Electric Vehicle Ecosystem

5 Key Trends Influencing the Electric Vehicle Ecosystem in India

Electric Vehicle Ecosystem

With a focus to lower the harmful emission by the automotive industry and to boost the local manufacturing of automotive in India, the government plans to promote the adoption of electric vehicles (EV), EV batteries, and EV charging infrastructure in the country. For the successful implementation of these, the government must address the five key trends that are expected to influence the electric vehicle ecosystem in India.

1)  Ambitious Government Targets and its Support to Ensure Electric Vehicle Adoption

In the recent union budget of 2019, the Indian government announced several incentives to boost the sale of electric vehicles in the country. Tax rebates were announced up to ₹1.5 Lakhs ($2,189) on interest paid on loans, with a total exemption benefit of ₹2.5 Lakhs ($3,649) to buy electric vehicles. Custom duty exemptions on lithium-ion cells were also announced to reduce the cost of lithium-ion battery raw materials in India, primarily because they are not domestically produced in the country. Similarly, custom duty was also exempted for various electric vehicle components such as e-drive assemblies, on-board chargers, e-compressors, and charging guns.

Moreover, component manufacturers of solar electric charging infrastructure and lithium-ion batteries, among others, are to be offered tax exempted investment plans and other indirect tax benefits, to ensure the growth of electric charging companies in India. The government also decreased the goods and services (GST) tax slab for electric vehicles to 5% from 12% earlier, to make electric vehicles more affordable for the public. The government further reduced the GST on chargers/charging unit for EVs has been reduced to 5% from 18%.

2) Urgent Need to Combat the Rising Pollution Levels

Some of the key drivers for the Indian government for increasing the sales of electric vehicles in the country are measures to curbing the increase in oil imports and efforts in tackling the problem of pollution. India is currently the third largest oil importer in the world. India’s dependence on oil import reached 83.7% in 2018, while the amount of spending reached $111.9 billion on oil imports, according to the Oil Ministry’s Petroleum Planning and Analysis Cell (PPAC).

Many of the world’s most polluted cities are situated in India, and 90% of the total transport sector emissions is a result of rising level of vehicles on the Indian roads. These drivers have made the government focus essentially toward alternative fuels and sustainable mobility using electric vehicles. The government has planned to invest ₹100 billion ($1.4 billion) toward incentivizing electric vehicle manufacturing in the country through its Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme.

The government has also planned to ban all IC engine two-wheelers under 150cc by 2025 and three-wheelers by 2023. Moreover, the government has been actively pushing the commercial vehicle operators to adopt electric vehicles. Cab aggregators such as Ola and Uber are set to lead the transition toward electric vehicles given the regulations to ensure total electrification in new commercial cars and two-wheelers by 2026 and 2023 respectively.

3) Need to Ensure Sustainable Battery Production/Procurement Without Excessive Dependence on One Country

While there is a certain push to ensure large-scale adoption of electric vehicles, there is a need to ensure a sustainable supply of lithium-ion batteries to make EVs a reality in India. If local manufacturing is not promoted, India could become increasingly dependent on countries like China. China has strategically positioned itself to attain total control of the entire battery manufacturing supply chain. Achieving technological and manufacturing competency is essential for EV adoption in countries such as India.

The electric vehicle market in India has grown gradually over the years; further, there needs to be more comprehensive planning from the government and vehicle manufacturers to make the transition from internal combustion engine vehicles to electric vehicles faster. In 2017, electric vehicles sales were 0.06% of the total vehicle sales in India, which consisted mostly of electric two-wheelers.

These electric scooters consist primarily of low speed vehicles, with speed less than 25 km/hr., and these often do not need vehicle license and registration. Most of these electric scooters use lead batteries to decrease the cost of the vehicle, but this has led to various limitations for increase in sales of e-scooters such as battery faults and low battery life. Another major segment contributing to the sales of electric vehicles in India are e-rickshaws. E-rickshaws are small three-wheeled battery-powered vehicles often used for last-mile connectivity. Recently, there has been an increased presence of these vehicles many tier 1 and tier 2 cities across India.

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4) Lack of Charging Infrastructure Becoming a Major Bottleneck Among Consumers for EV Adoption

One of the many hindrances toward a smooth adoption of electric vehicles in India has been the lack of charging infrastructure. There have been many initiatives to develop charging infrastructure in the country, such as building community charging stations or installing solar-powered charging stations at the existing fuel station in the country. These initiatives have till now been executed only at a limited level, as there are only about 289 community charging stations and negligible coverage of solar-powered EV charging stations at existing fuel stations.

Also, charging of electric vehicles takes up an excessive amount of time, around 6-8 hours, and other options such as DC fast charging can be relatively expensive. To address this, the Power Ministry of the Government of India will deploy various fast charging technologies at its various public electric vehicle charging stations such as Charge de Move (CHAdeMO) and Combined-Charging System (CCS), which are high voltage chargers of 200 volts and above, along with the existing Bharat Standard, which are low voltage chargers of 72-200 volts.

5) Rising Interest of Various Stakeholders to Capitalize in EV Industry

The current electric vehicles present in India, which are mostly two-and three-wheelers, do not need fast charging options. However, with ambitious targets set for EV market development in the country, the government is actively planning to improve the infrastructure for fast charging technologies. These technologies will be key to the success of passenger electric vehicles such as the newly launched Hyundai Kona, in the market. The Energy Efficiency Service Limited (EESL) currently has launched a project to expand the number of electric vehicles charging stations in Delhi, with plans to expand to over 150 charging stations from the current 55 public charging stations by October 2019. Some of the leading companies, which are installing electric vehicle charging stations in India, are Ather Grid, ABB, Delta Electronics, ECOYAN, Exicom, and EESL.

Another major problem for the shift toward electric vehicle would be to evolve the existing industry structure, which serves the IC engine vehicle markets towards serving the new electric vehicles industry. Many manufacturing companies of various conventional vehicle components such as engines, transmissions, after-treatment systems, fuel-recirculation systems, vehicle exhausts, and fuel tanks, would be susceptible to the advent of electric vehicles.

The auto parts industry, fuel station industry, and many in the informal automotive parts sector in India can be majorly influenced by the transition toward electric vehicles. Along with forming regulations for electric vehicles in India, the government also needs to ensure proper transition plans and skill training for such at-risk groups in the Indian automotive industry.

There are many leading companies in India, which are planning to develop electric vehicles for the Indian market. Mahindra and Mahindra Ltd, Tata Motors, Hyundai, MG Motor India, and Maruti Suzuki are some of the leading companies, which have launched electric vehicles in India. These companies have aligned their plans for vehicle production with the need of the Indian customers and the vision of the Indian government for affordable and energy-efficient electric vehicles.

Participate in BIS Research on Indian Electric Vehicles and Electric Vehicle Batteries Market  and get 10% off and a complimentary copy of the executive summary as soon as the report is published.