India’s E-Vehicle Drive: Context And Challenges – Analysis


There is no doubt in the merits of moving away from fossil-based mobility, but all the efforts must match up to the targets that have been set forth. India has plenty to learn from other countries who have executed their e-vehicle programme with success.

By Alok Raj Gupta

To reduce carbon emissions by 2030, India is determined to accomplish its Intended Nationally Determined Contribution, and make itself an energy-sufficient economy. In order to do this, transitioning to electric mobility or e-mobility is seemingly one of the most promising options and there is palpable support across Government and corporate communities towards this goal.

One example is the income tax exemption that Nirmala Sitharaman, India’s Finance Minister, has offered in the last budget. Besides lowering GST from 12% to 5%, in order to accelerate EV adoption, the Government of India has also budgeted Rs 795 crores under FAME-I and Rs 9,634 crores under the FAME-II scheme until the year 2021-22. This has been done to provide an impetus to the EV sector in various areas such as creating demand incentives, developing a charging infrastructure, and building IEC (Information, Education & Communication) efforts.[1] Automotive majors like Mahindra & Mahindra (M&M), Tata Motors, Hyundai-Kia, Maruti Suzuki and Toyota are already anticipating potential EV growth. Accordingly, M&M alone has committed more than Rs 1,000 crore to build manufacturing lines for electric vehicles and power trains. Similarly, Hero Electric plans to expand its manufacturing capacity five-fold; it will manufacture 500,000 units of two-wheelers a year in order to meet the expected surge in demand.

While all these developments may seem encouraging and similar to the route most other developed nations are following, we might be overlooking a key aspect: the EV growth trajectory that countries like China, USA, Norway and Japan have successfully followed are not necessarily the best examples; the factors that shape them are fundamentally different from those in India. Key factors such as investment priorities, opportunity costs, market preparedness, and policy guidelines may require some more inward thinking in the Indian case. A belated realisation of this particular perspective was what caused the government’s revision of total EV share to 30% from 100% by 2030.

Moreover, ironically, while India’s EV narrative mainly focuses on the need to curb emissions, the primary source of power for these e-vehicles will come from hydrocarbons like coal. Even now, with a total contribution of 70% to total power, coal is the major source of power generation in India.

India currently has sub-optimal capacity to handle the end-of-life dead Li-ion batteries, another grim reality it needs to confront. To make this point, let’s look at EV sales which have taken place as of 2019 — a total of 6.3 lakhs 3-wheelers, 1.3 lakhs 2-wheelers, and 3600 4-wheelers have already been sold. [2] Going by the trend, and the policy mandate to have 30% of all vehicles as EVs by 2030, the demand for batteries will continue to rise. This translates to an exponentially growing stock pile of discarded batteries. In a scenario where safe recycling of the more common lead acid batteries found in our cars and inverters remains a challenge, the capacity to manage Li-ion battery waste from e-vehicles is literally negligible — a fact that was corroborated by the Central Pollution Control Board in its 2016 compliance report. This clearly articulates our present lack of preparedness to support the intended e-mobility growth. A 2018 study led by Envecologic, in association with SIIB (Pune) lays emphasis on the need to scale up R&D efforts to improve battery efficiency and identify economically viable ways to manage battery waste.

The Bharat Standard-VI (BS-VI) emission norms will be implemented across India by 2020; this is another potential EV growth decelerator. Automakers in India have been busy recalibrating vehicles to meet the new standard, and have already made significant investments to meet the deadline. This translates into divided bandwidth, and the inability to invest wholeheartedly in the EV growth story, especially given the lacklustre demand for vehicles since 2018.

From a consumer’s point of view, the cost of EVs is an impediment, specifically in a value-conscious markets like India. Most EVs in India provide a range of 110 km (on a full battery) and fall in the INR 6-10 lakhs price bracket. This does not offer any cost advantage when compared to higher segment cars with comparable pricing. This could be a crucial deterrent in the fast adoption process.

However, despite these factors, the Government is optimistic that consumers will overcome cost hurdles through the subsidies being offered. That said, other hurdles may continue to sabotage EV prospects. India will need reliable excess power supply to feed the charging stations, which at present looks like a big leap, considering the frequent power outages experienced in many parts of the country, especially during summer.

While a lot has been spoken about the challenges with respect to the network of charging infrastructure, the discussions still prove inadequate. A minimum skeleton network of 4,230 public charging stations in 53 cities with a million plus population has been planned under FAME-II, but even that is just 1% of what is required to meet the needs of the targeted 30% of all vehicles by 2030. [3]The (un)ease of operating electric vehicles will impact the demand significantly. Picturing the infrastructure requirement, one can’t help but remember the long queues in front of CNG stations, and the productive hours wasted waiting in queues for gas. This particular picture does not give a very encouraging message with respect to the electric vehicles.

There is no doubt in the merits of moving away from fossil-based mobility, but all the efforts must match up to the targets that have been set forth. India has plenty to learn from other countries who have executed their e-vehicle programme with success. For example, with just 38 million vehicles on the road and considerable power surplus to boot, the UK’s plan to replace half its vehicles with e-vehicles by 2030 looks somewhat possible. This is alongside its endeavour to phase out coal fired power generation by 2025. Going by this benchmark, India still looks underprepared in its EV pursuit. Overall success in EV adoption will critically hinge upon the coordination between manufacturers, government policies and, most importantly — consumer ability to participate in this new age green revolution. The government must keep in mind that the opportunity cost of India’s e-mobility programme is prohibitive, and sub-optimal execution at any level may come at a high cost.




Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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