India has declared its ambition to become a global leader in manufacturing and sales of electric vehicles in public and private transport. If India achieves its goal of accelerating EV adoption by 2030*, it will lead to a cumulative lifetimes’ worth of oil and CO2 savings, amounting to 5.4 million tons and 846 million tons respectively, deployed over vehicles’ lifetimes. For this to become a reality, India urgently needs a holistic policy approach that addresses the automotive sector’s concerns, creates market rules to build the new energy infrastructure, preserves and creates jobs, and fosters demand to accelerate technology adoption in order to fully capture the available economic opportunity.
A recent report “Policies for India’s global leadership on EV adoption” by the World Business Council for Sustainable Development (WBCSD) outlines 18 actionable policy recommendations that can accelerate India’s transition to an electric mobility future. Among these, the report focuses on the potential of electrifying commercial fleets – for employee transport, ride-hailing, home deliveries and commercial and industrial applications. This is the fastest growing segment of vehicles on Indian roads, and the economics for electrifying these vehicles is improving quickly.
Here’s what India can do to electrify this segment –
A) Ride hailing transport
The emergence of innovative app-based ride hailing services has made it a preferred mode of transport across India. Ride-hailing cars, representing 1.2% of the total car stock in India (as of 2019), contribute 6% of the total emissions caused by cars. With such high-utilization rates and scope for expansion, ride-hailing becomes an ideal segment to transition to EVs.
While there are policy and regulatory support in favor of this, uncertainties prevail for the growth of e-bike taxis and rentals in India, and more can be done to enhance ride-hailing driver incomes.
Recommendation 1: Legalise e-bike taxis and streamline licensing of e-bike rentals across states
- Electric bike taxis should be legalized across all states (currently legal in only 14 states) and licensing and permit processes should be eased. Cost of e-bike licensing, which is as high as 25% of the vehicle cost, should be brought down to encourage its sales.
- State governments should issue consistent, supportive policies enabling commercial application of e-bikes used for rental, taxi and pooling options. City authorities and planners should synthesize e-bike taxi operations at the city planning stage to improve links with public transit by providing designated pick and drop spots, parking and chanrging options, and digital integration with public transport for ticketing and payment.
- License issuing for e-bikes should ne digitized, have clear guidelines in all states, and be processes within a stipulated time of one month.
Recommendation 2: Waive toll fees and airport charges for EV taxis
Toll fee and airport charges equate 15-20% of a taxi driver’s income. This is a huge deterrent for e-taxi drivers, who already find it hard to afford EVs due to their high upfront cost. Waiving toll fees and airport charges will reduce operating cost and encourage ICE taxi drivers to switch to EVs.
B) Commercial fleet for deliveries
India is ordering more goods online now than ever before — and demanding that those goods arrive at a lightning pace. In the business-as-usual scenario, the carbon footprint and the congestion caused by urban logistics globally is expected to grow continually and increase by 36% and 21% respectively, until 2030. There is huge scope to electrify the commercial fleet, and many companies like Zomato, Amazon and Flipkart are already committing to convert their delivery fleet to EVs.
However, there are challenges related to EV adoption in this use case, such as a lack of EV options for heavier delivery vehicles; permit concerns related to cross-sector usage of the same vehicle; and concerns related to the licensing regime of 2Ws vehicles, and these challenges require policy and regulatory interventions.
Recommendation 1: Experiment with daytime entry of electric SCVs and MCVs into cities for a timebound period.
- This willreduce the turnaround time for delivery fleets, which is a key performance indicator, encouraging them to switch to electric variants. It will offer governments an instrument with greater flexibility than more firmer measures such as LEZs. The resultant increase in demand for EVs in this space can incentivize OEMs to develop more such vehicles and to fleet owners to pilot them.
Recommendation 2: Allocate FAME funds to subsidize certified retrofitting kits for electric SCVs and MCVs for a timebound period.
Under FAME II, incentives are available only for new sales of 2 and 3 wheelers, which in 2019 was a mere 10% of the total 2 and 3 wheeler sales in India. Retrofitting kits to convert ICE to electric vehicles will target the remaining 90% of the market.
- Allocate funds to subsidize retrofitting kits for SCVs under FAME. It can assume the same INR 10,000 (USD $138) per kWh value for subsidies, which can be granted to retrofitting companies developing the kits, similar to OEMs for newly-fabricated EVs.
- Institute fiscal measures and incentives for certified retrofitting kits for heavier delivery vehicles (SCVs, MCVs and HCVs). These include reducing the GST charged on retrofitting services from 18% to 5%, bringing it on par with GST on new EV sales.
- Waive registration charges on retrofitted EVs, the same as new EVs, to encourage more consumers to use retrofitting kits.
Recommendation 3: Allowing permit flexibility for usage of e-2Ws across use cases Since EVs have a high upfront cost, in the commercial space they need to run at highest utiisation to benefit from low operational costs. Allowing cross-industry use of e-2wheelers across people and goods movement would encourage people to own EVs, and allow dual revenue earnings from passenger and deliveries transport.
*India has planned EV sales penetration of 30% of private cars, 70% of commercial cars, 40% of buses and 80% of two- and three-wheelers by 2030