Rising fuel prices, record-high carbon emissions, and traffic woes may curb one’s enthusiasm to hit the roads again. But India can vouch for electric vehicles (EVs) to transform commute!
EVs represent a significant leap in innovation in the automotive industry, optimizing renewable energy use and integrating with smart grid and energy storage systems. The concept of green and clean mobility is relatively new in India, but it is also a much-needed catalyst for change. This shift aims to address energy security, affordability, and sustainability crises while simultaneously bolstering the economy and creating new employment opportunities. Over the last three decades, India has been a leader in the global Internal Combustion Engine (ICE) market. With the increased worldwide focus on EVs, now is the most opportune moment for India to transition toward fuel-efficient mobility.
EVs: A Global Necessity
A recent study suggests that the global EV industry is expected to reach $128.13 billion by 2030, with a CAGR of 28.2% during the forecast period of 2022 to 2030. Emerging economies like India from the APAC region are anticipated to have a dominant share in this burgeoning industry. This growth is attributed to green innovation led by key players such as Hyundai and Tata Motors, rapid EV adoption rates, and government subsidies and initiatives supporting and installing EV charging infrastructure.
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The Indian government alone has set a target of achieving 30% of EVs in the country by 2023. This decision aligns with India’s commitment under the Paris Agreement to reduce the emission intensity of its gross domestic product (GDP) by 35% over the estimated period, thereby promoting sustainable practices in the automotive industry.
Recent Developments Towards EV Adoption in India:
FAME and PLI: For manufacturers, the Indian government launched the Faster Adoption and Manufacturing of Electric Vehicles Scheme- II (FAME-II) and Production Linked Incentive Scheme (PLI) with planned budgets of nearly ₹10,000 crores and ₹25,938 crores, respectively. These two initiatives offer a substantial boost for automotive manufacturers, encouraging increased funding and investment to promote e-vehicle and hybrid innovations in heavy vehicles and public transport systems and to produce EV charging products and components. The PLI rewards incentives for over 18% of sales of EVs and their components.
Tax and Duty Exemptions: The government has reduced the GST on EV chargers and charging stations from 12% to 5% and 18% to 5%, respectively. Additionally, the Ministry of Road Transport and Highways (MoRTH) has announced permit exemptions for battery-operated vehicles, which will be given green license plates for transporting passengers or goods. MoRTH also notified state governments to waive road tax on EVs as a measure to lower the initial cost of EV setup. Furthermore, custom duty exemptions on capital goods, machinery, and raw materials for manufacturing lithium-ion cell batteries have been announced to promote local EV manufacturing.
Demand Incentives: Over the last two years, the government has increased demand incentives for two-wheeler EVs from ₹10,000/KWh to ₹15,000/KWh, with a rise in capital from 20% to 40% of the EV cost, to ensure they are competitively priced with ICE vehicles.
Make in India and Electrification Initiatives: The goal of reaching 100% local EV production under the Make in India initiative is a pivotal national measure for EV adoption. India’s current target of achieving 30% electrification by 2030 has led numerous domestic and global manufacturers to establish production plants across the country.
Tesla’s Investment Proposal: Recently, Tesla announced plans to build a factory for manufacturing $24,000 cars in India. During the company’s discussion with the Commerce Ministry, it expressed interest in producing low-cost EVs, leveraging both in-house and externally sourced technologies, and using India as a car export hub for the Indo-Pacific market.
Growing Customer Interest in Hybrid Vehicles: Fuel-maximizing hybrid vehicles combine an internal combustion engine with an electric motor, allowing higher mileage, cost savings, and less dependency on fossil fuels. Electricity per unit is less than fuel cost per kilometer. Along with the lower emission rates, and design and performance breakthroughs like regenerative braking, hybrid vehicles have garnered the interest of consumers in India. Hybrid vehicles are catching up in the mass segments. Honda’s City Hybrid, Toyato Hyryder, and Maruti Grand Vitara’s midsized SUVs with hybrid units are popular. Plug-in-hybrid electric vehicles are also gaining traction in urban regions due to their longer battery capacity and plug-in features suitable for city driving.
Despite the above improvements underway, there are several barriers to EV adoption. The State Government’s panel of vendors to convert ICE into EVs has raised concerns about higher GST at the rate of 18%. The battery prices also increased by 25% since the previous year due to high input costs. On the other hand, there have been several concerns about the R&D efforts on the nascent EV technology that requires additional tax deductions and exemptions. Though the government announced a concessional income tax rate of 15% for local manufacturers, it would be wise to defer this policy due to the immature R&D state of this emerging industry.
From the sustainability front, research-based evidence goes against the sustainability philosophy of EVs in comparison to hybrid and ICE car engines. EVs reportedly produce 15 to 50% more greenhouse gasses and are up to 60% more costlier than ICE and hybrid cars. Moreover with 75% of India’s electricity being sourced from coal, the argument about EVs as a sustainable option weakens.
Our Final Takeaway
The world has made a significant shift towards fuel efficiency and sustainability. However, the planet continues to warm, and according to the UN emission gap report, it is currently 1.2 degrees Celsius warmer than pre-industrial times. Unless countries collaboratively and intentionally work towards decarbonization, the world is at risk of reaching a 2.7-degree temperature increase by the end of the century. India’s strong emphasis on climate commitments and key international stakeholder partnerships remains central to fulfilling the promise of green mobility.
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Written By: Vanishree Bhatt
