Electric Vehicles in India

General Studies Paper -3

Context: There is a media highlight that the unsold electric two/three-wheeler vehicles will not be able to claim subsidy after expiry of Faster Adoption & Manufacturing of Electric Vehicles (FAME) II.

Market Growth and Potential of Electric Vehicles in India

• India is witnessing a significant shift towards electric vehicles (EVs), driven by the government’s ambitious targets and increasing consumer awareness about the environmental benefits of EVs.
• India has set a target that by 2030, 80% of two and three-wheelers, 40% of buses, and 30 to 70% of cars in India will be electric vehicles.
• India offers the world’s largest untapped EV market, especially in the two-wheeler segment.
• It is expected to be worth around at least ₹475 billion by 2025.
• The Economic Survey of 2023predicted that India’s domestic electric vehicle market will see a 49% Compound Annual Growth Rate (CAGR) between 2022 and 2030, with 10 million annual sales by 2030.

Challenges associated with the EVs in India

• High Initial Cost:The upfront cost of EVs is a significant barrier to their adoption. Over 60% of consumers believe that an EV is beyond their budget.
• Lack of Charging Infrastructure: The lack of adequate charging infrastructure is a major hindrance to the mass adoption of EVs.
  • Compared to traditional petrol stations, charging stations are harder to find, normally limited by investment costs and difficult infrastructure development.
• Reduced Allocation:The government has ₹1,500 crore right now for disbursal from the revised estimate of nearly ₹4,807 crore allocated in FY24 for FAME schemes.
  • It has reduced the allocation by around 44% to ₹2,671 crore for FY25. Because of this cut, a slowdown is expected in the adoption of EVs in India in FY25. Last year too, the government slashed the incentive from ₹15,000 per kWh of battery to ₹10,000 per KWh from June 1, 2023.
• Battery Technology and Raw Material Availability:It is anticipated that there will be a shortage of nickel, and scaling up lithium production would be a challenge, leading to supply shortage that may cause manufacturers to use lower-quality mineral inputs, adversely affecting battery performance.
• Uneven Electricity Distribution:The issue of power shortage in India, especially in villages and smaller towns, can affect the EV switch on a large scale.
• Limited Choice and Performance of EVs: There is a lack of high performing EVs in the market, and the choices available to consumers are limited.
• Service and Repair Options:Consumers have concerns about the availability of service centres and repair options for EVs.

Government Initiatives

• FAME India Scheme:It was launched with a budgetary outlay of Rs. 10,000 crore for a period of five years starting from April 1, 2019.
  • It aims to promote hybrid/electric technology in transportation to reduce dependency on fossil fuels and address issues of vehicular emissions.
• Production Linked Incentive (PLI) Schemes:The government has launched PLI schemes for Advanced Chemistry Cell (ACC) and Auto and Automotive Components to boost the manufacturing of EVs and their components.
  • The budgetary outlay for the ACC PLI scheme is Rs. 18,100 crores, and for the Auto and Automotive Components PLI scheme, it is Rs. 25,938 crores.
• Tax Exemptions and Subsidies:The government is offering subsidies for purchasing electric vehicles.
  • A tax exemption of Rs 1.5 lakh is also given for people buying electric cars on loan.
  • The GST for the purchase of EVs is set at just 5% with zero cess.
• Infrastructure Development:Under the FAME scheme, the government has been trying to improve the infrastructure for electric vehicle manufacturing in the country.
  • There is also a plan for 22,000 EV charging stations to be set up by Oil Marketing Companies across the country.
• Battery Swapping Policy:In the Union Budget (2022), a battery swapping policy was announced as an easier way to charge EVs.

Conclusion

• The transition to electric vehicles is a key component of India’s strategy to reduce its carbon emissions and achieve its climate goals.
• While there are challenges to overcome, the potential benefits of this transition – in terms of improved air quality, reduced dependence on fossil fuels, and opportunities for economic growth – make it a journey worth pursuing.