As concerns about environmental sustainability and carbon emissions intensify, electric vehicles (EVs) are one of the key drivers towards a greener future. Consequently, a report by Fortune Business Insider speculates the market size of the global electric vehicle industry will reach $1579 billion in 2030, growing at a CAGR of 17.8%.
India has already begun to play a meaningful part in the global EV ecosystem and is expected to grow faster than the world average. Here are some interesting facts:
If India has to achieve these forecasts, the Central and state governments will have to play a vital role in boosting EV investment through well-crafted policies and incentives. Let us delve into the current government initiatives and challenges that must be overcome.
The Indian government is also contributing towards an eco-friendly India. Here are some of the schemes and government initiatives introduced to promote the EV trend:
1. National Electric Mobility Mission Plan (NEMMP)
NEMMP, launched in 2013, aimed to introduce 6-7 million electric and hybrid vehicles by 2020. It focused on creating a comprehensive ecosystem for EVs through research and development, pilot projects, and market creation.
The plan encouraged collaboration between industries, academia, and various government departments to achieve a greener and sustainable transportation system through fiscal and monetary incentives. Although the plan did not achieve its targets, it laid the foundation for future EV adoption in India.
2. Faster Adoption And Manufacturing Of Hybrid & Electric Vehicles (FAME) Scheme
FAME was introduced in 2015 under the NEMMP to promote the adoption of eco-friendly vehicles. It provides incentives to manufacturers and buyers of electric and hybrid vehicles. The scheme's second phase, FAME II, launched in 2019, emphasises public transportation and charging infrastructure. It supports electric buses, two-wheelers, and three-wheelers while also focusing on setting up charging stations.
3. Goods And Services Tax (GST) Benefits For EVs
Electric vehicles benefit from a reduced GST rate of 5% from 12%, compared to around 28% for conventional vehicles. This price advantage makes EVs more attractive to potential buyers, contributing to increased adoption and a greener environment.
4. Battery Swapping Policy
The battery-swapping policy addresses two significant concerns with EVs: charging time and low driving range. The average time for recharging a small EV battery (2 and 3W) is 3-4 hours. The government introduced battery swapping stations to skip the downtime while charging an EV, allowing EV owners to exchange their depleted batteries for fully charged ones.
5. Production Linked Incentive (PLI) Scheme
The PLI policy is part of the government's effort to boost local manufacturing of EV components and vehicles. It offers financial incentives to manufacturers based on their production and sales targets. This initiative aims to strengthen the domestic supply chain for EVs, reduce import dependence, and attract investment in the sector.
While India's government initiatives for EVs are commendable, some challenges and criticisms need attention. These are as follows:
1. Lack of Adequate Charging Infrastructure
One of the main obstacles hindering the seamless transition to EVs in India is the absence of a robust and widespread charging infrastructure. As the number of electric vehicles on the road increases, the availability of conveniently located charging stations becomes critical.
According to recent data, there are only 6,586 public charging stations available. A lack of uniform charging standards further complicates matters, making it challenging for EV owners to find compatible charging points. This deficiency in charging infrastructure contributes to range anxiety, raising a significant concern for potential EV buyers.
2. High Initial Costs
The long-term savings associated with EVs are evident through reduced operational and maintenance costs. However, its higher initial purchase price than its internal combustion engine counterparts remains a significant deterrent.
Although government incentives, subsidies, and tax benefits have been introduced to ease this cost disparity. Still, the perception of EVs as expensive upfront investments discourages around 40% of consumers from considering them as viable options.
3. Dependence On Imports For Components
Despite the emphasis on local manufacturing by the ‘Make in India’ project, the EV industry faces challenges in achieving self-sufficiency. They face difficulties in making key components like batteries.
Today, India depends on foreign countries for 70% of the components required in manufacturing EVs, affecting the EV market's cost-effectiveness, availability, and growth. Thus, building a robust domestic supply chain for critical EV components is crucial for achieving competitive pricing and promoting a thriving EV market in India.
4. Sustainability Of Power Generation
Electric vehicles are closely tied to the sources of electricity for their functionality. This raises concerns about the net environmental benefit of EV adoption in India, as the country’s 55% of energy generation still relies significantly on non-renewable sources like coal.
Thus, the electricity generation process could contribute to carbon emissions, making transitioning to renewable energy sources essential for EVs to achieve their full environmental potential.
Grip Invest was one of the first companies to facilitate the leasing of electric vehicles. Investors of Grip Invest’s platform were able to co-invest and purchase electric vehicles that were then leased to large fleets like Zypp Electric, BluSmart, Battery Smart, ChargeZone and Everest Fleet. Since 2020, investors on Grip Invest have purchased and leased over 16,000 electric vehicles and charging assets worth over INR 250 crore.
Grip Invest recently hosted the Founder of BluSmart, Mr. Anmol Jaggi, on a webinar to talk about the EV industry. You can view a recording of the webinar from the link below.
The government's actions play an essential role in shaping the trajectory of EV adoption in India. The focus of enterprises and government makes the EV sector a probable investment avenue.
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