Indian Government’s focus on e-mobility has been reiterated in the Union Budget 2022-2023, in terms of which special mobility zones with zero fossil-fuel policy and a battery swapping policy to accelerate the adoption of electric vehicles[1] are proposed to be introduced. Continued emphasis through integrated and holistic measures will enable India’s success on its track to transition to electric mobility.

[1] Budget 2022-2023 Speech of Nirmala Sitharaman, Minister of Finance, Government of India on 1 February 2022.

[1] Energy Sector Management Assistance Program (ESMAP), Electric Mobility in India: Accelerating Implementation, April 2021 available at <https://openknowledge.worldbank.org/bitstream/handle/10986/35655/Electric-Mobility-in-India-Accelerating-Implementation.pdf?sequence=1&isAllowed=y> accessed on 1 February 2022.

[2] Supra note 22.

[3] Tom Moerenhout, “Is India Ready for an Electric Vehicle Revolution?”, Trade and Sustainability Review, Volume 1, Issue 3, July 2021, International Institute for Sustainable Development, available at < https://www.iisd.org/system/files/2021-07/iisd-trade-sustainability-vol-1-issue-3-en.pdf> accessed on 1 February 2022.

Disclaimer:
This article was originally published by  Swathy Ramanath,  Partner | Energy, Infrastructure and Resources, Mergers and Acquisitions, Khaitan & Co.

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