Electric Vehicles in India

GS:3

 

Context: 

• India aims to generate 40 per cent of its energy from renewable sources by 2030 and become a 30-40 per cent electric vehicle (EV) nation. 

• An electro-economy is an inevitable reality. 
• The quicker India prepares for this change, the bigger will be the economic spin off, along with low carbon and health benefits

 

Electric Vehicles (EVs)​

• An electric vehicle, uses one or more electric motors or traction motors for propulsion.
• An electric vehicle may be powered through self-contained battery, solar panels or an electric generator to convert fuel to electricity.

 

Need for EVs in India

Climate change

• Problem of rapid global temperature increase has created the need for a reduction in the use of fossil fuels and the associated emissions.
• India has committed to cutting its GHG emissions intensity by 33% to 35% percent below 2005 levels by 2030.

Rapid urbanization

• Economic development leads to rapid urbanization in emerging nations as rural populations move non-agricultural sectors in cities creating environmental problems.
• According to a recent study by WHO, India is home to 14 out of 20 most polluted cities in the world. EVs will help in tackling this problem by reducing local concentrations of pollutants in cities.

Energy security

• India imports oil to cover over 80 percent of its transport fuel.
• EVs can reduce dependence on imported crude oil promoting India’s energy security.

Innovation

• It will encourage cutting edge technology in India through adoption, adaptation, and research and development.
• EVs manufacturing capacity will promote global scale and competitiveness.

Employment

• Promotion of EVs will facilitate employment growth in a sun-rise sector.

Clean and Low carbon Energy

• The shift towards renewable energy sources has led to cost reduction from better electricity generating technologies. This has introduced the possibility of clean, low-carbon and inexpensive grids.

Cutting edge Battery Technology

• Advances in battery technology have led to higher energy densities, faster charging and reduced battery degradation from charging. Combined with the development of motors with higher rating and reliability, these improvements in battery chemistry have reduced costs and improved the performance and efficiency of electric vehicles.

 

Challenges for EV Industry in India

• Lack of a stable policy for EV production: EV production is capital intensive sector requiring long term planning to break even and profit realization, uncertainty in government policies related to EV production discourages investment in the industry.
• Technological challenges: India is technologically deficient in the production of electronics that form the backbone of EV industry, such as batteries, semiconductors, controllers, etc.
• Lack of associated infrastructural support: The lack of clarity over AC versus DC charging stations, grid stability and range anxiety (fear that battery will soon run out of power) are other factors that hinder the growth of EV industry.
• Lack of availability of materials for domestic production: Battery is single most important component of EVs. India does not have any known reserve of lithium and cobalt which are required for battery production. India is dependent on countries like Japan and China for the import of lithium-ion batteries.
• Lack of skilled workers: EVs have higher servicing costs and higher levels of skills is needed for servicing. India lacks dedicated training courses for such skill development.

 

Government initiatives:

