Why India’s electric vehicle adoption goals are fraught with challenges?

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India has set an ambitious goal to have a large proportion of the vehicles plying on its roads to be electric by the year 2030 and beyond. However, it is a bumpy road as the country has to overcome many constraints to become a global leader in e-vehicle manufacturing, especially in car manufacturing. Graphs source: Society of Manufacturers of Electric Vehicles

In an effort to curb emissions and control pollution Indian government has been mooting the promotion of electric vehicles (e-vehicles) since the last few years. The move to switch over to e-vehicles gained traction with India signing the Paris Climate Accord in December 2015.

One of the primary goals of the Paris Accord is to reduce greenhouse gas emissions and limit the rise in temperature to around 2 degree Celsius above pre-industrial levels by the year 2050. In furtherance of this the government aims to make alterations in the auto sector.

Increased use of e-vehicles and gradual phasing away of fossil fuel ones have been identified as the means to achieve this. Globally, China, Europe and the US have been ahead in this race with India still catching up.

The Global EV Outlook 2023 report published by the International Energy Agency (IEA) stated that global e-vehicles stocks increased from zero in 2010 to 26 million in 2022 and China accounted for almost half of those stocks.

China and Europe accounted for 85% of the global e-vehicles stocks followed by the US which had 10% of the global share. Worldwide, about a fifth of all cars sold in 2023 were electric ones, developing economies like India were still in nascent stage, according to the report.

India which ranks high amongst the global list of countries for two and three-wheeler vehicles has seen larger penetration of e-vehicles in this segment unlike cars which haven’t picked up in sales. Less than 2% of cars sold are electric which is seen as a glaring challenge.

Yet the government in India wants the larger share of automobiles to be electric in the coming years. In 2013 the country had 53,387 e-vehicles which increased to 28,30,565 in 2023 as per data shared by the Ministry of Road Transport and Highways, Government of India.

India’s e-vehicles market is pegged to grow at a combined annual growth rate (CAGR) of close to 50% between 2022 and 2030 according to government estimates. As this happens the annual sales of e-vehicles could cross 10 million units by around 2030.

The production linked incentive (PLI) scheme extended to the auto sector, tax benefits, tightening of emission standards, development of charging infrastructure are incentives to increase the adoption of e-vehicles in India.

In 2021 the government launched the PLI scheme for National Programme on Advanced Chemistry Cell (ACC) Battery Storage to widen India’s manufacturing capabilities to manufacture ACC in India.

An outlay of Rs.18,100 crores (US $ 2.1 bn) for seven years including two years of gestation period was proposed. Three companies have been selected with a manufacturing capacity of 30 Gwh. The second phase of the programme is expected to be launched soon.

Interestingly, as per the IEA report, e-vehicles and component manufacturing in India is picking up admirably backed by the government’s US $3.2 bn incentive programme, attracting investments to the tune of US $8.3 bn.

Furthermore, the government in the Union Budget of 2023-24 had extended customs duty exemption to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in e-vehicles up to the end of March 2024.

GST reduction on e-vehicles from 12% to 5% and from 18% to 5% on chargers/charging stations for e-vehicles, waiver on road tax which will help reduce the initial cost of e-vehicles are key incentives.

The government has also exempted permit requirements for commercial and private battery- operated vehicles having green license plates. Encouraged by this Ola and Uber, leading cab aggregators, have announced investment plans to manufacture e-vehicles and batteries in India.

In a move to strengthen public e-vehicle charging infrastructure, the Ministry of Power issued revised consolidated guidelines and standards egging private players to install charging stations. Oil companies would set up 22,000 charging stations in prominent cities and national highways.

The government also launched the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) schemes and the National Electric Mobility Mission Plan (NEMMP) to make India a leader in e-vehicle manufacturing.

Notwithstanding these efforts India’s e-vehicle adoption goals are fraught with numerous challenges point out industry analysts. Besides infrastructure limitations, affordability and consumer awareness, battery technology and supply chain constraints are major concerns.

The trials and tribulations for e-vehicle adoption in India

Internal Combustion engines (IC), hybrid models, and e-vehicles will co-exist. Suitable controllers aren’t made in India and there aren’t many testing facilities for e-vehicle manufacturers, according to Chennai based R. Ramanathan Srinivasan, Managing Director, Automotive Test Systems.

Srinivasan was speaking in a webinar on challenges and opportunities in e-vehicles organized as part of the Hindu Education Plus Career Counseling series with VIT Chennai, last year. Cost of battery that constituted about 60% of the vehicle price was a big deterrent for buyers.

Consumers aren’t aware of the benefits of purchasing e-vehicles such as lower maintenance costs, reduced carbon emissions, etc. The government needs to dole out more incentives in the form of tax benefits and subsidies, according to Neeraj Kumar Singhal, founder Semco Group.

A report by World Bank titled ‘The Global Diffusion of Electric Vehicles’ identifies the availability of charging infrastructure and smart grids, and critical resources such as lithium needed for making batteries as impediments to rapid expansion of e-vehicles.

Disposal of used batteries is another major challenge according to leading researchers as their dumping would increase environmental contamination. Research is still on to find viable alternatives to lithium-based batteries and battery recycling.

Dependence on China for lithium is highlighted by industry analysts as a challenge. The discovery of lithium in Jammu & Kashmir, Karnataka, and Jharkhand regions can help transition India to green economy, yet the disposal of batteries needs to be addressed.

Conclusion

E-vehicles are undoubtedly one of the means for low carbon emission transportation in Tier-1, Tier- 2 and Tier-3 regions. Use of advanced battery technologies, sustainable biofuels, and low emission hydrogen will significantly reduce emissions in land, sea, and aviation transport.

Such decarbonization would pave way for achieving the government’s goal of making India a net zero emission country by around 2070, provided all stakeholders act together in the right way. India then will have energy security, economic and technological opportunities in key industry segments, and cleaner air to breathe, according to experts. 

Importantly with India’s economy slated to grow at 6.5% for 2024-25 and at a similar pace the year after according to International Monetary Fund’s ‘World Economic Outlook’ report, many foreign companies are eyeing India as a manufacturing destination for e-vehicles.

It will augur well for India to consider policies that would increase its homegrown capabilities and for this the government needs to tighten the screws. Any foreign company setting up a manufacturing base in India should meet domestic manufacturing requirements.

Critics however point out that unlike in China the moment India develops a technology or service it is taxed heavily which puts off entrepreneurs. The greed to earn money in the form of heavy taxes needs to be curbed for the country to improve upon its technology adaptions.

For any realistic progress all these need to be taken care of, say experts. As this happens India can fulfill all its potential to become a leader in e-vehicles technology and improve upon its current global ranking by several notches.

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