2022 witnessed an optimistic transition from internal combustion engine (ICE)-powered vehicles to battery-powered vehicles in India. This has been supported by the strong push from the government, numerous new launches and a rise in awareness level among buyers.
The transition to clean mobility is critical for India to achieve its CO2 reduction goals, as transportation is the third highest emitting sector in the country. Road transport accounts for more than 90 per cent emissions. Hence, there has been a heightened push from the government to accelerate the adoption of electric vehicles (EVs). Also, India has pledged to cut its dependence on energy imports and this transition would result in enormous savings, that could be used for developmental projects.
Schemes that support EV
Government schemes such as FAME and Production Linked Incentive (PLI) for advanced chemistry cells, focus on expanding electric charging infrastructure. The reimbursements through the FAME scheme aim to promote EV sales by reducing the Total Cost of Ownership (TCO).
From a TCO perspective, EVs are already competitive. Leading 2W EVs have TCO that is about 40 per cent lower than comparable ICE models, when used more than 40 kilometers a day. Similar is the case with 4W vehicles too. Daily high usage cases like ride-hailing and fleets are already seeing TCO advantages that is improving, according to a report by Bain & Company.
The government has also come up with a policy on battery swapping. This policy will help in making EVs more accessible and affordable, as it eliminates the need to purchase a new battery every time the old one runs out of charge.
“Investing in EV mobility is becoming the go to choice in India, as people are consciously making eco-friendly choices. The ambitious Rs 26,058 crore PLI scheme for Auto under the New Non-Automotive Investor (OEM) category has come as a welcome initiative to bolster manufacturing capacities. Under this mandate, we will be investing more than Rs 2000 crore in India in the next five years to boost HOP Electric’s chances of becoming a global energy mobility pioneer,” said Ketan Mehta, Founder & CEO, HOP Electric Mobility.
Growing market
The adoption of EVs has expanded and the major manufacturers and start-ups are focussing to develop new vehicles suited for the Indian markets.
The number of EVs expected to be on roads in 2023 is about 2.2 million, with the number rising to 3.9 million in 2024, 5.6 million in 2025, 7.5 million in 2026, and 9.1 million by the end of 2027, according to estimates. The EV penetration for the overall automobile industry is expected to reach 40 per cent by FY32.
Charging infrastructure – the back bone
To support this huge growth momentum, a reliable charging infrastructure is vital. The proliferation of commercial EV charging stations, which provide plug-in chargers on the road, would play a pivotal role in penetration.
India would require around 63,000 charging stations at an investment of Rs. 26,900 crore over the next five years. In the next decade, in line with the growth, the country would need 0.23 million charging stations, entailing a total investment of Rs.1.05 lakh crore by FY32.
There were only 1,000 commercial charging stations in FY22. Under phase II of the FAME-India Scheme, Rs 1000 crore has been allocated for the development of charging infrastructure. The Union Heavy Industries Ministry has sanctioned 2,877 charging stations in 68 cities across 25 states/UTs. Further, 1576 charging stations across 9 expressways and 16 highways under phase II of the FAME India Scheme have also been sanctioned. Under Phase-I of FAME, the Ministry had sanctioned 520 EV charging stations, out of which 479 have been installed.
There has been a slew of investments to build an EV ecosystem in India to drive mass adoption. Investments have been made in localised manufacturing and battery assembly, battery management systems, software and telematics and parts. There have also been new models of mobility services, and platforms to meet end-consumer requirements.
Increasing EV Penetration
Presently, EV registrations are driven by electric two and three-wheelers as buyers see a host of benefits and cost savings when compared with the ICE vehicles. Two-wheelers dominate the EV market in terms of sales growth, new launches, and distribution networks.
Though new players continue to dominate the electric two-wheeler market, traditional players such as TVS Motor, Bajaj Auto, and Hero are also ramping up their EV offerings.
For the growth to boom, dependence on imports needs to be curtailed. This will require an aggressive focus on building a domestic infrastructure to manufacture components and batteries.
“Adequate charging stations on the road, commercial and residential areas will play a major role in enhancing EV growth,” said Raj Mehta, Founder, Greta Electric Scooters.
Dedicated financial institution
Meanwhile, the NITI Aayog has proposed categorising the loans to purchase EVs under the priority sector lending category. This would reduce the cost of finance and also provide an impetus to demand, thus increasing the penetration of EVs in India.
The government can look at establishing a dedicated financial institutions for the sector, similar to Power Finance Corporation or NABARD, which is funded through various sources of capital, including banks, institutional funds, green funds, and green tax-free bonds. This institution will be able to build the sector expertise required for meeting the massive capital requirement and help in accelerating India’s energy transition in mobility.
With a successful run this year, the EV industry will enter 2023 with a lot of optimism and hope to grow its sales momentum.
