Over the past ten years, the automobile sector has been gravitating towards electrification. Electrification is essentially the replacement of conventionally used Internal Combustion Engine (ICE) vehicles with more powerful, simpler, smarter and greener Electric Vehicles (EV). 

EVs came into being before its ICE counterparts but due to lack of infrastructure, high upfront costs and absence of incentives, they could not gain the deserved spotlight. So, are we to believe that the right time has come to think about the electrification of our cars? 

To understand the situation better, let us look at why it is imperative for India to adopt electric mobility. The Indian automobile market has earned the distinction of being a unique market; the Indian auto and ancillary market is among the largest in the world and constitutes 9% of the country’s GDP. 84% of vehicles sold domestically are either two or three Wheelers (2W/3Ws) and therefore, it is imperative for the nation to adapt to electrification now. 

EV adoption in India is more than just a technological upgradation in the automotive sector. There are varying reasons which make it essential for the fifth largest economy to pace up the process of electrification. 

Extensive and often reckless use of ICE vehicles paired with exorbitant industrial pollution has worsened the nation’s Air Quality Index (AQI), making it the third most polluted country in the world. Moreover, considering the macroeconomic factors, India imports $100 billion worth of crude oil to quench its industrial and retail demand (which is mostly generated by operational ICE vehicles). 

Now that the intent is clear, let’s see how long is the road ahead of our goal. 

Electric mobility targets can only be achieved with joint efforts of all the players in the EV ecosystem. Government incentives, appropriate charging infrastructures, battery costs and manufacturing coupled with Original Equipment Manufacturers (OEMs) transitioning from ICE to EV can help in  ramping up the process of electrification.

Over the last decade, Indian policymakers have been extensively promoting adoption of electric vehicles, mostly under the umbrella of the National Mission for Electric Mobility (The EV Mission) led by the Department of Heavy Industries (DHI). 

Introduction of schemes like FAME II (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles) and Production Linked Incentive (PLI) coupled with GST incentives are pushed to achieve adoption targets, localisation of key components with an aim to foster electric adoption in both private and public transportation. 

FAME II aims to provide direct financial benefits to EV manufacturers which would benefit in reducing the cost of acquisition for end-customers. As a mechanism, OEMs first pass on the subsidy support to the end-customer by way of decreased purchase price, and later claim the amount from the DHI. 

There was a mismatch between the market demand and the policy’s vision, as since inception, FAME II has only been able to achieve less than 10% of its target of supporting one million electric two-wheelers, half a million of 3Ws, 55,000 four-wheelers and 7,000 buses by 2022. To tackle the same, new amendments were introduced in June 2021 to reduce the overall vehicle cost and revamp the EV adoption scenario in the country.

As per the new amendments, the subsidy offered has been revised from ₹10,000 to ₹15,000 per kWh per electric 2W vehicle, thereby increasing the demand incentive by 50%. Maximum cap on subsidies offered has also increased from 20% to 40% of the cost of E-2W, which drastically bridged the Total Cost of Ownership (TCO) gap between conventional ICE and electric two wheelers. 

Electric charging infrastructure in the country is at a very nascent stage and the charging grid is more like a mandate to support the operational leg of the electrification process. Therefore, it is important for India to have the required charging infrastructure to accelerate the process. 

India needs about 400 thousand charging stations to meet the requirement for two million electric vehicles that could potentially move on its roads by 2026. Currently, it has about 18 hundred charging stations, most of which are slow chargers. 

One of the biggest players in this segment is Tata Power which owns a network of over 500 public chargers in 100+ cities across India, and has recently tied up with HPCL to further expand its network.  

To support the forecasted electricity demand that EV adoption is expected to bring with itself, it is a must for the nation to develop grids which are capable of handling the multitudinous increase in load. India relying on its coal dependent grid is said to be one of the most inefficient ones in the world, thus giving a reason for the nation to shift the composition of the grid towards renewables to truly address the pollution problem. 

In one of his announcements, the Union Power and New and Renewable Energy Minister Raj Kumar Singh disclosed the country’s plans to set up around 14 gigawatt-hour (GWh) grid-scale battery storage system at the world’s largest renewable energy park at Khavda in Gujarat. This is in addition to the plan to invite bids for the largest global tender for setting up a 13GWh grid-scale battery storage system in Ladakh. This strategic push is to make India’s grid-scale battery storage programme the largest in the world.

It is encouraging to see the government's action in this regard but there still lays a long road ahead for the nation. 

Another gap which needs to be bridged to achieve EV adoption is the TCO (Total Cost Ownership) disparity between ICE and EVs. TCO is the sum of upfront and operational costs which a customer has to incur through the life of the vehicle. With batteries constituting 35% of the vehicle cost, it is one of the major drivers of EV’s upfront costs. 

With inefficient indigenous cell technology and limited access to battery raw materials like Lithium and Cobalt, India is yet to become a leading player in the EV battery industry. Local players like Exicom Power, Amar Raja Batteries, Tata Power have plans to turn this around. 

Electric 2W are smaller vehicles and are easier to electrify, hence they require smaller and simpler batteries and are much closer to economic parity. Li-ion battery based e-rickshaws form a major portion of electric 3W base in the country and have in fact achieved TCO parity and are benefitting from the lower charging costs and time. 

However, there still exists a wide gap between TCO parity of electric 4W and buses with their ICE counterparts, mostly due to large battery sizes requirements and lack of complementary infrastructure. 

Tesla in its recent pitch to the government was successful in lowering import duties on EVs which would eventually make electric vehicles more affordable for the Indian masses. However, the administration is in favor of high import duties as it wishes to encourage domestic production. Therefore, it's too early to show such excitement as only time can vouch for its implementation. 

With the 2W segment being the frontrunner followed by 3W in the ICE-EV shift in India and 4W premium and commercial vehicles yet to achieve the value for money proposition, a lot more has to be done by the government on many fronts such as OEMs transitioning to electric mobility, customers considering EVs over ICE vehicles and other players in the EV segment actively working to achieve India’s goal of becoming a 100% electric vehicle nation by 2030.