E-MOBILITY: Future of Transport in India

Driven by the Sustainable Development Goals (SDGs) and Paris Agreement, the thrust to declutter the highly polluting transport sector has made exceptional changes across the world. With climate change impacting the country faster than expected, India is in the forefront of this initiative and is in top gear with 'The National Electric Mobility Mission Plan (NEMMP) 2020'. The objective is to achieve national fuel security and reduce climate impacts by promoting hybrid and Electric Vehicles (EVs) in the country. This article will extend a glimpse on the India E-mobility story, the progress, prospects, challenges and way forward for future of transport in India.

The EV story so far…

The FAME I (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India, 2015-19) aimed to encourage progressive induction of reliable, affordable and efficient electric and hybrid vehicles (xEV). By the closure of the scheme a total disbursement of about Rs 359 crore was ensured for 2.80 lakh vehicles. The total expected fuel saved with FAME I is about 50 million liters, and total CO2 reduction is about 129 million kg.

With public sector mobility in focus, the Government has initiated FAME II (2019-2022) with an outlay of Rs 10,000 crore. FAME II aims to generate demand for 7000 Electric Buses (e-bus), 5 lakh Electric Three Wheelers (e-3W), 55000 Electric Four-Wheeler Passenger Cars (e-4W) and 10 lakh Electric Two Wheelers (e-2W). As this article is being written, a total disbursement of about Rs 352 crore was ensured for 1.12 Lakhs vehicles. The total expected fuel saved due to FAME II is about 26 million Litres, and total CO2 reduction is about 59 million kg; and still counting.

At the national level, the Government has come up with a slew of initiatives for adoption of EV viz. creation of charging infrastructure, registration and parking fee exemption, license exemption for people between 16-18 years for battery operated e-2W, popularization of battery technology developed by ISRO, and so on, to encourage the general public to embrace EV.  About 12 plus states have come up with their own EV policy with a broad goal to fast-track EV adoption, to initiate investments in the state, prioritize public transport, paratransit and job creation, and they differ in terms of targets, as well as demand and supply side incentives.

Where EV fits the best..

As states started considering EV buses for long distance services between cities and the automobile manufacturers have lined up a number of models for personal vehicles, the focus is now on last-mile connectivity. With the on-going pandemic, intra-city transportation has become crucial as doorstep deliveries have increased multi-fold and EVs are a preferred choice in the line of business. The last mile operators have gone the extra mile and have ensured that turnaround times remain on par with ICE vehicles and also set up battery swapping stations to ensure that riders do not lose precious time and customers receive their packages as expected.

Statistics suggest that EV can operate with less than 20% running cost of an ICE (Internal Combustion Engine) vehicle. Low cost of ownership as well as O&M costs have made EV an attractive proposition for intra-city movements, whereas ICE vehicles require a host of additional expenses, including fuel expenses. In addition, EVs reduce emissions by 12 tonne per 100 km making it a sole winner for last-mile commuting and cargo segments. EVs are being successfully employed as feeder service for Delhi Metro and Cochin International Airport and are being piloted in many locations, across the country.

Financing for EV

A paradigm shift into e-mobility can only be achieved through converting public commuting facilities to EV. Though FAME I and FAME II might have kicked-off the revolution, there is a lot that has to be done. As the electric buses are costlier than ICE buses, it would need funding as transport undertakings may not find the money within their budgets. Apparently, the private sector can play a vital role in closing the gap through various financing models and funding options. The World Bank in 2009 initiated the concept of Green Bonds, by which the proceeds from the securities issued by public, financial or non-financial entities will be used to finance only green projects. Green Bonds will also be another instrument for funding EV and can mobilize resources from domestic and international capital markets for investment in green projects alone. And also, for the fact that, India is the second-largest emerging green bond market behind China, upholding the potential of this financing route.

However, financing for EVs remains with a number of questions to be resolved, especially for commercial vehicles. The financing institutions have a number of challenges on the residual value and rate of technological obsolescence making it difficult to assess the risk profile for EV lending. As a result, there are a few financial institutions extending EV loans and that too marked up with shorter loan terms than ICE vehicles, higher down payments and higher interest rates.

Private investments in EV

Public-Private Partnership (PPP) for operating electric vehicles, especially buses, will help governments deploy more such zero-emission vehicles in the immediate future. The Gross Contract PPP model for running electric buses will gradually gain momentum among state transport undertakings. The central government's push through the FAME II has led to at least 4,580 electric four-wheeler vehicles, including electric buses, operating during FY21. PPPs may offer a promising way forward and accelerate the development of charging infrastructure by tapping the private sectors' financial resources and professional skills. To put the need of charging stations in perspective, by 2030, Delhi alone is estimated to have around 250,000 high-speed charging stations, assuming a 25-percent EV penetration into an approximate car population of 8 million, needing an investment of about USD 1.25 billion (about Rs 9,000 crore).

Massachusetts has come up with a PPP engagement by which, in addition to installing and maintaining electric vehicle charging stations, they are developing 'e-mobility hubs' - locations that combine charging stations for public use, electric vehicle car sharing, and, in some cases, electric scooter and bike rental. A partnership like this can enhance EV penetration as the private party can offer resources, expertise or productivity that the public partner is lacking. These Hubs can help advance SGD goals viz. lowering carbon emissions and also achieving climate change solutions. They are also trying to include a car-share component that can help advance the public's general acceptance of electric vehicles.

