Factors that will Fuel the Growth of EV Ecosystem in India

The alarming rate of air pollution in many parts of India has led to increasing concern and rightly so. While authorities and people debate over the contributing factors, one solution has emerged as an effective alternative. Electric vehicles (EVs) are now being widely seen as an eco-friendlier alternative to conventional cars and bikes. In fact, the benefits of EVs go far beyond the reduction in pollution.

India has the potential to be the largest EV market in the world and the government’s role is crucial in accelerating its adoption. Currently, the uptake of electric vehicles is still slow due to the high upfront cost and range anxiety, but a long-term investment in research and development will create sustained growth. The governments, both at the centre and the states, have taken a number of proactive measures to bridge the gap.

Steps Taken for growth of EV ECOSYSTEM
• Initiatives like National Electric Mobility Mission Plan (NEMMP) and Faster Adoption and Manufacturing of (Hybrid &) Electric vehicles in India (FAME India) have been launched to build a sustainable EV ecosystem
• Multiple state transport services now house more than 500 electric buses
• Organisations like the Bureau of Indian Standards (BIS), Dept. of Heavy Industry, and Automotive Research Association of India are devising design and manufacturing standards for EVs, Electric Vehicle Supply Equipments (EVSEs) and the charging infrastructure. This is expected to help tighten quality control during in-house production of EVs
• The Centre for Study of Science, Technology and Power Sectors (CSTEP) proposed 164 e-bus routes in Bengaluru. These routes were decided on the basis of studying and analysing factors like constraints of location, size of depots, bus schedules, incentives, and policy schemes.

Higher subsidy & support under FAME II: -
As per its latest modification, the Department of Heavy Industries capped incentives for electric two-wheelers at 40 percent of the cost of vehicles, up from the earlier 20 percent. Recently, the Centre has made a partial modification of the scheme for Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME India Phase II), including increasing the demand incentive for electric two-wheelers to Rs 15,000 per kWh from the earlier uniform subsidy of Rs 10,000 per kWh for all EVs. The focus is now on locally-built electric two-wheelers, a move that is expected to catapult India as the manufacturing hub for EVs. For example, city speed electric scooter with a range of 100km/charge will now cost less than INR 60,000, and a high-speed scooter with a range of 80 km will be nearer an INR 1 lakh price tag. Given their other positive factors, like extremely low running cost, low maintenance, and zero-emission, these highly economic price levels are expected to spur a substantial demand for electric two-wheelers.

The government has also has decided to go for the aggregation of electric buses and 3-wheelers under the National Mission for Clean Mobility. Energy Efficiency Services Limited or EESL is expected to bring down the cost of electric 3Ws to that of ICE-3Ws. It will further aggregate the demand for three lakh electric 3Ws. It is also working towards generating demand for EV buses in 9 cities with over 4 million-plus population, including Delhi, Mumbai, Bangalore, Hyderabad, Ahmedabad, Kolkata, Chennai, Surat, and Pune.

According to recent updates, the FAME-II scheme is also likely to be extended by two years till 2024. One reason for the extension and restructuring could be that only 5% of the allocated INR 10,000 crore has been spent till date.

Launching PLI Scheme for ACC Battery Storage
To further boost the sector, the Centre has given its nod to the much-awaited PLI scheme for manufacturing Advanced Chemistry Cells (ACC) with a budgetary outlay of INR 18,100 crores. The PLI scheme for manufacturing ACC aims at setting up giga-scale factories, promoting exports, achieving economies of scale, producing cutting-edge high quality globally competitive products, and most importantly, creating the next wave of job growth in the energy sector.

This scheme is applicable for manufacturing ACC, which are defined on the basis of cycle life and energy density. As there is no specific technology to be adopted, there is room for any new-generation technologies that can store electric energy. The scheme will also help in incentivizing localization of the supply chain in India. The state governments would be extending their support by providing land, easing permit and license procedures, providing trunk infrastructure, and so on.

While the Department of Heavy industries is going to implement the PLI scheme, several other central agencies, including the Niti Aayog will coordinate and monitor its implementation. Currently, Telangana, Karnataka, Tamil Nadu, Maharashtra, and Gujarat lead the field when it comes to energy storage and EV space. States such as Rajasthan, Uttar Pradesh, and Punjab are also trying to attract investments.

Today, India is at a crucial time and space in its transformative journey to an e-mobility ecosystem. Establishing domestic manufacturing capability in the EV battery value chain is a critical and essential enabler towards accelerated adoption of Electric Vehicle mobility in the country.

Best of 2020: The year of EV investments
While much of the manufacturing world will remember 2020 as the year of COVID-19 shutdowns and lost sales, it will likely go down as the turning point for investments in EVs. By making the shift towards EVs, India stands to benefit on many fronts: it has a relative abundance of renewable energy resources and the availability of skilled manpower in technology and manufacturing sectors.

India offers the world’s largest untapped market, especially in the 2Ws segment. 100 percent foreign direct investment is allowed in this sector under the automatic route. Leading players are rapidly growing their market presence in response to this opportunity. States like Karnataka and Tamil Nadu are also rolling out innovative and timely investor-friendly policies, besides building the necessary infrastructure.

Recently, an American electric vehicle and clean energy company marked its entry into India through its subsidiary in Bengaluru. Many original equipment manufacturers or OEMs have also set up their 2W plants. An intelligence EV manufacturer moved its USD 86.5 million factory from Bengaluru to Hosur in Tamil Nadu and plans to achieve an annual production capacity of 0.11 million 2Ws. In March 2021, a ride-hailing startup announced that it would be setting up the world’s largest electric scooter plant in Hosur over the next 12 weeks, at a cost of USD 330 million with an aim of producing 2 million units a year.

The pandemic triggered an unprecedented growth in the e-commerce industry last year, a trend that is likely to continue in the future. This growth, in turn, will continue to boost EV adoption in the logistics and e-commerce industries. For instance, Amazon has struck a partnership with an EV manufacturer in February for 10,000 EVs, to be delivered by 2025.

Key Takeaways
Ultimately, the scope of India’s EV market growth rests on the availability of capital for OEMs, battery manufacturers, and charge point operators as well as improvements to infrastructure and diversified options for consumers. Realizing India’s EV ambition will also require an estimated annual battery capacity of 158 GWh by FY 2030, which opens up huge investment opportunities for investors. Hence, measures such as supportive policies are a critical need at this juncture.

To support the same, the government has also been rolling out incentives to boost market demand in priority segments like electric 2Ws and localizing production of key components like ACC battery storage through the PLI scheme.
 

- Mehul Shah, Vice President Transport BU, Exide Leclanche Energy Pvt Ltd, Nexcharge