The Pieces of India’s EV Jigsaw Are Falling in Place

In the midst of growing impact of climate change, Electric Vehicles along with renewable energy have come as a savior to world. India, which has to grow at faster pace to make its 1.3 billion people’s life healthy and happy, has also embraced this opportunity with open arms. After a flip flop for last couple of years, we have taken a decisive step in adopting Electric Vehicles. Few recent policy measures, to which I come later in the article, are testimony to that. First let us understand the significance of automobiles and how and why EV occupies the core for times to come

EV to form nucleus to transport sector

Two decades of robust growth have propelled India from being a net importer of automobiles to a leading manufacturer and exporter of vehicles and components. By volume, India is the fifth largest vehicle manufacture in the world. It is estimated that by 2020 the automobile industry in India will be the third largest in the World after China and USA.

The domestic demand for automobiles is expected to remain strong as only 20.3 out of every 1,000 Indians own a car, being among the world’s lowest rates. Compared to this, developed countries like USA, Europe, China, Norway, Japan have number of cars per 1000 person is in the range of 200-800 and more. Another interesting fact suggests that percentage of household owning “No Car” or “One Car” is fast declining and “Two Cars” or “Three Cars” are increasing. In a hierarchical country, ownership will continue to lead despite proliferation of shared resources. This augments well for automobile sectors.

While numbers highlight impending opportunities in the sector, there are several challenges fueled by carbon emissions. According to World Health Organization Report, out of the 20 most polluted cities in the world, 14 are in India. Not surprisingly, vehicular pollution is one of the major contributors to the deteriorating air quality in the country. In this background, adoption of electric vehicles (EV) have emerged as the most viable option to help curb the emissions from transport sector.

Challenges for acceptability of Electric Vehicle

Like other countries, India has embarked on a journey towards the electrification of automobiles. Scheme and Plans like National Electric Mobility Mission Plan (NEMMP) 2020, and Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME), have provided the initial framework for adoption of EV in the country. But this has not proved enough.

According to McKinsey’s 2016 EV consumer survey of buyers considering battery-powered EV in China, Germany, and the United States, consumers rank not having enough access to efficient charging stations as the third most serious barrier to EV purchase, behind price and driving range. With EV prices declining and ranges expanding, charging is expected to be the top barrier.

Considering the fact that in India EVs will remain confined to urban areas initially, adoption to such extent would require a ubiquitous network of public charger as in urban areas in India, private garages are not very prevalent. No doubt there would be workspace charger, but that would be a complimentary to Public Charging than otherwise.

Another push towards electric mobility shall be largely driven by personal choice of consumer. Indian consumers currently have practically no choice of electric vehicles to choose from whereas a consumer in US and China have more than 50 and 100 variants respectively. Indian OEMs shall have to come out with many more variants to offer a bouquet of choice to consumer. However, mere choice of vehicle will not attract a consumer to switch to EV unless they find the cost pocket friendly. Even though on Total Cost of Ownership (TCO) an EV is better than equivalent ICE vehicle for certain travel range on daily basis, most of privately owned vehicles will not fit into this bill as their total travel is less than 50km a day. With expected battery cost reduction to less than US $ 100 by mid 20s as per one report, EV will become at par or less than ICE vehicle by 2023-24. Thereafter, there will not be any stoppage to adoption of EV as there will not be any incentive to drive ICE vehicles as operational and maintenance cost of EV will be much owner than that of ICE vehicles.

The infrastructure problem and possible solutions

Three things – clarity on charging standards, availability of space, and suitable electricity infrastructure- are needed to facilitate a robust charging point networks in India. Charging stations should be capable of servicing all kinds of vehicles. On this front, India need not reinvent the wheel. On DC Fast charging front, globally two leading standards – CHAdeMO and CCS- are widely accepted and same can be adopted/adapted for 4-Wheeler segments. On AC side of charging, Type-2 charging would make the charging station completely interoperable. Fortunately, this issue has been settled after a protracted discussion amongst stakeholders.

Developing large scale charge point network in Indian urban environment will be more challenging from space and robustness of electricity infrastructure point of view. As urban areas, which are expected to adopt EV in initial stage, are short of enough spaces and faced with ever increasing electricity demand, optimum utilization of available public space with sufficient power would be needed. One unit of space in public places shall cater to more number of vehicles. Government can secure sites, and provide upgraded electricity grid infrastructure to Charge Point Operators for setting up charge points at these locations. This ‘charging’ problem can also be addressed by tying up with commercial establishments such as restaurants and malls to install EV charging points at those locations.

