Time for India to hit the gas pedal on electric vehicles?

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One of the primary policy objectives for the incoming government will be to achieve the electrification of its vehicle industry, which will nurture a far more ecologically and economically sustainable means of transport.

Imagine a scenario wherein you walk out onto the main road and are not immediately assaulted by toxic exhaust fumes and rumbling internal combustion engines.

As the Bharatiya Janata Party–led NDA government resumes charge of the nation’s governance, Ministers are sworn in and the Cabinet is repopulated, it is time to ponder the implications and roadmap for various policy issues. The incoming Indian government has a lot of challenges to face. Over the short and long term, one of the key challenges India would do well to be proactive on is making a shift to electric vehicles (EV).

It is a goal that will help in combating pollution, lowering the oil import bill, and ensuring our mobility in the long term. Having acquired the mandate, the new administration needs to ensure that India’s switch to electric vehicles progresses through effective policy.

Union Minister Piyush Goyal has previously claimed that “The idea is that by 2030, not a single petrol or diesel car should be sold in the country”. The interim budget indicated a reduction in import duties on electric car components along with incentives for domestically produced parts, presumaby to help Make-in-India cars stay competitive. There is a lot going on on the EV front and India has a huge stake in the trajectory of electric mobility in the future. For that reason, it is worthwhile to examine why India has not been able to set up an EV industry, and how those problems should be tackled going forward.

 

Value for money

The Indian consumer is value-conscious. It makes sense to switch to electric cars only if they prove to be a bargain. As of today, the only available electric car–maker in the Market is Mahindra. The brand offers just two models — the eVerito and the e2o Plus 4. The latter costs around ₹6 lakh while the former costs around ₹13 lakh. Both those options only offer a 110-km range per charge. This affects market demand and supply, making people resist the switch to EVs. Set up in 2018, the new Mahindra manufacturing plants can produce 25,000 EV units a year. For context, competitor Maruti produces 3,100 cars a day (running on internal combustion engines).

 

Charging Infrastructure

It would be a welcome change for consumers to remain unaffected by the unstable prices of petrol and diesel. As per Tesla’s model, charging should either be free or fast, both of which sound preferable to being subjected to fluctuating prices of oil. However, India does not have a nationwide charging infrastructure set in place. To achieve that, India would need to adopt charging standards (already underway) and decide where the stations would be required (also in consideration by the government). Once charging stations are in place and commonly accessible, demand for EVs should rise and stabilise.

 

Acquiring Lithium (including battery prices)

For mass adoption of EVs to become possible, it is important to have lithium (or cobalt) reserves to feed the demand. Lithium is the metal used in batteries to store charge. As the demand for EVs in India grows, so will the need for Lithium. As of 2018, Lithium reserves were mainly concentrated in Chile, Australia, Argentina, and China (as shown in the figure below).

 Statistic: Countries with the largest lithium reserves worldwide as of 2018 (in metric tons) | Statista
Find more statistics at Statista

Indian efforts to acquire the resource are underway as of mid-2018. The government has directed three state-owned mineral companies to team up for a new venture tasked with scouting and acquiring strategic mineral assets abroad. Hindustan Copper Ltd., Mineral Exploration Corporation Ltd., and National Aluminium Corporation Ltd. had in September 2017 agreed to set up a joint venture named Khanij Bidesh India Ltd., or KABIL.

 

Setting up a level playing field for domestic and foreign companies

An important variable in the mass adoption of EVs is going to be the variety available to Indian consumers. Having different brands in the market catering multiple price segments will be instrumental in making a healthy start in mass EV adoption drives. A good step in this direction was to lower the import tax for EV components from 15-30% to 10-15%. However, the interim budget still poses a 60-100% tax on completely built-up electric cars. While such measures may help Indian-manufactured cars remain competitive, they may lead to increased prices for foreign market leaders who do not have their plants in India — most notably among them, Tesla. EV adoption is a marathon where foreign options should not be seen as a threat but as a welcome change. Having more options is likely to lead to faster adoption. It may not make sense to Make in India for many EV startups, including Tesla, but the Indian market would be lucky to have them, and more importantly, needs them.

The incoming administration has previously had a proactive approach and attitude to EVs in India, and rightly so, given the stakes. It is good for the country to work on the goal of filling its roads with electric cars by 2030. The next step is to create a roadmap of how we plan to achieve that, with a special focus on building public and private partnerships as well as an environment that enables foreign companies to compete. Regardless of how votes are divided within the nation, mass EV adoption should be a bi-partisan issue in India going forward.

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