Mission Possible? How Close Is India To Achieving Its EV Vision 2030

The stage has been set for electric vehicle transition and startups are leading the drive. With a target of 30% penetration of electric vehicles on Indian roads by 2030, the market is ready for India’s EV ecosystem to take charge, but the initial developments have not spurred on market demand for EVs yet.

The government launched the second phase of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME 2) scheme, with an outlay of INR 10K Cr. It aims to give the necessary push to EVs to curb pollution afflicting major cities and cut down the oil imports. FAME has put a healthy number of electric 2W, 3W, buses and some BEV and mild hybrid cars on Indian roads. In FY 2019, more than 750K EVs were sold with a total of 7,59,600 units which includes electric two-wheelers (126K), electric three-wheelers (6,30K) and electric passenger vehicles (3,600).

According to Datalabs by Inc42 Electric‌ ‌Vehicle‌ ‌Market‌ ‌Outlook‌ ‌Report,‌ ‌2020‌, the capital inflow in electric vehicle startups has grown exponentially between 2014 and 2019. Taking the outlier funding rounds into consideration, the total capital inflow in the electric vehicle sector was at $601 Mn whereas the capital inflow into electric vehicle startups peaked at $394 Mn in 2019. But in the global scheme of things, the Indian market is woefully short of leaders such as China or Norway.

As a result, there’s an increased focus on developing the ecosystem for EV component manufacturing, value creation to increase brand appeal, especially for low voltage electric drivetrains and batteries. The transition is happening, however, the bigger question is when will it happen and who will lead the journey?

Industry leaders spoke to Inc42 about the feasibility of the Indian government’s targets, the sub-sectors in the EV industry that will grow faster, as well as automation in production. Will India ever achieve 100% transition, as aimed by countries like Britain, Norway and Sweden?

EV Leaders Predict The Future

While the initial expectation of 100% transition was criticised by most industry leaders, many feel 30% transition will happen and is achievable given the government push.

“Electric vehicles are the inevitable future and the time for EVs have arrived in India. Policies like FAME 2 and various state policies have given the right push not just for products but to create a proper ecosystem required for electric vehicles to flourish,” said Mahesh Babu, CEO, Mahindra Electric.

He also added that Phases Manufacturing Program will see EV technology being made in India for the world. Globally, EV sales are expected to cross 500 Mn units and Babu expects EVs to be the big growth segment over the coming years.

The vision is grand and has helped set the tone for the future of mobility in India. “What is needed now are plans/policies to implement this. The incumbents are keeping a close watch, some have made announcements and others will follow suit in the coming quarters,” added Amitabh Saran, CEO and founder of EV solutions maker Altigreen.

As demand grows, more models and players are expected to emerge. Experts feel India has the mind and the capability with electric rickshaws being a classic example of a thriving “industry” that developed organically. “The focus is to make EV technology here in India rather than simply importing components. Mahindra Electric is now a complete electric vehicle technology manufacturer with a clear focus to develop the entire ecosystem in India and not just manufacture vehicles. The Phased Manufacturing Program will see more investments coming into India creating jobs and thus has the potential to make India a global manufacturing hub for EVs,” said Mahindra’s Babu

With ten years still to go for the target deadline, industry leaders see a bright future.

“Over the last 12 months, there has been tremendous progress in terms of the policy framework in terms of OEMs coming about, energy investments and tier one suppliers. For the first time, we are seeing a big movement towards this area,” said Chetan Maini, cofounder, vice chairman, SUN Mobility.

EVs, which are powered by lithium-ion batteries and utilise electricity, lead to zero emissions and the latest EVs are almost on par with their combustion engine counterparts in terms of performance. The industry has also started looking at recycling of lithium-ion batteries with the help of the latest technology. “These batteries can have a long life and ensure zero-downtime. Manufacturers are aiming to achieve a battery lifecycle of more than 10-15 years in the near future. Thus, EVs are definitely the future of mobility and will be adopted across the world in the coming years,” said Akhil Aryan, cofounder and CEO of ION Energy, which is working on improving battery management and efficiency in India.

Shunning Dependency On Imports

The Union Budget 2020-21 has proposed to increase customs duty on import of electric vehicles across categories. The decision comes in the backdrop of Chinese manufacturers exporting low-quality battery packs for EVs in India, which adds to the cost and on-road price. “If we do not shun our “trader” mentality soon, we will remain dependent on China. Startups and incumbents have to look at electrification as the next tectonic shift, which will be around for the next 100 year,” Saran added.

