The Growth of Electric Vehicles in India: Insights from EVINDIA

From a land of rich culture and vibrant cities, India is now witnessing its own silent revolution on the streets by

Electric Vehicles

Indian Government's Trade Gamble: A Double-Edged Sword

India’s one of the top exports is refined petroleum, with approx value of $86.2 billion, while crude oil is imported at $170 billion (according to OEC world report). It's no secret how much

EVs

As per the All India study report submitted to the Petroleum Planning and Analysis Cell (PPAC) of the Petroleum Ministry, 70% of diesel and 99.6% of petrol are consumed in the transport sector alone. Hence, decreasing this consumption will further enhance India’s export quantity. This shift to cleaner energy automobiles will make India capable of storing more petroleum reserves which in turn will make India less vulnerable to the volatile global oil market. The potential surge in the export of refined petroleum products induced by EVs taking over the automobile market can also reduce India’s current account deficit by increasing its receipt. However, this ambitious plan has a sharp edge towards its side i.e. the component of EVs that India imports can further increase due to this shift. In the current geopolitical scenario, shifting its import dependency from oil-producing countries like Russia and UAE towards Battery manufacturing, and EV component manufacturing countries like China will not be a good step for India. Moreover, curbing the intervention of Chinese interference in the EV industry has also increased the upfront cost of the vehicles which has raised affordability questions in the energy transition cost.

Emerging Demand and Supply: Bridging the Gap

Indeed, the Indian government feels the need to pin an answer to the affordability question. Here is where demand and supply-side incentives step in.

For Demand-Side Incentives, we have Faster Adoption and Manufacturing of Electric Vehicles (FAME), and Electricity Mobility Mission Plan (EMPS) Schemes. The mentioned scheme gives subsidies that can make EVs more consumer-friendly for commuters to help them transition to Electric Vehicles. It can also offset a sizeable portion of the upfront cost, making EVs more plausible. For Supply-Side Incentives, we have a Production Linked Incentive Scheme which helps in pushing the domestic production of Electric Vehicles and Batteries and the creation of a healthy domestic EV industry.

Besides the government, many private companies are engaged in the EV sector, bringing about disruptive features and sleek designs that turn the eyes. Such a competitive scenario is sure to accelerate EV adoption in India.

Research & Development: Way Towards Self-Sufficiency

How far the ambitious dream of India's self-sufficiency in the EV sector can be translated into reality depends much on robust research and development. The development of Battery Technology has been very helpful in switching to electric vehicles. India Energy Storage Alliance has come up with a report according to which the EV battery market in India shall witness a minimum CAGR of 36 percent by 2026. This firm growth rate reflects a concurrent focus on indigenous battery technology development and reduced dependency on imports. 

Then we have the opportunity for job creation: The total EV industry is likely to generate a huge job pool; it is thus estimated that there will be 10 million direct and 50 million indirect jobs by the year 2030, according to IVCA-EY-IndusLaw reports). This, in effect, would therefore mean a huge impact on the Indian economy.

EV Financing: According to Niti Aayog estimates, by the year 2030, the volume of the EV financing market is likely to jump up by a massive US$ 50 billion. This spurt in investment shall help further nurture and expand the EV sector.

There is a promising future with regard to electric vehicles in India but with a hidden challenge too. While 30% of the country's auto component imports, costing USD 20.3 billion in 2022-23, are sourced from China, the tectonic shift toward EVs could actually increase this dependence, since China controls the global EV component supply chain. Under these circumstances, India has a pressing need for increasing its holistic approach. While domestic R&D efforts are commendable, the vision of the government seems to be short-sighted to not include the primary sector in its EV policy. For a stable EV future in India, it is necessary that government promotes public and private funding in the mining sector to exploit recently found battery manufacturing resources like Lithium in J&K's Reasi district.

Investment and Infrastructural Development: Building the Ecosystem

The success of EVs will be as good as the infrastructural development. With increasing EV Charging networks it has been a phenomenal support to provide an easy adjustment for the commuters.  Private companies are collaborating with government stakeholders to make sure that a robust network of EV charging stations is established across the country. For example, the 2500+ Ather grid network, Ather makes it easy for commuters and decreases their range anxiety, and the Tata Power network too, is expanding its presence to serve increasing demand. Then comes the EV Highways, the government's plan to create EV highways along the Golden Quadrilateral, a key national highway network of India that includes Delhi, Mumbai, Bangalore, and Chennai, showcases its commitment towards long-distance EV travel. This would bring in much-needed intercity connectivity for EVs.

What makes Indian EVs successful is the ingenuity that goes into their making. Take, for example, PRAYAAG, which was acquired by the Arren Group—what that can do is only indicative of the kind of revolutionary innovations India is capable of, by achieving the energy strategy application. Their Energy Strategy application provides superior power per atom as compared to any other available traditional options such as sodium ion or aluminum air; they are nothing but a quantum jump over the present batteries. Another includes AI-based features like Tata Motors' regenerative braking and voice recognition systems among other established players. 

Way ahead: observing the EV industry's potential

The other decision of the government to permit 100% FDI in the EV sector is also a well-calculated move. This inflow of foreign capital paves the way for greater innovation and technology transfer that can propel India's EV industry towards global leadership. With this, the government tagging EVs as a "sunrise industry" depicts that the sector has huge potential according to them. It makes allowances for venture capitalists and angel investors to look into the EV sector with the promise of high returns. With India’s economic calculus falling into alignment with EVs, the challenge to shift towards cleaner energy while making it financially and diplomatically viable remains in the centre stage to get addressed.