The buzz surrounding electric vehicles (EV) is not new in the world of automotive technology. With the perils of climate change looming over us, the decision of switching over to EVs is not a question of ‘if’, but ‘when’. As per the World Air Quality Report 2018, 20 of the 30 most polluted cities of the world are in India. Millions of citizens in our metros are grappling with serious ailments, and an estimated 1.24 million deaths (12.5% of all deaths) in 2017 alone have been attributed to air pollution.
On the other hand, our substantial reliance on fuel imports poses various economic and strategic challenges for the future growth of the economy. Our oil import dependency reached an all-time high of 84% in 2018-19, of which 47% is consumed by the transport sector alone.
The government drives for a greener future
As a structured push towards a sustainable and greener future, the Central Government has recently announced the second phase of the Rs 10,000 crore scheme, termed Faster Adoption and Manufacturing for Hybrid and Electric vehicles (FAME II). Under this scheme, the centre has sanctioned incentives to the tune of Rs 8,596 crore to boost electric mobility and increase the number of electric vehicles in commercial fleets.
Alternatively, the government is looking to incentivize retail consumers by offering a tax deduction up to Rs 1.5 lakh on interest paid on loans taken to purchase an EV (Section 80EEB), in addition to slashing the GST on EVs from 12% to 5%, and providing road tax exemptions and registration waivers.
As per a NITI Aayog proposal, India needs to make a 100% switch to electric vehicles by 2030 for new automobile sales. While this is a very audacious goal, it could help us save 64% of energy demand for road transport and cut down carbon emissions by 37% pursuing a shared, electric, and connected mobility future.
OEMs buckle up
Automotive Original Equipment Manufacturers (OEMs) outside India, are working round the clock to make EVs lucrative in terms of design and performance improvements that will make EVs the first choice for consumers. The Tesla 3, for example, is not just a beautifully designed car but offers a “thrilling driving experience” as per a Consumer Reports survey. No wonder Tesla has a top-of-mind recall for EVs and has accounted for 13% of global plug-in vehicle sales for 2019.
Closer home, to make EVs a profitable proposition, OEMs are looking to aggressively cut costs. In fact, OEMs are going a step further by designing a few parts of these cars from eco-friendly or recycled materials that will help bring down costs and further reduce the ecological impact.
In some of the small-to-midsize car segments, OEMs have been able to bring the upfront cost of EV models almost at par with their diesel counterparts (helped partly by the subsidies) – a feat that was considered to be wishful thinking till very recently.
The stringent fuel-economy and emissions policies have created an opportunity for startups too; especially for those operating in the battery tech, vehicle diagnostics and analytics, and charging aspects of EVs.
Many startups have not only managed to raise funding from some of the biggest names in the venture capital space but are also benefiting from key public-private partnerships. Complementing the Central Government’s National Electric Mobility Mission Plan, many state governments such as Delhi, Maharashtra, UP, Kerala and Telangana have drafted their individual EV policies.
But is India prepared for these developments in mobility infrastructure?
While we are moving in the right direction, there are a lot of issues that need to be ironed out. EVs today are costlier to manufacture. There is a huge dependence on imported components and batteries. All this adds up to a higher upfront cost for the majority of currently available models (even after netting out the benefit from subsidies), which becomes a huge deterrent for the highly price-conscious Indian consumer. While addressing a consumer base in which only a fraction can afford the upfront cost of a car, and even higher upfront cost with lower “total cost of ownership” becomes a very hard sell.
Secondly, even when a consumer starts considering EVs, “where will I charge this thing” is the first question that pops up. The inadequate power supply in many parts of the country doesn’t help, and neither do the limited options for charging and battery swapping. As per a report, India had only 650 charging stations in 2018, compared to 456,000 in China during the same year. Even as residential apartments start setting up charging infrastructure in their parking lots, usage of these EVs for intercity purposes will continue being a challenge because the majority of the current models have a low range, and developing charging infrastructure along highways will be even less viable than doing it in denser urban pockets.
Further, “EV first” cars are yet to come to India. The expectation from the consumers is to buy EV versions of cars that are already available in ICE versions, as against creating EV-only cars that are so compelling that consumers say “I want this awesome car, and I’m fine even if it is an EV” (e.g., Tesla). The design science of an EV is different from that of an ICE. “EV first” cars will make better use of the new degrees of freedom that EV technology offers, e.g., the space that gets saved by the elimination of the engine and its associated peripherals in a fossil fuel car can be smartly used to increase the cabin space.
Yet another challenge that needs to be addressed is dependence on fossil fuels for upstream power generation. The lack of affordable renewable energy means charging EVs will put a greater toll on the already stressed coal-powered electricity infrastructure. We need to integrate power generation from renewable sources with conventional grids in order to meet EVs’ demand to bring an effective reduction in carbon emissions as well as cut down on electricity cost, which accounts for about 30% of the total cost of operating an EV.
Lastly, consumers have not had an opportunity to experience a personal rendezvous with EVs. There just aren’t enough private use EVs on the road at present. In the near future too, most of the EVs we will see will be the ones for commercial purposes and public transport. Hence, many people are hesitant to invest in an asset with such little information. A good way around this dilemma is to opt for subscription-based self-drive EVs, that will let consumers experience how an EV works at a fraction of the cost and without any long term commitment.
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The strong intent of the government to make a transition towards EVs has resulted in a slew of investments and technological advancements in the EV space. It has given an impetus to indigenous manufacturing through FAME II and tax breaks. The subsidies and incentives for promotion of electric mobility to three and four-wheelers for commercial and fleet applications will help bring in last-mile connectivity.
OEMs too are gearing up to bring electric versions of existing cars, despite concerns of a lack of charging infrastructure. This year, we can expect about 21 new EV variants to be launched in India. Hyundai, Mahindra, MG and Tata already have their EVs on Indian roads, with Lexus, Nissan, Porsche, Maruti, Audi, Tesla, and many others to make an entry soon with completely electric or hybrid models.
If the Indian automobile industry moves on course with NITI Aayog’s estimation, coupled with strong consumption demand, India could reduce its annual diesel and petrol dependence by 156 million tonnes of oil equivalent, resulting in fuel savings of US$60 billion, while cutting down on carbon emissions by as much as 1 Gigatonne by the year 2030!
Authors: Anupam Agarwal and Karan Jain, Co-founders, Revv shared mobility platform
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