Can Tamil Nadu accelerate into the future with electric vehicles?

Tamil Nadu’s electric vehicle journey has been mostly about high investments for production and manufacturing of vehicles, and strangely low uptake among residents. The lower adoption in the State can be attributed to affordability challenges, limited charging infrastructure, concerns about range and consumer preferences for traditional vehicles

Updated - October 29, 2023 04:43 pm IST

Published - October 29, 2023 12:23 am IST

A view of Electric Vehicles being charged at a charging point in Chennai

A view of Electric Vehicles being charged at a charging point in Chennai | Photo Credit: B. Velankanni Raj

Tamil Nadu has attracted around ₹60,000 crore in investment commitments to the electric vehicle (EV) sector so far, according to the data available with Guidance Tamil Nadu, the government’s investment promotion agency. That is, however, just one part of the success story. Here is the other part: the State still has a long way to go in EV adoption or penetration (measured in terms of EV sales as a percentage of the total vehicle sales).

According to data from Climate Trends, Tamil Nadu’s EV sales stood at 68,335 units between January and September 2023, and the penetration was 4.93%. For the same period, comparable States such as Maharashtra had a penetration of 7.71%, Karnataka 8.76%, and Gujarat 5.40%. In terms of EV categories, two-wheelers had a penetration of 5.59%, four-wheelers had 2.24% and three-wheelers 12.96% in the State.

Ather opens second facility

Scooter brand Ather Energy opened its second manufacturing facility at Hosur last year, taking its production capacity to 4,20,000 units a year. “EVs have a tremendous potential to grow in Tamil Nadu. While several brands, including ours, have expanded presence over the last few months, EV awareness drastically varies within districts,” says Ravneet S. Phokela, Chief Business Officer, Ather Energy.

Over the last few months, the reduction in subsidies under the Centre’s Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) Scheme has increased the prices of EV scooters, but the impact is short term, and the industry will eventually bounce back, he adds.

Mr. Phokela says a good way to encourage EV adoption is to offer State-level subsidies, and Tamil Nadu should consider it. However, it is encouraging to see the power tariff for EV charging stations reduced by the Tamil Nadu Electricity Regulatory Commission (TNERC). The reduction has brought relief to the charging station operators, and is expected to increase the number of charging stations and strengthen the infrastructure further, resulting in faster adoption of EVs, he reckons.

The rate of EV adoption in Tamil Nadu has been slower than anticipated, but the government is addressing this challenge, says Sanjay Behl, Executive Director and CEO, Greaves Electric Mobility. The company owns the Ampere EV scooter brand and inaugurated its largest EV mega site at Ranipet in 2021. The site can turn out up to half-a-million units annually.

Updated policy

The State government’s updated EV policy, released in February 2023, emphasises EV development, infrastructure enhancement, and incentives for local EV manufacturers. This signals a promising step towards a brighter future for EVs, Mr. Behl says.

“Tamil Nadu has attracted substantial investments in the EV sector, but lower EV adoption can be attributed to various factors, including affordability challenges, limited charging infrastructure, concerns about range, consumer preferences for traditional vehicles, and the need for more aggressive incentives and awareness campaigns,” says Suhas Rajkumar, Founder & CEO, Simple Energy.

“Although it [the State] serves as an EV manufacturing hub, the transition to widespread adoption may take time as production scales up and prices become more competitive. However, States with favourable EV policies, incentives, diverse EV options, and developed charging networks tend to see higher adoption rates,” he explains.

“We chose Tamil Nadu for manufacturing owing to its established automotive ecosystem, government support, strong infrastructure, skilled workforce, access to raw materials, a sizeable local market, ongoing development, sustainability initiatives, and research support, creating an ideal environment for EV start-ups like ours to thrive,” Mr. Rajkumar says.

Survey in February

In February this year, Climate Trends conducted a consumer perception survey on EVs among over 1,300 respondents in Tamil Nadu. It revealed what we already know: among commercial vehicle-users (last-mile delivery fleets and cabs), insufficient range of vehicles, limited charging infrastructure, limited service network and high initial investment were the main barriers to the switch to the EVs. Among private users, battery safety and performance, and use during the rainy season were the chief concerns. This underscores the need for more awareness of the robustness and safety of EV technology. Nearly 80% of the respondents from Chennai and Madurai felt that there was inadequate charging infrastructure in their cities.

“Besides exemption from road tax and waiver of registration fees and permit fees, the Tamil Nadu Electric Vehicles Policy, 2023, focuses on demand-side incentives for commercial vehicles and not for private vehicles, thus strengthening the importance of electrifying public transport and shared mobility,” according to Archit Fursule, research associate, e-mobility, Climate Trends.

Tamil Nadu is among the States offering the highest incentives in terms of battery capacity (₹10,000/kWh). However, the number of vehicles incentivised is lower than those in other States, he says.

While most other States focus on scrapping incentives, Tamil Nadu has taken the lead in offering retrofitting incentives for two- and three-wheelers. This will not only support the conversion of ICE vehicles into EVs but will also foster start-ups working on retrofitting, says Mr. Fursule.

