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The dawn of electric vehicles in India is miles away, but there is hope

India’s road to the electrification of automobiles has long been rocky. It is unlikely to get smoother post the pandemic but there is a glimmer of hope due to a gradual change in the mindset of a section of customers and the EV action in two-wheelers.

September 29, 2020 / 12:50 PM IST

The Indian automotive market has kept electric vehicles (EVs) in a prolonged state of purgatory despite the obvious benefits being written on the wall—in bright neon letters. Given that they need far fewer parts to operate, and therefore, a lot less maintenance, EVs have a leg up on the practicality ladder, straight-off-the-bat.

It’s not just the fact that their moving parts are on an average a fifth of the number found in an internal combustion vehicle. It’s that EVs are intrinsic to the autonomous, connected and shared form of mobility that we must gravitate towards for the sake of sustainability. We’re long past wondering “if” we should make the switch; the question is “when”. And the answer is “yesterday”.

The depredations of the SARS-COV-2 pandemic have only served to extend the limbo in which India’s EV infrastructure is stuck. Range and refuelling still remain a pertinent concern, as do battery prices, despite having fallen by 85 percent globally, in the last decade, according to a report by Avendus Capital.

But the pandemic has led to the sort of industrial ferment that’s ripe with possibilities. In addition to that, environmental and geopolitical concerns appear to be at the forefront of our collective consciousness and could push us towards substantive policy change.

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The Impediments 

Until 2016, the EV market appeared decidedly sparse, with only cars like the poky Mahindra e2o appearing as flag bearers of electric mobility. The e2o, despite its refinement and charm, failed to address issues of range anxiety and price – issues which continue to persist to this day.

Despite the subsidies offered by the FAME II scheme, India continues to rely heavily on exports to bring-in vast supplies of lithium-ion cells – the chief component in battery electric vehicles (BEV). Between 2018 and 2019, India quadrupled its imports of lithium-ion, depending largely on countries like China and South Korea on the import of raw materials. With the central government recently announcing a likely import tax on lithium-ion, in an effort to scale-down trade ties with China, the stage appears to be set for homegrown lithium-ion batteries, with states like Gujarat and Telangana being earmarked for heavy-duty local lithium-ion production.

That said, India continues to remain low in mineral reserves required to produce the batteries. Namely: lithium, cobalt, aluminium and copper. But that’s far from our only concern – poor charging infrastructure, lack of swapping stations and poor penetration of low-cost mobility models – that dominate India’s automotive sector – by OEMs due to the high production cost of EVs continue to serve as challenges. Obviously, manufacturers of high-end cars aren’t facing the same problem, since all of them are likely to have an electric version of their existing models by 2025, if not a completely electrified fleet.

The Forecast

Under the recent slew of incentives highlighted by last year’s FAME II scheme, the government has made an outlay of Rs 10,000 crore, for three years, with a tenth of the sum set aside for charging stations. In addition to that, this year’s annual budget slashed GST on electric vehicles to 5 percent from the previous 12 percent (although the GST on raw materials continues to stay high) along with a Rs 1.5 lakh deduction in income tax for interest paid on loans.

However, according to a report published by Frost and Sullivan in April, it’s e-rickshaws, e-autos and e-two wheelers that will proliferate in numbers, and will account for 4 million units by 2025. The range of incentives proposed by FAME II also intend to generate gradual demand for electric mobility by supporting 700 e-buses, 5 lakh e-3 wheelers and 10 lakh e-2 wheelers – a target it has fallen short of, considerably since 2019.

The SARS-COV-2 pandemic has certainly impeded the natural trajectory that FAME II’s schemes were to follow, but it’s also served as a crucible, creating fresh opportunities and disadvantages. For starters, the rising cost of fossil fuel could nudge potential customers towards EVs, particularly in the two-wheeler segment which is likely to see a sharp rise in sales, owing to the hazards presented by public transport. At the same time, India’s burgeoning EV startups could find it challenging to secure funding, especially taking into account the recalcitrance shown by nationalised banks in offering loans for EV ventures.

Schrodinger’s cat

It’s clear that, in the foreseeable future, the EV offensive in India will be led by two-wheelers, with startups like Ather Energy, Okinawa and Revolt having made in-roads into the two-wheeler market and the government promising subsidies in the segment. Electric three-wheelers will also gain prominence, in tandem with the rise in e-commerce. As for electric buses likely to be the evangelists for public transport.

A larger and larger section of the population taking cognizance of the lack of electric infrastructure shows that EVs have managed to grab the country’s attention. They’re also spread more widely across the price spectrum with cars like the Tata Nexon EV starting at Rs 13.99 lakh (on-road Rs 14.81 lakh in Mumbai), while Mercedes-Benz’s EQC will likely sit on the other end of the price spectrum.

It’s uncertain where charging infrastructure ranks on our current plan for economic recovery. As the global car market recovers from a slump in EV sales, owing to large markets like China pulling back on incentives, internal combustion vehicles are likely to see a surge in sales, both in India and overseas, but the compass for mobility continues to point sharply towards electric cars. What manufacturers need are guaranteed incentives in the form of tax exemptions, lowered permit costs and tariffs on charging EVs. With India’s economy likely to pick-up after the year 2022, a delay in widespread electrification is inevitable.

Parth Charan is a Mumbai-based writer who’s written extensively on cars for over seven years. 

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Parth Charan
first published: Sep 29, 2020 11:50 am