Furthermore, we need to find ways to manufacture cheaper, more efficient batteries as an alternative to the expensive lithium-ion batteries, which is one of the key factors determining the cost of EVs. And, while we can be reasonably hopeful that Indian engineers – masters of frugal innovation – will rise to the occasion, it may also be worthwhile to form a manufacturer consortium to develop battery cell technologies and packs, and to procure common components for Indian original equipment manufacturers.

Push from Government and Pull from Consumer holds the magic

Any new disruptive technological product and services gets adopted by innovators and early adopters who are to left of the curve of Law of Diffusion. To get it adopted by mass majority, “Push” by Government and “Pull” by customers are needed. Government provides the required push by way of various regulations. In the case of EV in India, those push have been provided by Government in the form of numerous initiatives like Faster Adoption and Manufacturing of Electrical vehicles (FAME), Electric Vehicle Policy by some of the state governments, Smart Cities Mission, Standardization of EV Chargers – Bharat Charger, intent to replace fleet of Govt vehicles with EVs, according the separate EV Tariff by Electricity Regulator, bringing it under lower bracket of GST etc. over a period of last 4-5 years. In Budget 2019 Government reiterated its commitment to support e-mobility in transportation. The vision of Government to leapfrog and make India as a global hub of manufacturing of EVs is laudable as this would provide the positive momentum to manufacturing of battery which is critical for making EV affordable to India consumer. Income tax rebate to individual buyers of EV, further lowering of GST from 12% to 5%, customs duty rationalization/exemptions for certain products including parts of Electric Vehicles etc. are boosters for EV sector. To see the significance of only GST component in a perspective, I cite the example of Norway. Norwegian Government exempted the EV from paying VAT which is 25% and above on ICE vehicles. In Indian context GST on ICE vehicles varies from 28% to 50% depending upon size and engine capacity whereas in the case of EV it is just 5%. Under FAME-2, besides demand incentive, an outlay of 125 Million Euro has been made for setting up of charging stations across country.  

So, the fiscal support of India is at par with Global leader in EV adoption. We cannot complain about Govt’s support.  Government has done its bit and it is the turn of other stakeholders – OEM, battery manufacturer, Financial Institutions, Charge Point Operators, and above all Customers to provide the necessary pull by creating demand and providing supply.

As a result, to these measures and initiatives of Government, we now see a lot of action in the electric mobility, charging and storage space in line with the government’s green vision, which is very encouraging for the industry. At Fortum India, we wish to collaboratively work with vigour towards government’s aim of having 30% electric vehicles by 2030, by continuing our investments in recycling the capital.  These are all steps in the right direction.

The EV movement just needs a tipping point

Indian economy is not insulated from what is happening at global level. EV which was occupying almost one third of vehicle share in US in early 20^th centuries have come back strongly during last decade or two. As more and more countries are adopting EVs, it will shortly start moving on high pace and India being globally connected economy will reap the benefits of global adoption and it will reach to majority stage in shorter span than other countries as Indian customers will form part of early majority in terms of Global market.

As Tesla did for US market, startups in India are poised to make huge contribution towards adoption of EV. Free from any legacy baggage, they are well in position to offer pure electric vehicles which is also evident on road particularly in 2-3 wheeler sector. Traditional OEMs have also pulled up their socks and are readying themselves to hold to their market share. Hyundai has taken the lead by introducing Kona. Electric version of Maruti Electric Cars can be seen on road though in test mode. More than 10 models of electric vehicles are slated for launch in next 12-18 months. Tata Motors have just announced that they will introduce more models on Electric variant. Mahindra promise to launch KUV 100 and SUV 300 with electric power train. Clearly, we can see that Indian EV industry is well prepared to join the bandwagon and offer a pollution free, and affordable EV experience to Indian customers. With India poised to become third largest auto market of world, none of the players would like to miss the huge opportunity.

Further, with more and more renewable energy, which is variable in nature, fed in the grid, use of EVs shall provide the flexible load to balance the system. If we see India’s vision to achieve all electric fleet by 2030 from this perspective, it becomes obvious that we have no choice but to achieve this.

India does indeed have a future for electric cars. It could be a matter of three-to-four years while the policy and infrastructure pieces of the jigsaw fall in place. In the meantime, we, as consumers, would do well to objectively assess our mobility needs and ready ourselves for a change that will sustain our mobility needs and those of future generations for decades to come.