India has made a strong commitment to e-mobility. The country's EV transition is gaining traction due to demand creation, State EV policies, and domestic manufacturing. Concurrently, the market for e-mobility in India is growing, facilitated by policy, captivating, and improving economics, and the advent of new business models and investment opportunities.
The decarbonization of the transport sector in India is at the center of global climate change reduction. Adding 300 million new vehicles to its roads by 2040 could lead to a four million barrel per day increase in oil demand.
The Government has already pledged that by 2030, 30 percent of all new vehicle sales in the country will be EVs, a policy goal that has several strategic advantages involving decreasing carbon emissions and improving energy security. In support of this pledge, it has introduced important initiatives at the national and State levels, not least its flagship EV scheme - Faster Adoption and Manufacturing of Electric Vehicles (FAME), which provides purchase subsidies to consumers.
For India to keep pace with its ambitions, however, it will need substantially more foreign direct investment. Presently, there is a major gap between the investment levels in EVs and the batteries required to remain aligned with net-zero scenarios and existing investment levels. But there is also strong optimism, including among investors, around India's EVs sector and its growth potential.
Policy framework driving the EV adoption
India's recent policies have been successful in incentivizing consumer demand for electric two-wheelers (e-2W) and three-wheelers (e-3W), with electric four-wheelers (e-4W) and e-buses also scaling up.
E-mobility offers a viable alternative in addressing these challenges, when packaged with innovative pricing solutions, appropriate technology, and support infrastructure; thus, it has been on the radar of the government of India.
The government of India has undertaken multiple initiatives to promote manufacturing and adoption of EVs in India. With support of the government, EVs have started penetrating in the Indian market. However, availability of adequate charging infrastructure is one of the key requirements for accelerated adoption of EVs in India.
Under the FAME II guidelines, incentives are available only for EVs with a predefined level of localization. The goal is to promote domestic component manufacturing. The industry exhibited promise, with OEMs introducing a range of new EV products.
The government established the National Electric Mobility Mission Plan 2020 (FAME India) to accelerate the use and manufacturing of (hybrid and) EVs in India. The transition to clean transportation is critical because automobile pollution is wreaking havoc on the environment.
The National Electric Mobility Mission Plan (NEMMP) aims to invest approximately ₹14000 crore in R&D initiatives and emerging technologies, to accelerate the adoption of EVs, and to build critical infrastructure through public-private partnerships.
To seize this golden opportunity, several State governments are stepping up to declare their respective State EV policies, which are aimed to encourage the adoption and manufacturing of EVs.
India's approach to e-mobility transition
The economics of EVs are improving, driven by a reduction in battery prices and advancements in vehicle efficiency. The public and private sector investments and initiatives in the EV ecosystem are accelerating capital deployment toward India's e-mobility transition.
In a report titled 'Mobilizing Electric Vehicle Financing in India', GoI's think-thank NITI Aayog considers that the role of finance is critical for the holistic and comprehensive growth and development of India's electric vehicle industry and a 'just transition'.
As per the report, the quantum of finance required for this EV adoption scenario is considerable. Between 2020 and 2030, the estimated cumulative capital cost of the country's EV transition will be ₹19.7 lakh crore ($266 billion)—across vehicles, electric vehicle supply equipment (EVSE), and batteries (including replacements). The estimated size of the annual EV finance market will be ₹ 3.7 lakh crore ($50 billion) in 2030
"India has got an aspirational approach to e-mobility transition", said Sudhendu Sinha, Adviser (Infrastructure Connectivity – Transport and Electric Mobility) - NITI Aayog, at a webinar organized by Emerging Technology News (ETN) on 'Investing in India's EV Transition'.
The aim is to bring behavioral changes related to the adoption of EVs over ICE-powered vehicles for transportation.
With regards to this purpose, the GoI has introduced several schemes aimed at strengthening public transportation electrification as well as micro-mobility, which has developed as an important driver for e-mobility transition in the country.
Mr. Sinha considers investment as a key aspect that will impact and drive manufacturing as well as the adoption of e-mobility.
He said, "We are trying to solve a few puzzles on e-mobility before we reach at a point where EV adoption becomes a natural transition. We are trying to find finance partners, and source international climate funds with the idea of a specific commitment to reduce the cost for borrowers. By the end of this financial year, we should be able to take care of the finance part of e-mobility adoption."
"We, at NITI Aayog have planned out various initiatives and programs with regards to EV battery manufacturing, Advanced Cell Chemistry (ACC), recycling, and accelerating indigenous production with Production-Linked Incentives (PLI) scheme for manufacturers to scale sustainable manufacturing and lower down the total cost of ownership (TCO) for the consumers as well."
Awareness and innovation go hand in hand. It is important to bring a radical transformation and it can only be done with adequate awareness as well as technological innovation to back the transition.
Speaking on India's ambitious plans to transform into a global hub for EV manufacturing, Mr. Sinha said: "India wants to be the manufacturing hub of the world regarding EV manufacturing, and it is only possible if our standards and specification are at par with global standards. Sustained investment is an important prerequisite. There is tremendous acclaim for India for sustainably taking e-mobility."
The government of India's flagship initiatives FAME II, PLI for ACC batteries and automotive manufacturing alone total ₹0.6 lakh crores ($7.5 billion)
Stressing upon the importance of the public and private sector investments and initiatives in the EV ecosystem, he said: "the entire ecosystem of EV must be driven by private players. Better business models must be worked out with the support of the government."
A good amount of collaboration is required as we are moving people from their preferred choice, which should be an ideal choice of adopting EVs for transportation. The awareness must be an integral part and should be driven at regular periods, Mr. Sinha further added.
"It is not the government's efforts alone, but it's a collective effort of different stakeholders, private players, and business corporations coming together with a common commitment towards driving the e-mobility."
As per Invest India Report, India's EV market is projected to be worth $150 billion by 2030. Central policies such as FAME II, PLI-ACC, and PLI-Auto have established a strong environment for a globally competitive EV ecosystem in India. Around 18 Indian States have also added new incentives to the mix that can help India strengthen demand for e-4W and e-buses as well as host mega factories.
Incentives, investment, and innovation are driving India's swiftly increasing EV adoption. Finance will be crucial to accomplishing scale.