NITI Aayog has incentivised the electric mobility industry through rebates and tax breaks
A long-term vision and clarity is required for the EV industry, said Yulu founder Amit Gupta
Govt has proposed moving to electric two and three wheelers in India by 2023
This year, the United Nations Environment Programme has decided on“Air Pollution” as the theme for the 2019 World Environment Day. Improving the air quality is the need of the hour as the 2018 State of Global Air report revealed that 95% of the world’s population lives in areas with worse air quality than the WHO guidelines for healthy air.
According to the report, nearly 60% of the world’s population live in areas that do not meet even the least-stringent air-quality target from WHO. It also revealed the steep rise in pollution levels in India.
A recent global air analysis revealed that 15 out of 20 most air-polluted cities are Indian. Gurugram took the top position in the list followed by Ghaziabad. Vehicular emission, stubble burning and industry emissions are some of the major reasons behind the alarming levels of air pollution in India.
At a time like this, a switch to the use of electric vehicles is seen as a necessity in helping reduce vehicular emission. However, lack of proper infrastructure and high costs of electric vehicles have become the major roadblocks in India’s emobility dream.
“The overall infrastructure needs to be established, with the right product solution and a thriving social environment, for the Indian EV space to flourish. The consumer is currently looking at electric vehicles as suboptimal for his daily use. In addition to logistics, we must also steadily shift our focus to educating the consumer and gaining his confidence. With the government promoting superior quality vehicles, the consumer will slowly change perspective, but we need to educate them on the benefits of making the move to EVs — not just from a sustainability point of view but also from an ROI perspective,” said Parveen Kharb, CEO and cofounder of Twenty Two Motors.
Indian Government’s Ambitious Strides For Green Mobility
In a bid to ensure greener mobility, the Narendra Modi-led government had taken several steps to promote production and adoption of electric vehicles in India. On April 1, 2015, the central government had launched the FAME India scheme with an outlay of INR 895 Cr to offer incentives on the purchase of EVs.
The government launched the revised second phase of FAME in March with an outlay of INR 10K Cr. It proposes to support 10 lakh two-wheelers, 5 lakh three-wheelers, 55K four-wheelers, and 7K buses which run on lithium-ion batteries. It also plans on setting up 2,700 charging stations, with the availability of at least one charging station in a grid of 3 km x 3 km.
With the NDA party being re-elected to power for its second term, will the government look into implementing other schemes and policies for developing the EV ecosystem?
“It was this government which had created a road map for EV policy. A project close to the heart of the Prime Minister. NITI Aayog, the government’s apex policy think tank, has been tasked with rolling out an ambitious electric vehicle (EV) plan, pushing the department of heavy industries (DHI) into a tertiary role for a policy that is aimed at projecting India as a global torchbearer of green vehicles,” said DOT founder and managing director Vineet J Mehra.
Most recently, NITI Aayog has proposed a complete switch to the use of electric two and three wheelers in India in a phased manner from March 31, 2023. This will involve banning the sales of all internal combustion engine (ICE) three-wheelers by March 2023, and two-wheelers below 150 cc by 2025.
It is also planning to launch a comprehensive scrapping policy and the ‘polluter-pays’ model to encourage the purchase of electric vehicles. The polluter pays model which was earlier introduced as feebate model was put on hold in March, prior to the general elections.
The scheme proposes imposing a fine on traditional fuel run vehicles and the funds collected through this will be used to provide incentives on the purchase of electric vehicles, charging infrastructure and establishing battery plants of at least one-gigawatt capacity.
Will Modi 2.0 Address Gaps In EV Policies?
While it can’t be denied that the Modi government has shown a keen interest in developing the EV space in India, it is arguable if the initiatives are doing enough to meet the demands of the nascent industry.
The FAME II scheme’s aim incentivise electric vehicle is a welcome move but its stringent specifications had caused concerns among the players. The need for recertification of electric vehicles at the beginning of the financial year has dampened the sales of electric two-wheelers since April.
“While the government is working on providing the charging infrastructure, we believe the first step that we need to take as manufacturers, is to create something that’s better or at par with the conventional engine. Working in this direction, we have the perfect amalgamation of the right engineering & design aesthetics that will give consumers the confidence to opt for an EV and encourage mass adaptability,” said Rahul Sharma, founder and chief revolutionary officer of Revolt Intellicorp.
Is FAME II Enough?
