The Evolving Electric Vehicle Landscape In India: Opportunities And Challenges

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While Electric Vehicles (EVs) have been around for a long time, the level of innovation and interest in the space has been witnessed only over the past decade. Infact, EVs are now being looked as at future of vehicles due to its enhanced energy security, reduced reliance on crude oil, better air quality and lower greenhouse gas emissions. EVs are therefore, emerging as the preferred clean technology for the future of mobility. This has led to improvement of event the advancement in the segment especially the battery and charging technologies, which will soon also witnessed reduced costs to further give this a push.

The opportunity of EV has long been seen as a game changer for the automotive segment in India. A desire to reduce pollution levels and dependence on oil imports has bolstered the case for EV adoption. India's post-liberalization journey has encompassed rapid urbanization, migration and economic growth. India held the worst pollution record in 2019, with 21 out of the 30 most polluted cities in the world, also the country has alarmingly over 2 million pollution linked deaths annually, the most in the world and air pollution is an immense drain on the country's resources, costing India the equivalent of 5.4 per cent of GDP. Despite the compelling cases for adoption of EV, the success of EVs so far has been constrained by weak customer appetite and infrastructure roadblocks, among other factors. Many EVs introduced in India have fallen short of customer expectation with concerns lingering on costs, range, speed, battery life and battery technology.

The fallout of the COVID outbreak and subsequent lockdown has also taken a harsh toll on the automotive industry, further impending the shift to EVs as several projects have been deferred. While EVs represent less than 1% of the overall market, the silver lining is that there is considerable room for growth. Also India is one of the leading players globally in unit EV sales, thus any movement in EV volumes is likely to have a large impact on global EV penetration.

Light electric mobility is likely to lead the EV growth story in India, with the pace of adoption for 2 wheelers and 3 wheelers expected to pick up in the coming years. In India 2 wheelers dominate EV sales given their economic viability both in terms of price and fuel economy. Intra-city transport buses are also ripe for EV adoption. These segments are likely to be followed by fleet cabs and then others. Though Indian automotive industry has been grappling with slowdown long before pandemic hit, it still remains one of the largest automotive markets globally in terms of sales.

With continuously rising fuel prices and environmental hazards, policy-makers in India too have been actively pushing for EV adoption. Government think-tank NITI Aayog has specified that Faster Adoption and Manufacturing of Hybrid and Electric Vehicle (FAME II) and other policies supporting EV are expected to push EV sales penetration to 30% for private cars, 70% for commercial cars, 40% for buses and 80% for 2 wheelers and 3 wheelers by 2030.

On the other hand, battery producers in India have come up with innovative business models such as battery swapping which has enabled widespread EV adoption. It alleviates issues of long charging times, range anxiety, high upfront cost and battery reliability concerns for the EV owners.

In line with Make-in- Indian initiatives and global supply chain realignments , the government is strongly pushing localization of production to achieve the twin objective of self-reliance and job creation. This will create opportunities for setting up infrastructure across the EV value chain, spanning charging and battery manufacturing.

The penetration of EV in 4 wheelers has remained extremely low at less than 1% as several gaps exists in the market such as limited number of products, high prices, insufficient battery life, low performance and an underdeveloped charging ecosystem. It is understood that unless these gaps are filled growth of EVs in 4 wheelers will not be picked up.

On the other hand, as more EVs enter Indian market, the challenge of sustainable end-of-life practices for battery disposal and recycling also arises. At present, India has very little recycling infrastructure, implying that batteries are discarded or disposed in landfills. Currently only a few states EV policies provide guidelines and incentives on battery recycling.

All in all the development of battery industry, charging infrastructure and local supply chains are critical for EV adoption. With the objective of transforming India into a manufacturing and exports hub, the government has been promoting the localization of production across the EV value chain. Other than batteries India has strong capabilities in certain EV components and can emerge as a hub for manufacturing as well as exports. Auto components players in India are increasingly seeking to develop the requisite technological capabilities and capacities in these areas.

To drive EV adoption, OEMs (Original Equipment Manufacturers) and the government both at state and central levels, need to work collaboratively towards an integrated policy, creating a conducive ecosystem for India's electric mobility vision.