In 2017, the Union Minister of Road Transport and Highway, Mr. Nitin Gadkari, announced that he would “bulldoze” traditional automakers into switching to alternative fuels. This was taken as a clear indication that the Central government would prioritise electric vehicles, and some media outlets interpreted it as a call for 100% e-mobility in the country by 2030.
The announcement was met with skepticism by most automakers, as they felt it was too short a period to develop electric alternatives to their existing products and revamp their manufacturing lines. The target was then revised by the Ministry of Power to 30% by 2030 in March 2018 (30% of all new vehicles sold).
Such revisions and a less-than-ambitious target erode confidence amongst investors and automakers alike. Both groups invest millions of dollars into developing new technologies with the primary motivation of healthy returns and profits. The absence of a clear target set under a nationally binding policy weakens their incentive to fund research in electric vehicles because of the uncertainty surrounding the future market share of a new technology.
The lack of a binding target also leaves room for the auto manufacturers to dictate when it would be convenient for them to switch over – which may or may not be soon enough for India’s climate commitments. There have been calls for the market, and not the government, to decide when and if EVs should be promoted over ICE vehicles. This is because most automakers are reluctant to re-tool their assembly lines and re-train their workforce to manufacture EVs unless there is strong demand from the end customer. The switch is time and capital intensive, which under current economic conditions will not be a priority.
Moreover, apart from fuel efficiency, most customers purchase vehicles based on two important factors: upfront purchase cost and resale value. On both, a sub-five lakh-rupee car petrol or diesel car, or a sub-one lakh-rupee petrol two-wheeler, are still a better buy for the majority of customers despite erratic fuel prices. The vehicles can also be serviced at independent garages, as they usually are – which is not yet possible with the electric powertrain.
Additionally, the absence of a national EV policy paints the Central government’s commitment to e-mobility in a bad light. India does have the National Electric Mobility Mission Plan (NEMMP), which aims to enhance annual EV sales across the country through subsidies, pilot projects and expanding the network of charging infrastructure. The NEMMP envisions that the steps will lead to better sales by augmenting EVs’ public visibility and thereby attracting customers.
Yet, data suggests that out of the 23.07 million vehicles sold in India in 2019, only about 156,000 – roughly 0.01% – were EVs. In terms of the country’s 1.3 billion-strong population, its EV market is still very small. When inevitably compared to the Chinese market, which is the world’s largest EV manufacturer and buyer, the figures look even worse as China added 1.21 million EVs (8X that of India) to its fleet in 2019 despite its government scaling back incentives. Clearly, the NEMMP so far has had little impact.
Also, on the international stage India has reiterated its commitment to global climate action at key events, such as the UN Conference of Parties in December 2019. Since inland transport is intricately related to economic growth and is hugely carbon-intensive, adopting a national EV policy to slash the sector’s emissions would greatly enhance India’s credentials as a major economy that is committed to a sustainable post-pandemic recovery. Most importantly, a clear roadmap would be a tool to measure annual progress and against which the Central and state governments could be held accountable.
At this point a market recovery back to pre-pandemic levels is top priority for automakers across all vehicle categories. The relatively cheaper prices of gasoline and diesel – at least on the international market – may also again boost ICE vehicle sales. Yet, at the same time, power tariffs from solar and wind farms are at record lows and are expected to get even cheaper through to 2030. This would progressively lower the running costs of EVs every year, while improvements in battery technology and EVs’ driving range will soon quell all objections to their everyday practicality. Therefore, it is the right moment for policy makers to declare a clear, comprehensive and nationally-binding EV policy that cements India’s commitment to e-mobility.