This article takes a look at the future of the electric automotive industry in India. 19 of the top 35 most polluted cities in the world are in India and we are in dire need of solutions in this time of ever increasing demand for vehicles. This article looks at the challenges and opportunities of the electric vehicle industry, specifically in the Indian context.
Switching to an entirely electric fleet can help reduce 1 gigatonne of carbon dioxide emissions by 2030, and save India $330 billion by cutting oil imports.
The explosive economic growth in the last few decades in India has given us much to celebrate, but it has also had its unpleasant consequences. Today, 19 out of the 35 most polluted cities in the world are in India. For the last two years, New Delhi has had the ignominy of being the most polluted city in the world, as a confluence of factors turns the capital’s environment into a haze of smog and potentially lethal pollutants. A Greenpeace India report indicates that 47 million children under the age of 5 years are residing in areas with hazardous pollution, especially in urban areas. While various causes and solutions are discussed, it is well acknowledged and understood that 50-90 percent of the pollution in densely-populated urban areas is vehicular. According to the Economic Survey conducted in India over the last year, an increase in available disposable income among citizens has led to an increase in the purchase of vehicles and a reduction in the use of public transport. Roads are the dominant medium of travel in the country, and as of 2016 there were 229 million vehicles on the road. With over 3 million vehicles sold in 2016-17 in the four-wheeler segment alone, the total number of vehicles burning petrol and diesel, and spewing dangerous fumes into the air is over 230 million. Despite the increasing pollution in India’s cities, vehicles that run on conventional fossil fuels continue to be sold massive numbers. How then, can we save our cities from pollution? Adoption of electric vehicles In August 2017, the Minister of State for Power and Renewable Energy Piyush Goyal indicated that the Niti Aayog was coordinating with various government ministries to create a plan to ensure that only electric vehicles are on sale in the country by 2030. During the course of his statements, the minister also indicated that hybrid vehicles were an unnecessary diversion because while they reduce fuel consumption, the benefits are marginal and the technology is dated. Even though the 2030 date was subsequently withdrawn, it seems that the Indian government is waking up to the potential benefits of electric vehicles.
Even the economics are impressive – switching to an electric fleet would also help India reduce its dependence upon oil imports, and save the country a mind-boggling $330 billion by not purchasing 876 million metric tonnes of oil. However, in spite of these numbers, the market has been slow to adopt electric vehicles. A report by market intelligence firm BIS Research indicates that the slow rate of adoption is a result of the cost of ownership being at a 45 percent premium over a conventional car. The report also identifies lack of infrastructure, government support, and incentives as being barriers to the sale of more electric vehicles in a market that it identifies as extremely promising.
The challenge and the opportunity There are positive signs for the electric vehicle sector in India. The above-mentioned statement from the minister of state indicates that the government is actively working towards encouraging the adoption of electric vehicles in the Indian market. In 2015, the government had launched a scheme named Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) under the National Electric Mobility Mission (NEMM) to promote the sales of fuel-efficient cars. Under this scheme, the government is planning to assign grant up to $16 million to cities with a population of more than a million, for purchasing electric vehicles in FY 2018. Manufacturers such as Hyundai, Mahindra & Mahindra, Nissan, Maruti, Toyota and Tata are beginning to show an interest in the market, and a slew of electric vehicle models – 25, according to the BIS Research report – are likely to be launched by them by 2021. However, for the sector to reach a critical mass and begin replacing the 230 million vehicles on Indian roads, the Indian government must take more concrete steps. It can look at governments in the APAC region, mainly China, Japan and South Korea, for inspiration. The development of electric vehicles in these markets has garnered massive attention. This is thanks to the collective effort of governments and manufacturers to initiate reforms that promote the sale of these vehicles and make them more economical to use. Their efforts have led to the sector showing a sustained increase in market volume, and the economic indicators seem to point to a period of explosive growth. According to the BIS Research report, the sector will show a projected CAGR of 29.5 percent between 2016 and 2026.
Innovators, entrepreneurs, and regulators must work together to evolve new business models for successful adoption. There needs to be streamlining of equipment, a smarter distribution of fiscal incentives, and a concerted effort to develop a robust infrastructure around electric vehicles. Once these elements are in place, the market can move to reduce the cost of electric vehicle ownership and help bring about a paradigm shift in how people in India perceive and use transportation.
This article is written by Faisal Ahmad
This article was first published here.