The current supply of batteries is largely from China. But the government is trying to promote the manufacturing of the same locally and aims to set up mega-manufacturing plants in sunrise and advanced technology areas such as semiconductor fabrication, solar photovoltaic cells, Li-ion storage batteries etc.

As we reduce the imports, simultaneously the industry is learning its lessons from the success story of China, which created an entire ecosystem to respond to the spiralling rates of pollution in the country. China reportedly sold more electric cars than in the rest of the world combined in 2018. It also spent over $7.7 Bn to incentivize electric vehicles. “It wasn’t just about one part of the equation of getting a vehicle, but it was policies that helped supply chain battery companies, motor controller companies, all come together for China. It also didn’t focus on one sector – it looked at three-wheelers, two-wheelers, buses and cars,” said Maini.

China also invests before time in terms of infrastructure, which other countries have been trying to catch up on. The country also had long-term policies in place. According to experts, for China, it wasn’t about the immediate 2 or 3 years, but more like the 5-7 years on what policy changes would be required. “I think this kind of long-term approach is what India needs today for becoming a global player in this space,” he added.

Countries like Norway have incentivized EVs by removing purchase tax, value-added tax on purchases, toll fees, parking fees for electric vehicles. Experts feel India also needs a similar approach. “The government has done the same with FAME II and Phased Manufacturing Program. There is a strong focus on Research & Development in India. Initially, India requires incentives only in the commercial, fleet and mass transportation segment. Once the economics of scales is achieved and with falling battery prices, EVs will soon be at par with ICE vehicles,” said Mahindra’s Babu.

Can India Phase Out Fossil Fuel Vehicles?

Great Britain is said to have ended the sale of all conventional petrol and diesel cars by 2040, France has reduced nitrogen dioxide pollution, China has said that 12% of cars sold will be battery-powered or plug-in hybrids by 2020, while Norway plans to end sales of new petrol and diesel cars by 2025. Similarly, Sweden, Denmark and Finland have shared similar targets to wean fossil fuel engines. Will India be able to completely phase out fuel engines anytime soon?

“If we skip the intermediate step of “hybrids” then I strongly believe that for last-mile transportation (2, 3, 4 wheeler SCV), India will leapfrog to 100% EVs. My estimates clearly indicate it will be well before 2030. In fact, we are confident that in these segments of Last Mile Transportation, more than 95% of new vehicles sold in 2025 will be fully electric,” added Saran.

The target of 100% transition to EVs completely by 2030 may be difficult across all segments, but certain segments will transition much faster, added Reva’s Chetan Maini

The thought of EV transition came much later in India than other countries. The customers are also not well-informed about the industry players. And then, there are issues like charging infrastructure, dependency on China for Li-ion and slow transition on electric cars. However, experts feel though late, India’s auto industry has responded well to the changing government norms for over 30 years now.

According to the society of Indian automobile manufacturers, compared to a personal vehicle, commercial vehicles like taxi fleets, bus fleets, three-wheelers have 5x more usage per day. Therefore, for such higher mileage vehicles, savings on operating cost will pay-back the initial high purchase price faster than low mileage vehicles. Attractive power tariff can play a significant role to offset capital cost of buying EV with lower operating cost at faster pace.

Building up an EV ecosystem and transition from conventional ICE driven vehicles to electric vehicles may be a time-consuming exercise. However, OEMs like Tata, Mahindra, MG Motor, Maruti and Hyundai do see a brighter future for electric vehicles in India.

Will Tesla’s Presence Change The Game For India?

The luxury market is comparatively small in India as Indian consumers are price-conscious. Tesla fits into that ‘luxury’ category. Is India the right destination for a Tesla launch?

“I don’t think so. Tesla will not help democratise the use of electrics in this geography. Don’t take me wrong – it’s an amazing vehicle, and Elon [Musk] and Tesla have together been a source of inspiration to many across the globe. But I believe that India and the emerging markets don’t operate on the top-down model where you start by building super fancy expensive cars,” said Altigreen’s Saran.

As India uses the bottom-up approach, once adoption starts happening at the lower segment of the market, mass adoption is expected to follow. “This is because, at the end of the day, change happens when economics tilts clearly in favour of the new technology,” he added.

Since Tesla defines EVs across the world, even though it appeals to a very niche audience, it is expected to create awareness towards EVs in general. Whenever that happens, it may put India on a global map in terms of luxury segment as well. It is also expected to be a motivating factor for other manufacturers to strengthen their presence.

