Globally, there has been a gradual shift towards electric cars, with annual sales of electric vehicles gaining significantly in 2018. Governments around the world have also stated that they will be banning internal combustion cars, especially diesels in the next 20-30 years. While governments have not formally passed legislation banning conventional cars, they have been passing legislation providing tax benefits to those adopting electric vehicles.
The recently concluded Auto Expo 2020 saw manufacturers show their production-ready electric vehicles. A few of those cars are already available for purchase while many more will be launched in the coming months. While manufacturers are showing an interest in introducing electric cars and customers are keen to adopt them, a look at the government policies in place in India will be instrumental in understanding whether electric vehicles can be adopted en-masse or whether they will remain a niche segment in the automobile market.
Electric Vehicle Policies in India
The adoption of electric vehicles will be greatly dependent on government policies to provide the required impetus for manufacturers and consumers to consider a new automotive alternative.
To this end, the Government of India identified the need for electric mobility in 2013 and has launched the National Electric Mobility Mission Plan 2020. Under this mission plan, the Department of Heavy Industry has formulated the Faster Adoption and Manufacturing of Hybrid & Electric vehicles in India (FAME India) scheme in 2015 to promote the manufacturing and sustainable adoption of electric vehicles in India.
The FAME India scheme was introduced with the aim of creating demand in the sector while simultaneously developing indigenous technology platforms and charging infrastructure in the country to cater to this demand. In terms of creating a sustainable marketplace, the government has also been running pilot projects under the scheme to gauge the most cost-effective mass adoption methods.
The government think tank, NITI Aayog has also set an ambitious vision to achieve electrification of 100% of commercial vehicles and 40% of private vehicles. This vision highlights the government’s focus on electrifying public transportation in India first to tackle a number of mobility and environmental issues in the country. The 40% of private electric vehicles will be the early adopters who will fuel infrastructure development to further make electric cars more attractive to regular customers.
This is a step in the right direction to build demand and supply for electric vehicles in a price sensitive market. However, progress towards vehicle electrification has been slow for a number of reasons. Let’s delve into the the reasons for consumers to be hesitant as well as the infrastructural challenges facing the electric vehicle segment.
Electric Vehicle Adoption in India
Any emerging technology is associated with a high price tag on release. This ‘early adopter tax’ is especially true for electric vehicles. The REVA electric car was launched in 2001 at a starting price of ₹2.50 lacs. This pit it against the value kings of the time, the Maruti Suzuki 800 and the Hyundai Santro. In a market that is value-oriented, the REVA electric car proved to be a niche option.
Jump forward to 2020, the market for electric cars has gradually matured with cars like the Mahindra e2o, Hyundai Kona Electric, Tata Nexon EV and the MG ZS EV available for purchase. However, the price compared to conventional cars has still remained high. For example, the Hyundai Kona is feature-packed but compared to other compact SUVs, is priced at a premium of 10 lacs. The only compact SUV that competes with the Kona is the top-variant Jeep Compass. There are some positives with regard to pricing as the Tata Nexon EV starts from a more affordable 13.99 lacs, which is a more palatable premium over the conventional Tata Nexon.
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Another key concern for prospective buyers of electric cars is the range of electric vehicles. The lack of charging infrastructure means buyers of electric cars will need to factor the expected range per charge. Manufacturers are aware of the infrastructure gap and are thus offering cars with a range of at least 300 km. However, manufacturers in Europe are offering electric vehicles with ranges between 100-200 km that are ideal for city-driving. Development of charging infrastructure is required to boost interest amongst manufacturers to offer more competitive products while at the same time reducing the range anxiety of electric car owners.
Challenges for Electric Vehicle Sustainability
Infrastructure is a critical component of the electric vehicle equation. Widespread public charging stations is seen as a necessity in electric vehicle ownership. The presence of charging stations helps alleviate many of the apprehensions potential owners have for adopting electric vehicles, especially for city usage. This particular challenge has already been identified by many state governments in India. Delhi, for example, has installed 55 chargers in major markets and plans on installing 300 more in the coming months. The Uttar Pradesh government has announced plans to install 2 lakh charging stations by 2024.
The sustainability of electric vehicles is dependent on varied but interrelated factors.
Affordability is another challenge that will require effective policy intervention to help reduce the import tariffs on Lithium ion cells. Additionally, incentives for electric cars would greatly help adoption of electric cars. Norway has incentivized electric vehicles by making the alternative combustion engine vehicles more expensive in terms of upfront cost and long term cost of ownership. While such a step would not be feasible in India, greater tax incentives need to be provided to those adopting electric vehicles. At present, under the FAME scheme, only commercial fleet owners can take advantage of discounted rates for new cars. A similar move for private vehicle owners will promote electric vehicles in urban city centres.
Electric vehicles are the future of mobility. Despite the technology being expensive to produce, a developing nation like India will need to emphasize and normalize ownership of electric vehicles to tackle the challenges of sustainability in the future. To prepare for the future, action from the government is required today to boost and sustain electric vehicle adoption for the future. While steps are being taken, policies will need to become more holistic in an effort to address the challenges emerging today and in the future.