Investing for EV infrastructure

As we are in the nascent stage of the EV evolution, auto majors are very much into setting up research, product development and manufacturing units for which substantial investments are required for development of automobile platforms and battery technology. Expert assessment reveals that the EV market in India will be worth USD 200 billion by 2030 if India maintains steady progress to its 2030 target. Data reveals that a large number of financial deals and the funds have been identified, earmarked and / or invested for EV manufacturing. Total investment done by e2W, e4W, EV component makers, electric commercial vehicles, and last-mile delivery entities was of the order of INR 25,000 crore till July 2021. The funding in the seven months of 2021 was recorded at INR 1652.15 crore in India's EV. These would necessarily entail an investment of over USD 180 billion in vehicle manufacturing and charging infrastructure. However, investors are still finding it difficult to invest more money in the EV market due to lack of charging infrastructure, import dependence on a few EV components, lack of financing options, and demand related challenges.

There are global brands working on an all-new electric vehicle platform for India and other global markets but the investments in the country are linked to the government laying down a clear road map and a stable policy. These brands look forward to solutions for larger concerns of availability of infrastructure, charging stations, battery production and swapping infrastructure needs to be addressed. Once these concerns are addressed brands will not only introduce technology and platforms, but also manufacture EV models in India.

Challenges ahead

The challenges for e-mobility are not limited to policy implications, financing and charging infrastructure as mentioned above. There are a series of challenges to be addressed which includes but also range anxiety, higher vehicle cost, lack of service centres, lack of skilled labour, supply/value chain problems, road quality as EVs are heavier due to battery stacks, availability of power and disposal of e-waste which is an end product of EV adoption. Many of the above challenges are work in progress and nearing a logical conclusion. However, firm answers to all these pointers and fast tracking those which set targets for EV manufacturing, facilitate innovation and start-up growth and support for industry-academia partnerships can extend a substantial thrust for complete adoption of EV in the country.

Sector outlook

In the first quarter of 2021, global EV sales moved up by about 135% compared to the same period in 2020. This was driven by sales of around 475,000 vehicles in China and in around 425,000 Europe, while in the US, it was 1.75 times compared to the first quarter of 2020. The number of EV models also is increasing as well as the average driving range of new EVs has been steadily increasing. In 2020, more than 350 electric models were available and of the world's top 20 vehicle manufacturers representing around 75% of new registrations in 2020, about 15 have stated plans to widen their portfolio and scale up the production of light-duty electric vehicles. The electric heavy-duty vehicles range is getting expanded, with major manufacturers indicating an all-electric scenario in the coming years. Looking further ahead, The International Energy Agency (IEA) anticipates “healthy growth” during this decade. Based on current trends and policies, the number of E-vans, E-heavy trucks and E-buses is projected to reach 145 million by 2030. This shows that the global scenario is very bright and could help sync with the SDG and Paris Agreement over a period of time.

Though the sales of EVs in India fell about 20 per cent in the financial year 2020-21 to 2,36,802 units, in the E4W segment, the industry witnessed registration of 4,588 units, compared to 3,000 units in FY20, a jump of 53 per cent. The Indian auto industry is expected to see stronger growth in 2021-22, after recovering from the effects of the pandemic, with EV sales, especially E2W, will see positive trends.

The IEA predicts that EV sales share across all modes (including two/three-wheelers) in India is above 30% in 2030 in the Stated Policies Scenario. Reflecting the intentions of FAME II, EV deployment in India is mainly achieved through the electrification of two/three-wheelers, which would reach a sales share of almost 50%. The rate of electrification of buses and Light Duty Vehicle (LDVs) would be lower, below 15% sales share in 2030.

In the SDG Scenario, EV sales shares in India will scale up to almost 50% in 2030 across all road vehicle modes (30% excluding 2/3-wheelers). By 2030 almost 60% of all 2/3-wheelers sold would be electric, as are about 30% of LDVs and buses.

Future of transport in India

EVs are here to stay. However, the future of transport is beyond EV. Rather, it is Fuel Cell Vehicles (FCV) or hydrogen powered vehicles that would be driving the transport sector ahead. Vehicles powered by hydrogen fuel cells have already started operations in select cities across Asia, Europe, and North America. While significant technical and infrastructure challenges remain, hydrogen offers several advantages over batteries and is a more flexible source of renewable energy. Hydrogen vehicles charge 15 times faster than battery-powered EVs. Hydrogen refuelling is half as capital intensive as EV fast charging, requires about ten times less space and allows for approximately three tonne more payload, which gives FCV unmatched advantage than any other option in the transport sector.

In his Independence Day speech, Prime Minister Narendra Modi announced five key initiatives, the first being Mission Hydrogen. He outlined a vision of becoming a global leader and enabling a substantial domestic hydrogen economy. Hydrogen has the promise of transforming India from an energy-deficient to an energy-rich country. It can even make India a net exporter of energy. Hydrogen is considered one of the most sustainable fuels of the future. When it is burned, you get water vapour, with no residue or climate-harming impact. Its promise has been known for decades. But recent developments make it possible to go from hype to hope. In the immediate future, there will be an inflexion event that will catapult hydrogen from fringe to mainstream status. Kerala State has made expert groups to discuss and formulate hydrogen in its future endeavours as its sustainable energy source.

C. P. Nair

EV/FCV Enthusiast

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