Four recommendations to boost India’s emerging electric vehicle sector
According to a BNEF report, India will only achieve 7% of its electric vehicles target by 2030, based on its current policies
India’s Road Transport and Highways Minister Nitin Gadkari announced in February that the BJP government was abandoning the idea of a national electric vehicle (EV) policy, in the hope that market forces and new technologies would offer a better alternative to government regulation. However, hindered by a combination of policy uncertainty and lack of charging infrastructure, India’s domestic EV industry lags far behind that of China and many developed nations, prompting the need for the BJP to take a more active role in supporting the sector.
In order to ensure that India doesn’t fall further behind in the EV industry, PM Modi’s government must consider and implement these four recommendations, ahead of India’s first global mobility summit, where electrification of the transport sector will be a major focus:
1) The BJP government needs to ditch unrealistic targets and focus on introducing EV production quotas for automakers: Former Power Minister Piyush Goyal had in 2016, announced that the government was targeting the sale of only EVs on Indian roads by 2030. Gadkari backed this claim by firmly chastising car makers and urging them to switch to clean vehicles. However in March, the BJP reduced this target to 30% EV sales by 2030. Although these ambitious targets are intended to demonstrate the BJP’s commitment towards electrification, frequent policy changes and a lack of regulatory clarity is undermining the sector. Automakers are choosing to adopt a wait and watch strategy, rather than ramping up investments in EVs and clean alternatives, limiting consumer choice and awareness. India’s first EV manufacturer, Mahindra, produced only 400 units in February, .
According to a 2018 report by the Bloomberg New Energy Finance, India will only achieve 7% EV sales by 2030, based on its current policy trajectory. In order to meet its targets and tackle India’s pressing environmental concerns, the BJP must introduce clean vehicle production quotas for automakers. This policy has been implemented in China and mandates that automakers produce various types of low-emission vehicles to comply with stringent government standards. India’s production quotas must be initially designed to increase the supply of EVs and hybrids in the market, and to improve the fuel efficiency of conventional vehicles.
2) An integrated government body is needed to develop India’s EV ecosystem: Six ministries and the Niti Aayog are jointly responsible for formulating and implementing EV-related ‘action plans’. The Ministry of Power is tasked with building charging stations and ensuring grid stability. The Department of Heavy Industry provides incentives to EV buyers under the national government’s Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. The Ministry of Urban Development is implementing a scheme to encourage the use of EVs in urban areas, and the Ministry of Road Transport and Highways is procuring EVs for public transport.
Each ministry has its own set of priorities and often operates in silos, leading to a lack of policy co-ordination. The BJP must create an integrated government department with representations from different ministries. A single body would be best suited to address the lack of accountability and governance deficit which has hampered the development of India’s EV ecosystem.
3) State and local governments must be incentivised to build public charging stations based on their specific requirements: Research from countries with the highest EV sales, such as China, Norway and Netherlands, have demonstrated that increased public charging stations are the main factor behind EV adoption, above even monetary incentives. India’s lack of public charging stations is a major barrier in the adoption of EVs. Moreover, as the experience of Ola’s pilot project in Nagpur demonstrates, high recharging costs and long wait times — despite roughly 1 charging station for every 17 cars — has led to drivers of the shared mobility firm abandoning the EV scheme and reverting to diesel vehicles.
The investment required to build fast charging infrastructure is substantial and will necessitate the coordination of national, state and city governments. Karnataka, Maharashtra and Andhra Pradesh became the first three states in India to formally to launch an EV policy, with incentives for both manufacturers and customers, intended to increase the production and demand for EVs in their state. The national government must encourage these state initiatives by providing them financial incentives. State governments are best suited to build charging stations in urban areas, since each city has unique requirements based on its population density and road infrastructure, while the national government should build charging stations on highways.
4) The BJP should consider lowering taxes on the imports of EVs for a few years to increase consumer awareness and choice: A major challenge in achieving the government’s target of 30% sales by 2030, is the limited production of EVs by domestic automakers. The country’s largest passenger vehicle manufacturer, Maruti Suzuki, has pledged to build 35,000 EV units per year by 2021, which would represent about 1% of India’s total car sales. Therefore, imports are likely to be needed to bridge the gap between India’s production capacity and target. Reducing the high tariffs and customs taxes applied on EV and hybrid imports is an essential step towards increasing consumer choice and meeting the government’s targets.
Consumers’ response to existing models has been lacklustre, mainly due to a combination of range anxiety (domestic EVs have a range of around 100 km per charge), budget constraints and limited choices. Although lowering taxes on imports is likely to incur opposition from domestic automakers, failure to clean the transportation sector is likely to exacerbate urban air pollution problems. The BJP needs to carefully balance economic and environmental considerations, and replicate the success of its renewable energy policies in the EV sector. It is important to remember that cost-effective solar panel imports from China played an integral role in enabling India to ramp up its renewable energy capacity, at the cost of domestic panel manufacturers.
By implementing these four recommendations, PM Modi’s government could not only give a much-needed boost to India’s electric vehicle sector but also to its own vision of a greener and cleaner India.