Tamil Nadu provides the highest incentives to public charging point operators, but there are limits to the number of individuals eligible for benefits, he says. The first 200 fast-charging stations will be eligible for an incentive of 25% capital subsidy of the cost of equipment and machinery or up to ₹10,00,000 per station. The first 500 slow-charging stations will be eligible for an incentive of 25% capital subsidy of the cost of equipment and machinery or up to ₹1,00,000 per station.

Two years ago, Tamil Nadu was behind most of the comparable States in charging infrastructure. But in the last six months, there has been an improvement. This will take some time to reflect in the EV adoption rate, argues K.P. Karthikeyan, CEO and Director of Zeon Electric Private Limited, which installs EV chargers at public locations. “In terms of charging infrastructure on highways, Tamil Nadu is much better than other States. In cities like Chennai, the charging infrastructure is not as good as Bengaluru. That is changing now.”

One of the reasons for Bengaluru’s good performance is the registration of EVs for taxis. About 250 cars a month get registered as taxis. Only recently has Tamil Nadu allowed EVs to be registered as commercial vehicles. So, the adoption in this segment will pick up, Mr. Karthikeyan says.

Tariff hike halted investment 

He also points out that when electricity tariff was increased on September 10 last year, investment in public charging infrastructure came to a halt. The tariff has been reduced this year. In five months from now, Tamil Nadu should be on a par with the other leading States, Mr. Karthikeyan predicts. However, the tariff reduction for the charging stations is yet to be fully implemented. “Of our 60 charging locations in Tamil Nadu, the tariff has so far been revised only in 4-5 locations,” he points out.

Tamil Nadu Generation and Distribution Corporation (Tangedco) has to play a key role in the development of the charging infrastructure. Power connection charges are more expensive in the State and they should be brought down, he says.

New Pandian Travels Pvt. Ltd., which provides staff transport services, has procured over 100 EV cabs from Tata Motors. “We plan to have a fleet of 200 EVs. Already 116 EV cabs are running. Enhancing the charging infrastructure in Chennai on a par with that of Bengaluru and Hyderabad will help in improving adoption,” says S. Natarajan, Managing Director, New Pandian Travels.

Cab owners prefer CNG cars to EVs, given the cost. The incentive announced by the government is lower, says an official of another private cab aggregator.

‘Subsidy needed’

State Transport Undertaking buses account for a major chunk of public transport vehicles in Tamil Nadu. The government will electrify these buses through a phased augmentation and replacement plan. The State shall endeavour to increase the share of electric buses to 30% of the fleet by 2030, says the EV Policy, 2023. “We need to have some kind of subsidy. In the Phase-II of FAME India, there is a subsidy of around ₹50 lakh given to the State Transport Undertakings and not to the private sector. That kind of subsidy is needed,” says D.R. Dharmaraj, secretary, Federation of Bus Operators Associations of Tamil Nadu.

The government should come out with infrastructure, especially for charging stations on highways and at bus stands. “Setting up a charging station is going to cost you more than ₹50 lakh. The government has to provide land or a common place which can be availed by everyone. Electricity should be of a particular quality,” he says.

Taking EV buses on lease, so as to avoid initial investment, could be a model for private operators, suggests Mr. Dharmaraj. Manufacturers, financiers, and charging station operators could come together to establish a viable model. He also calls for reduction in the GST and quarterly taxes, toll charges exemption, loans at cheaper rates and a longer repayment option for the operators to shift to EVs.

Mr. Dharmaraj said the Centre’s policy think tank Niti Aayog had a meeting recently where they wanted to know the total volume of EV buses would be procured and bring all manufacturers to reduce the price.

T.R.B. Rajaa, Tamil Nadu Minister for Industries, Investment Promotion and Commerce, says that since the DMK returned to power in July 2021, the State has signed memoranda of understanding for ₹40,000 crore in investments in the EV sector. Tamil Nadu is an advanced manufacturing hub, and its foray into the EV sector began with vehicle manufacturing. “We started out by playing to our strengths and it has borne fruit: about 70% of the EV two-wheelers and 40% of the EV four-wheelers sold in India are made in Tamil Nadu,” he says.

Output will increase: Minister

“This is just the beginning and our EV output is only set to increase drastically in the coming years, with many more global players choosing Tamil Nadu for EV manufacturing. There are significant strides being made in EV research and EV-related segments in the State, like battery tech and auto electronics,” Mr. Rajaa says. “Even so, we are aware that EV adoption in the State leaves much to be desired. We believe that the delay in adoption is due to the slowly changing consumer behaviour and the need for wider charging infrastructure,” he adds.

“Under the leadership of Chief Minister M.K. Stalin, this government has taken steps to address these issues, like tweaking the EV passenger vehicle policy for registration of EV auto-rickshaws and taxis, and holding industry-wide round table consultations on improving demand and charging infrastructure. We believe that increased awareness and improved charging infrastructure will boost adoption in the State,” Mr. Raaja says. “We are confident that all departments concerned in this government will enact and fully implement EV-focussed policies soon so we can fully leverage the potential of the EV future.”

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