With India poised to become one of the largest global economies, the eyes of the world are squarely on it. A young aspiring population is fast migrating to the cities, the country’s economic power engines, which are forecasted to be the backbone to this growth. Cities in India contribute to 82% of the GDP but are also responsible for 78% of overall CO2 emissions, based on a statement by Amitabh Kant, CEO of NITI Aayog.
For cities to be resilient, India is looking to decarbonize its economic growth and development pathway. Moreover, for a healthier and productive workforce, and to achieve the ambition of becoming a US$ 5 trillion economy by 2025, the issue of air pollution is being addressed. Air pollution caused 1.24 million deaths in 2017, a Lancet Planetary Health study reported. India launched the National Clean Air Program (NCAP) this year, aligned with programs to promote electric mobility.
Going by recent policy announcements, India has clearly turned to electrifying mobility to decarbonize growth and for cleaner air. Clearly, the government believes in this transition pathway, something that is evident when it announced phase-2 of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) policy just ahead of national elections. This, even after knowing that a move such as this may not find favour with the industry which is sceptical of such a fast paced transition to electric mobility, and in the face of a gloomy forecast of a looming downturn due to a weak auto demand.
To foster a robust electric mobility ecosystem, India has:
· Increased its outlay under FAME-II to 10,000 crores – over 10 times from its previous phase – incentivizing demand with a focus on public charging, 2 and 3 wheelers, commercial fleets and public transport
· Reduced GST on electric vehicles (EVs) and chargers to 5%, as well as income tax exemption of up to INR 150,000 on interest paid on EV loans, announced in the Union Budget 2019
· Proposed prohibiting the sale of petrol/ diesel 2 and 3-wheeled vehicles and selling only electric vehicles by 2025, with an ambition of a Zero-Emission India by 2047
India’s intent here is to catalyse demand for electric vehicles through measures that target low-hanging fruits such as the vehicle segments with higher potential to immediately get electrified. These steps are deemed to spur market-led exponential growth with minimum need for further governmental intervention. A thriving electric vehicle market for India heralds a future economic upturn for the automative sector along with a benefit of generating jobs, once the manufacturing of powertrain and batter packs in indigenized.
A 30-year history of increasingly stringent emissions norms in the country, from the early days of a mandatory catalytic converter to Bharat Stage (BS emission norms) I through VI (albeit lagging European norms) is a testimony that automakers have developed cleaner vehicles and have evolved their businesses to align to new rules as determined by the incumbents.
Considering the compliance of India’s automotive industry to every ambitious leap in curtailing emissions taken in the past, it is fair to assume that in the long run they would all queue to support government’s vision of an electrified transport transition to a low carbon economy and cleaner cities.
How, and how quickly, will Indian auto suppliers respond, considering Hyundai, Nissan, KIA among others have deep interest in this market, is a matter to be seen.
Top Indian car makers, Tata Motors and Mahindra, both sell electric cars, albeit the options are currently limited. India has a huge 2 and 3-wheeled vehicle market holding two-thirds of market share in terms of yearly sales. First generation 2-wheeled bike-sharing companies like Bounce, Vogo, Yulu and others are also going electric. Many Indian cities and states are integrating electric buses into their fleets for public transport. Delhi is expected to have 1,000 electric buses running on its roads soon.
Even taxi-hailing companies, e-commerce and home-delivery services are moving goods, and passengers on electric vehicles. Charging infrastructure is being built at government buildings, malls, fuel stations and even within neighbourhoods. Public sector companies like Bharat Heavy Electricals and Energy Efficiency Services are planning to set up over 10,000 stations over two years. Magenta Power is setting up renewable energy powered chargers, some of which are portable.
The new energy transition paradigm has electric mobility at its core and is clearly happening. It is underpinned by unprecedented entrepreneurial enthusiasm coming from Indian start-ups, however, big corporations will have to step up and join the imminent bandwagon. A few market signs are heartening nonetheless: Maruti Suzuki, India’s largest car automaker, announced a phasing out of diesel production after BS-VI emissions norms by April 2020. Reliance Industries Ltd. is planning to end production of petrol and diesel fuels in favour of only petrochemicals and aviation turbine fuels from its Jamnagar refinery complex – the world’s largest refinery in a single location. Business decisions such as these indicate that India’s corporations are future readying themselves, as well as ratifying the fated rise of electric mobility and decline of transport fuel demand.
As much as the electric mobility transition will be about manufacturers, developers and service providers on the supply, it will equally, if not more, be about the demand generated for it. Some Indian corporations have already adopted EVs for their existing mobility needs, because it makes business sense. Flipkart, an e-commerce leader, announced shifting 40% of its last-mile fleet to electric by as soon as next year, while Ola, leading ride hailing company, is focussing on offering electric mobility solutions; major hyperlocal delivery players like BigBasket, Grofers and Zomato, among others, are deploying pilots across Indian cities.
State Bank of India, Wipro, Shuttl, BSES Rajdhani Power Limited andBSES Yamuna Power Limited have gone a step further by pledging to EV100, an initiative run by The Climate Group, entailing a commitment to shift their internal transportation to 100% EVs by 2030. Consequently, a combined global demand of over 2 million EVs by 2030 across 50+ global EV100 members, through such bold corporate commitments, is giving manufacturers the appropriate demand signal to scale up production, bringing down costs for the masses.
Quite understandably, the action taken by each stakeholder in the value chain will define the scale and speed of EV adoption in India. To have an edge, India automakers will have to shed their risk-averseness, adapt to this change and embrace it early on. Falling costs, ever-increasing global EV uptake and a growing cohort of environmentally conscious consumers corroborate the inevitable transition to electric mobility and end of internal combustion engine. While the Indian government, states and cities do their part through policy, the industry will have to take responsibility, as they did in building telecom, infrastructure, and banking. Quoting Pawan Goenka, Managing Director ofMahindra & Mahindra, “The government has done what they could do. Now, the onus is on the industry and service providers to make the EV dream happen.”
(Originally published in September, 2019 edition of Energetica India)