While luxury EV looks far-fetched, the last-mile segment with two-wheelers, three-wheelers, small commercial four-wheelers and buses is expected to lead the growth of EVs in India. “I think that the lowest hanging fruit is three-wheelers, where the micro-mobility solutions will first come in, both from passenger as well as goods transportation, especially with shared economy and e-commerce on the rise. The next segment I see is the 2 wheelers, starting from fleet and shared, and moving on to personal mobility,” explained Maini.

The third-highest growth is expected for buses, which are a critical part of public transportation. This has already been triggered by FAME 2 outlay for 5000-6000 buses over the next 24 months to be deployed within India. Cars are expected to be the smallest percentage among passenger vehicles.

“But I see the shared aspect in four-wheelers also growing very rapidly, where adoption in corporate transportation, taxis, Ubers and Olas are likely to see high growth in the next five years, maybe 40-50%, if not higher,” Maini added.

In India, with its own sector dynamics, unlike developed nations where everybody uses cars, green mobility is expected to start with smaller vehicles and public transport options. The total number of vehicles sold in a year in India is approximately 3 Cr and within that 2.7 Cr vehicles are two-wheelers, three-wheelers and buses, accounting for 80% of the market.

“And, that will pave way for the ecosystem to develop as well, whether it is charging infrastructure or component manufacturing or customer awareness, that would pave way for the next round of electrification which would cars,” Sulajja Firodia Motwani, founder and CEO, Kinetic Green Energy, said.

Motwani also added that for the next five years, we will see a massive explosion of electric two-wheelers and three-wheelers in our country. Mobility as a service is also expected to be the early adopter of EVs.

“What is the best path to achieve green mobility in India? Anything that makes a larger impact. India is traditionally a country of two-wheelers and three-wheelers. So, that is the segment that will soon transition to EVs. Additionally, the mobility that can quickly become electric is when it is owned by companies rather than people, which is mobility as service or B2B,” said Amit Gupta, CEO and cofounder, Yulu.

Is There A Future For Autonomous EVs In India?

Connected, electric vehicles and autonomous vehicles are the two biggest areas of innovation in the automotive industry today. The convergence of these along with shared mobility is expected to disrupt the mobility. India already has somewhat connected vehicle features in about 10 Lakh vehicles.

With electric vehicles knocking on the door and with further rationalisation of battery cost; improved battery density; enhanced battery management system; and widespread charging infrastructure, the interest around autonomous EVs will grow slowly over the next 5-7 years in India. The mining industry, corporate parks, large industrial setups may be the early adopters in India. Next would be semi-autonomous goods carrying trucks followed by shared mobility, perhaps beyond 2030.

TCS, Mahindra and others have already used autonomous vehicles in closed and monitored environments and according to experts this can be replicated with EVs as well.

“They could have also done this on any EV available. Making a vehicle run on autonomous mode is equally challenging in electric or internal combustion engine vehicles. But their convergence is much-talked about today,” said Maneesh Prasad, CEO of Telematics Wire.

According to experts, switching to autonomous EVs is dependent on financial viability. For example, the number of electric rickshaws running in cities and small towns is expected to around 1.6 Mn, which is a phenomenal number that will continue to increase. It is happening because of the viable business model for those looking for self-employment in public transport. “Initial adoption being in shared mobility and goods transportation. Thus early adoption would be in developed economies. Globally, usage of autonomous vehicles is more than a decade and a half away,” said Prasad.

Financial viability is the biggest factor for EVs. “While many in public would say that the government has not been encouraging about the adoption and usage of autonomous vehicle, I think it’s a wise step to watch from the sides and take lessons from the early usage in geographies like North America, Europe, China and East Asia,” added Prasad.

But once the technology starts maturing, and there is commercial viability, India too will see changes in the approach of policymakers. Prasad pointed out the shortage of truck drivers, which is a big gap in demand, which is something autonomous vehicles can cater to.

While the government has come up with the FAME policy to promote EVs amongst the manufacturers, streamlining the policies is expected to give a further push to green mobility. Simplifying the process for manufacturers with benefits under the FAME umbrella would be a major impetus to bring more manufacturers on the board and drive up demand. Clear cut policy intervention, reasonable targets and timelines, improved fiscal incentives will encourage innovations and local manufacturing through attractive policies and incentives

“The government should first start by setting a roadmap for adoption of green mobility and make sure it follows such a roadmap. Industry may not have any problem in adopting greener technologies but the biggest fear they have is losing the investments they make if the government changes the policy at a later stage,” added Varun Chaturvedi, MD & CEO, Volttic EV Charging.