By - King Stubb & Kasiva on September 28, 2023
In the wake of a rapidly evolving global economic ecosystem, India embarked on a visionary journey with the beginning of the “Make in India” or ‘Aatmanirbharat’ campaign, conceived by Prime Minister Narendra Modi in September 2014 to turn India into a centre of global manufacturing. Far more than a mere slogan, “Make in India” was a comprehensive set of policies intended to unlock innovation, fuel economic growth, generate employment opportunities, and increase the country’s self-reliance by promoting domestic manufacturing across various sectors.
The transition from “Make in India” to “Made in India” represents a critical shift, with Electric Vehicles (EVs) taking the lead in this transformative journey.
Electric vehicles have become formidable contenders, offering not just a technological advancement but a pivotal solution. These vehicles rely on energy stored in batteries instead of petrol to power the wheels, fundamentally changing our perspective on driving. The use of conventional fuels- diesel, petrol, and natural gas for transportation- has emerged as a prominent villain due to their release of carbon dioxide (CO2) into the atmosphere, contributing to global warming and its aftermath. EVs offer a sustainable transportation option with approximately three times lower CO2 emissions. Moreover, dependence on oil imports exposes nations to volatile crude oil prices and economic vulnerabilities.
EVs have the potential to transform the entire transportation sector, leading to advantages such as job growth and increased energy security. By 2030, the EV industry is expected to contribute an impressive $150 billion to India’s GDP.
India has surpassed Germany, and Japan to take 3rd place in the world’s automotive markets in terms of sales. To promote the adoption of eco-friendly alternatives, there is currently a considerable push for cooperation between manufacturers and policymakers.
As per the Economic Survey of 2023, the domestic market for EVs is expected to witness a 49 percent yearly growth between 2022 and 2030, with an estimated annual sales figure of 10 million EVs by that time. Furthermore, the EV sector is anticipated to generate approximately 50 million jobs, both directly and indirectly, by 2030.[1]
India’s current EV ecosystem presents both opportunities and challenges as it aims to boost EV adoption. While numerous EV four-wheelers are available from key Indian and foreign automakers like Hyundai, Kia, and Mercedes-Benz, the majority of vehicles sold in India are two- and three-wheelers, which account for about 80% of all vehicle sales.
Remarkably, just 1 million of India’s 250 million two-and three- wheelers are electric. Nevertheless, India saw a rise in EV registrations in FY 2022-23 alone, topping one million, with electric two-wheelers making up a significant part of EV sales. As part of the “Make in India” campaign, the ride-hailing business Ola is also producing electric two-wheelers in India with the intention of encouraging domestic manufacturing and environmentally friendly transportation options.
Elon Musk’s Tesla, the pioneering EV manufacturer, has been making headlines in India with its plans to establish a manufacturing facility in the country, with the capability to produce up to 5,00,000 electric vehicles annually. However, the location for Tesla’s Gigafactory in India is yet to be finalised.
In the 2023-24 Union Budget[2], Finance Minister Nirmala Sitharaman unveiled a significant budget allocation of INR 35,000 crore for important investments aimed at moving towards cleaner energy and achieving net-zero targets by 2070. Additionally, she mentioned that the government would provide financial support to Battery Energy Storage Systems with a capacity of 4,000 MWH to make them more feasible.
To boost the EV industry, the government has already initiated programs like the Faster Adoption of Manufacturing of Electric Vehicles Scheme – II (FAME – II) and the Production Linked Incentive Scheme (PLI)[3]. Notably, the Budget has allotted INR 5172 crore to the FAME-II scheme, marking an 80% increase in budget allocation compared to previous years. Moreover, import duties on raw materials required for the manufacture of Lithium-ion batteries used in EVs have been exempted as well as the excise duties on natural gas and biogas may encourage import of more foreign EVs into India.
Investing in and developing our own technology, tailored for Indian conditions including roads, weather, range, and driving habits, is essential. The production of critical components like drive trains and batteries is in progress, promoting self-sufficiency. A significant hurdle in India’s EV revolution lies in magnets, which are crucial for EV motor manufacturing and rely on 17 rare earth metals, which are challenging to extract.
To address this, the Indian government and companies must invest in magnet research for cost-effective EV solutions. The government’s International Advanced Research Centre for Powder Metallurgy and New Materials (ARCI) is already conducting research to bolster India’s self-reliance in this area.
India will lead the way towards a widespread transition to e-mobility that is sustainable and promotes a greener, more energy-efficient transportation system by addressing the following issues:
The Indian government has initiated several programs, including the FAME scheme, to encourage charging infrastructure development. This ecosystem offers ample room for innovation, such as chargers in parking lots and vertical charging stations. Encouraging investments in forward-looking solutions like smart charging systems and battery recycling facilities is crucial. Policymakers should spearhead collaboration among ecosystem participants to guide infrastructure development, involving market stakeholders in crafting a transparent, comprehensive roadmap. This roadmap should prioritize cross-operator synergies, long-term strategies, and holistic planning.
Compared to lower-end Internal Combustion Engine (ICE) cars, electric cars in the same category are generally more expensive due to the higher cost of EV technology. This limits the inclusion of premium features. In the future, increased R&D and market competition are expected to align prices with India’s price-sensitive market, especially in the lower-end car segment.
Recent subsidies for electric two-wheelers indicate an impending price adjustment. With the government prioritizing sustainable electric mobility, a similar push for electric cars and buses is anticipated.
Many remain unaware of the advantages of EVs; hence, India must promote eco-friendly living and educate citizens about EV benefits to drive adoption.
Manufacturers and charging operators can partner with the government to launch awareness initiatives, with the government incentivizing such collaborations through tax breaks. These campaigns, exemplified by the ‘Go Electric’ initiative, encourage the development of the EV ecosystem.
As the nation moves forward, India’s EV market offers a promising landscape, driven by government policies, growing consumer interest, and technological advancements. This provides lucrative investment prospects for both domestic and international companies eager to contribute to the growth of India’s EV ecosystem.
The concept of an EV ecosystem holds the potential to accelerate the electric vehicle revolution in India by fostering collaboration among key stakeholders. It is imperative to engage all players, including policymakers, industry leaders, manufacturers, and charging infrastructure providers, in strategic planning and development. Synergy within the ecosystem can have a multiplier effect, speeding up the transition to EVs, and ensuring that everyone’s requirements are met effectively while aligning with the “Make in India” vision.
The ecosystem approach aims to unite all stakeholders within the EV industry, fostering collaboration and synergistic efforts. Given that EV technology is still in its early stages, various sectors of the industry – including EV manufacturers, battery companies, charging providers, and investors – must establish a shared vision for the future they aspire to create. Without this alignment, different EV players may work independently, potentially impeding progress.
It involves manufacturers, component suppliers, battery companies, dealers, EV charging providers, investors, policymakers, and consumers. Each segment of the EV industry contributes to this overarching ecosystem.
The Indian EV market is still in its early stages, accounting for just 1.32% of all vehicle registrations, despite significant growth of over 130% in the previous year. By 2030, India is aiming to achieve 30% EVs on the road. This presents significant opportunities for participants within the EV ecosystem to facilitate and profit from the ongoing EV transition throughout this decade and beyond.
[1] https://www.investindia.gov.in/team-india-blogs/indias-ev-economy-future-automotive-transportation
[2] https://pib.gov.in/PressReleasePage.aspx?PRID=1895320
[3]https://pib.gov.in/PressReleasePage.aspx?PRID=1945454#:~:text=Launched%20the%20Faster%20Adoption%20and,10%2C000%20crores.
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