Also, 50% localisation mandate for the electric vehicles is an encouraging approach towards local manufacturing of electric vehicles but connecting with the incentives may be a wrong move since it is a time taking matter. Reduced incentives for electric two-wheelers may also make them costlier by INR 10K- INR 12K, according to EV association Society Of Manufacturers of Electric Vehicle (SMEV). This may dissuade people for opting for electric vehicles.
“With the current scenario in the e-mobility division, we require a regulated market for which a holistic approach is essential. While the current policies remain perfectly in the right direction, we must realise that one size does not fit all and that the strategic policy for battery-swapping must differ from that for range,” 22Motors’ Kharb explained.
He added that FAME-II is encouraging the Indian emobility space towards the correct track by ensuring that good quality vehicles receive the benefit of the subsidies. But India also needs to look at other markets to see what they are doing right in promoting electric mobility such as providing unrestricted range and unlimited battery life and exploring subscription-based models for batteries.
FAME II also focuses majorly on higher EV adaptation in public and commercial transportation to ensure higher demand. It is an encouraging move but can also reduce interest in shifting to EV for personal interest. Earlier, reports said that Tata Motors hopes that private buyers of electric vehicles will also get government incentives in future. However, the carmaker believes that without incentives, individuals may get discouraged to purchase EV for personal use.
Car manufacturer Maruti Suzuki which is considering a commercial launch WagonR Electric next year. It will cost around INR 12 Lakh under the current regulatory circumstances as opposed to the petrol cars which are priced at 4.20-5.70 Lakh. According to chairman RC Bhargava, the availability for the vehicle will thus depend on the customers’ willingness to pay more.
EV Policy Gaps
The central government is yet to come up with new EV action plan. The charging infrastructure norms are also yet to be finalised. Earlier, while speaking with Inc42, a senior NITI Aayog officer working closely on the framework had said that it will be announced in June or July this year.
A central electric vehicle policy is also not in place to guide the industry, however, several states such as Karnataka, Telangana, New Delhi, Maharashtra, Kerala, Uttarakhand and Uttar Pradesh have come out with the state EV policies.
“Support in terms of regulation or policy regarding financing for EVs will be extremely helpful. We also expect the Government to bridge the cost of financing and make access to capital easier for the SME and MSME sector to create a robust supply chain for EV manufacturing.
Also, there should be easier norms on parking and charging infrastructure with special focus on commercial adoption of EVs,” said DOT’s Mehra.
Lack of proper and specific EV policy has disturbed the balance of the electric vehicle players as it provides no clarity on the long term goals of the industry. No clarity on the industry goals may be dissuading the players to make a complete investment in the space.
“Due to lack of clarity on long-term vision, many companies are holding their investments in the EV space. The government needs to articulate a very clear and stable vision for EV adoption in India. It should include plans to phase out gasoline-powered vehicles, disincentives on fuel-driven vehicles, incentives for battery-powered vehicles, etc. There is no lack of financial resources. Companies need better clarity of the future to go all-in,” said Amit Gupta, cofounder and CEO of Yulu.
Is India Really Moving Towards Emobility?
At a time when the central government is aiming to achieve 30% emobility, reports predict a grim scenario for the Indian electric vehicle space.
According to the government data, there were 210 Mn vehicles registered in India by 2015. The domestic sales of the vehicles for 2018-2019 was 26.2 Mn, increasing at a pace of over 5%. As per FAME-India, the total number of electric vehicles sold till date is 2,78,691 (under Fame-India).
In order to achieve 30% emobility by 2030, India will need at least around 100 Mn electric vehicles on the road, but the numbers are far behind right now. Also, to meet the goal of EVs making up 30% of the sales annually, India will need to consume roughly 12 Mn EVs annually by 2030.
Most recently, a report by Bloomberg New Energy Finance revealed that the global electric vehicle segment looks promising but growth in India will be slower. “India and other emerging economies go electric much slower, leading to a globally fragmented auto market. In markets like India and South East Asia, two- and three-wheeled vehicles are more attractive targets for electrification in the short term,” the report noted.
In April, analytical company Crisil in its impact note said that the Indian electric two-wheeler industry may experience turbulence in the initial phase of the FAME-II. It also predicted that almost 95% of the electric two-wheeler models produced in India now will not be eligible for incentives under FAME II.
As Gupta said, “India has surprised everyone on a massive adoption for so many things when all forces come together. Fixing urban mobility and improving our air-quality is the need of the hour, we can’t operate in a business-as-usual manner, big reforms are needed and I believe it is bound to happen.”