• Self-reliance and localisation: Already, the government has rolled out a subsidy and charging infrastructure-based incentive programme called Faster Adoption and Manufacturing of Electric Vehicles (FAME) in 2015.
• The FAME India Scheme is aimed at incentivising all vehicle segments i.e. 2 Wheeler, 3 Wheeler Auto, Passenger 4 Wheeler Vehicle, Light Commercial Vehicles and Buses. The scheme covers Hybrid & Electric technologies like Mild Hybrid, Strong Hybrid, Plug in Hybrid & Battery Electric Vehicles.
• Production Linked Incentive (PLI) scheme, under which Rs 18,000 crore have been allocated for developing EV battery chemistry and promoting investment in manufacturing.
  • PLI provides incentives between 2 and 12 per cent of the incremental sales revenue and between 4 and 7 per cent of incremental exports revenue. Incentives will be disbursed based on performance in the areas of cell manufacturing.
• India is also setting targets for giga-scale battery storage factories. It is working towards setting up battery storage potential of 50GWh to meet the requirements over the next few years.
• Invest India, the national investment promotion and facilitation agency under the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, provides information in this regard.
• States push for cell makers: Multiple state governments, too, have framed or are framing EV policies and offering capital subsidies to match those of the Union government to help build supply. 
  • Gujarat has seen large-scale investments for Li-ion battery manufacturing and is offering subsidised utilities.
  • Karnataka has focussed on R&D and interest-free loans for EV manufacturing.
  • US-based car manufacturer Tesla is already in Bengaluru to import completely built-up units, but also has plans to start production. 
• Startup boom: Start-ups and non-conventional players in this segment are moving aggressively with innovative business models than the conventional players. 
  • Taxi aggregator Ola Electric is setting up an e-two-wheeler manufacturing facility in Tamil Nadu. 
  • The car industry is slower to respond, as the demand is low. But it is also looking at an ecosystem approach. 
  • In the bus segment, 55 per cent of the orders under FAME till 2019-20 are said to have been won by Indian industry that partnered with Chinese firms. The dependence on China is more due to the lower costs of materials in China. 
• Accessing resources: India is looking at accessing mines globally for tying up sources for battery raw materials. Khanij Bidesh India Ltd, a joint venture of National Aluminium Co, Hindustan Copper Ltd and Mineral Exploration Corp, is acquiring lithium and cobalt mines overseas.
  • It is reported that two-thirds of the minerals required to achieve the energy transition goals are already available in the country. 
  • For the rest, the government is signing up battery mineral sourcing agreements with Latin American countries and Australia.

 

Challenges:

• India almost entirely depends on global (especially Chinese) resources and technology for this energy transition. Recent tensions with China have made the country even more aware of this dependence.
• While industry blames not enough consumer demand and infrastructure, consumers rue that there are not many quality products in the market. 
• Consumer awareness on e-models is low, hindering progress.
• Inadequate policies: FAME, PLI and state-level policies are steps forward but do not add up to achieve the required scale of change.
• Auto industry’s reluctance: Entrenched in manufacturing of internal combustion engines, the auto industry is resistant to ambitious and urgent electrification targets, especially after recent investment in BS-VI emissions standards. 
• Industry wants a long-term policy and a plan for 15-20 years for policy certainty. 
• The battery industry is also seeking more support for charging infrastructure. Though the infrastructure expansion will bring more private investment, financial strategies are still needed.
• Getting loans from banks and non-banking financial corporations is difficult and there is a need for financial support for capital expenditure.”

 

Way forward

The economics of electric mobility, as opposed to the internal combustion engine economy, is India’s chance to stay ahead of the global curve. While there will be restructuring in trade to access battery materials and mines, domestic industry and market development is necessary.

• Production of Li-ion cells: NITI Aayog has proposed to the government that each kilowatt hour of the manufacturing of the Li-ion cell should be given a direct fiscal incentive and that it should be a production-linked direct fiscal incentive. 
  • NITI Aayog’s approach towards supporting 50 GWh of battery production needs to promote smaller Gwh capacities to allow diverse battery chemistry.
• Localisation will require local component and battery development to customise to Indian conditions while reducing the cost of manufacturing.
• State level policy will play an important role in promoting manufacturing which is needed for supply side strategies. We need phased manufacturing plan for scale and to localise production.
• Integrated business model is a necessity in this segment. There should be an intertwined ecosystem to build an integrated platform to go beyond just assembling of vehicles.
  • This includes battery management systems, motor, controllers, charging infrastructure and connected dashboard. 
  • With FAME-II (an extension of FAME-I launched in 2019, with focus on public transport) becoming more performance based, more innovation is likely.
• India needs to ramp up battery recycling to recover material. Almost 90 per cent of materials like lithium, cobalt, manganese and graphite can be mined from used batteries.
  • India needs policy guidelines and amendments in regulations for disposal, recycling as well as for second-life of batteries.
• Global experience shows India needs targets for electrification, credit-based zero emissions mandate (including sales and purchase mandate), and a holistic industrial and trade policy to build the ecosystem for the massive change. 
• Incentivise players to setup local manufacturing and to have more rational cost structures to lower investment costs. This is needed to build supplies, jobs and skills around EVs while stimulating consumer demand.