As one of the world’s largest automobile markets, India’s country-wide electrification will be a turning point for the entire world and the country itself. Driven by the Indian government’s push towards sustainable mobility, growing consumer demand for new technologies, and the emergence of private players with an interest in EV technology, the future of electric vehicles in India looks promising.
However, the country continues to grapple with several challenges in its pursuit of full EV adoption, namely with the low number of charging stations and high upfront costs of EVs.
In this article, we focus on the following three questions:
- What is the state of the Indian EV ecosystem?
- What challenges and opportunities lie ahead?
- What can India learn from other countries?
India’s EV Market Is on a Rapid Growth Trajectory
India is one of the world’s largest markets for two- and three-wheeled vehicles, ranking among the global top five for private cars and commercial vehicles.
According to JMK Research, a staggering 455,733 EV units were sold in FY2022. India’s Ministry of Road Transport and Highways also claimed that 1,334,385 electric vehicles in India were on the road as of July 2022.
These numbers are sure to increase, with central and state governments, as well as private sector players, actively pushing for greater electrification on Indian roads.
India Sets Ambitious Targets
According to Union Minister Nitin Gadkari, the Indian government intends to achieve the following EV mix in India by 2030:
India sets ambitious targets for its EV ecosystem by 2030.
To reach these ambitious targets, the Indian government has created policies and programs like the National Electric Mobility Mission Plan (NEMMP), a broad plan to encourage the adoption of electric vehicles in India. The aim is to reduce India’s dependence on crude oil.
The Indian government has also formulated the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) scheme. This plan should facilitate greater adoption rates in the coming years. The Finance Minister of India has also announced a reduction in customs duty and taxes for the 2023 budget. This will help boost the domestic production of lithium-ion batteries that power electric vehicles.
Many state governments like Assam, Telangana, Tamil Nadu, and Gujarat have also created attractive policies and programs to incentivize EV manufacturing in their respective territories.
As a result of these strategies, private players have begun entering the EV market, setting the stage for the further adoption of electric vehicles in India. India’s success will also have a significant, positive impact on the rest of the world.
India’s EV Adoption Will Be a Global Win
According to the International Energy Agency (IEA), global EV sales in 2021 doubled from the previous year to 16.5 million EV units sold worldwide. India also announced that EVs will represent at least 30% of all road traffic by 2023. Though a modest target, a 30% adoption rate will have global ripple effects, both environmentally and economically.
For starters, India is the world’s third-largest oil importer, but the transition to EVs will significantly reduce its oil dependency, disrupting global oil markets. If India can meet its ambitious adoption targets, the country will create a model that other emerging economies can replicate. This, in turn, will have further impacts on oil markets as the dependency on this fossil fuel decreases.
Additionally, with India’s population of 1.4 billion and its rapidly growing economy, the country is certain to be an influential player in the global EV market today. The full adoption of electric vehicles in India will represent a major step in the right direction toward sustainable development in worldwide mobility.
The increasing adoption of EVs in India will have significant environmental impacts. Source: Pixabay, carlovenson
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Environmental Opportunities for India
The shift towards electric vehicles in India will have a significant impact on the environment. Currently, the transportation sector in India is a major contributor to pollution. Take the capital, New Delhi, for example, where two- and three-wheelers contribute 50% to the surface PM 2.5 levels.
India’s transportation sector also accounts for about one-fifth of the country’s total energy use. In light of these numbers, EVs can have a huge impact on India’s environment in the following areas.
1. Reducing Air Pollution
Within India alone, vehicular traffic contributes to 27% of total air pollution and claims 1.2 million deaths annually. EV adoption in India will therefore significantly reduce the negative global environmental impacts originating from Internal Combustion Engine (ICE) vehicles.
2. Reducing Noise Pollution
Noise pollution is also a major challenge in India due to the rapid urbanization increasing the need for vehicles. According to the 2022 UNEP report, five Indian cities feature in the world’s noisiest cities. Though vehicles are not the only source mentioned in the report, EVs are likely to bring down the noise levels because they don’t have the mechanical valves, gears, or fans common to ICE vehicles.
3. Improving Operational Efficiency
From a fuel efficiency standpoint, petrol or diesel cars convert only 17 to 21% of stored energy while EVs can convert 60% of electrical energy from the grid. Clearly, this shift to electric vehicles in India can improve the efficiency of fuel production and optimization. It will bring down the operational costs for end-users, thereby increasing demand for EVs.
Besides the above environmental impacts, the adoption of EVs in India will also present many economic opportunities for the country.
Economic Opportunities for India
In addition to representing significant progress towards a cleaner and greener future, locally, the full electrification of India will benefit businesses, investors, and consumers alike. Below, we highlight several of the most compelling opportunities.
1. Fleet Operators
Fleet operators like Amazon, DoorDash, and BigBasket can reduce their operating costs by switching to EVs. According to Weforum.org, the Total Cost of Ownership (TCO) for a two-wheeler in New Delhi is Rs 2/km when it’s run on petrol. This cost comes down to Rs 0.52/km when switched to EVs. Undoubtedly, the operating costs go down by more than half for fleet operators. Maintenance costs will go down as well.
However, shifting to EVs is happening at a much slower pace when compared to Brazil or the US. Electric vehicles in India are still unfavored because of the high upfront costs, unestablished reseller value, and lack of trust in the new technology.
To address these concerns, the government is providing tax incentives to reduce upfront costs. Meanwhile, first mover companies are providing robust and reliable charging solutions that will boost confidence in this new technology.
2. OEMs
The EV industry provides enormous opportunities for OEMs to build cost-competitive auto products for India and the rest of the world. Research shows that OEMs can produce a 5.7% higher value addition to every EV by 2030. As a result, the Indian government is pushing for indigenization of the supply chain under the Atma Nirbhar plan to support OEMs to develop the EV ecosystem.
Furthermore, efforts from companies in India are underway to help OEMs build a charging app using SDK development tools, and provide access to features like navigation, vehicle diagnostics, and keyless control. All these measures help OEMs offer on-the-go charging for their drivers and accelerate the shift to EVs.
3. The Real Estate Sector
EVs create multiple opportunities for real estate investors, realtors, and property developers, as this industry requires the construction of EV manufacturing units, industrial areas, and charging stations. Another key aspect is the development of retail infrastructure around EV charging stations, as it takes an average of 15 to 20 minutes to charge an EV.
A report by Colliers shows that the EV industry will require 1,300 acres to set up 110 GWh battery manufacturing capacity by 2030. The country will also need 13.5 million square feet for charging stations by 2025. These numbers reflect the ample opportunities available for every player in the real estate space.
4. Consumers
India’s young and dynamic population is looking forward to embracing new technologies as the country is experiencing a growing trend in upward mobility. As individuals become more affluent, their socioeconomic status continues to improve, and they are better positioned to purchase EVs.
To meet the growing demand, the government and other innovative players in India’s EV space are spearheading efforts to add more charging points to EV charging networks. This includes offering software solutions that make daily charging accessible.
Multiple players are also partnering with businesses and government agencies to build innovative solutions that positively impact the EV industry, leveraging India’s qualified talent pool. According to Nitin Gadkari, the Union Minister of Road Transport and Highways, the EV industry is likely to create five crore new jobs, and India’s young talent pool is well-poised to ride this job growth.
Despite these many opportunities, the country still has to address significant challenges before reaching full adoption of electric vehicles.