NITI Aayog And TIFAC Launch Report On Future Penetration Of Electric Two-Wheelers In Indian Market

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NITI Aayog and TIFAC launched a report titled ‘Forecasting Penetration of Electric Two-Wheelers in India’, on 28 June.

Using a tool made by NITI Aayog and TIFAC, eight scenarios have been developed for analyzing the future penetration of electric two-wheelers in the country.

In an optimistic scenario, the report forecasts a 100% penetration of electric two-wheelers in the Indian market by FY 2026–27. In another scenario, which is technology driven and where current incentives are withdrawn by 2024, the report predicts 72% penetration by 2031.

During the launch of the report, NITI Aayog CEO Amitabh Kant said, “This report provides a much-needed tool to the industry, researchers, academicians, and policymakers to analyze and respond to various scenarios. It can be replicated easily in other segments too, such as four-wheelers, without any hassle.”

The eight scenarios considered are:

  1. Challenged Diffusion
  2. Performance Driven
  3. Low Battery Cost
  4. Technology Driven
  5. Incentive Driven
  6. Battery Cost Challenged
  7. Same Performance
  8. Optimistic

The future scenarios have been constructed on the basis of three major factors that influence the market penetration of electric two-wheelers: (i) demand incentives (ii) cost of battery (iii) vehicle performance in terms of both range and power.

Four broad constraint levels have also been identified for the eight scenarios, in terms of installed vehicle manufacturing capacity and available charging infrastructure: (i) full constraint (where both vehicle production and charging infrastructure are constraints) (ii) production constraint (where only vehicle production is a constraint) (iii) charge constraint (where only the charging infrastructure is a constraint) (iv) no constraint.

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Highlights:

  • In the ‘Technology Driven’ scenario, if an R&D programme manages to enhance the range and power of electric two-wheelers by 5% annually between FY 2023–24 and 2025–26, and by 10% in FY 2026–2027, then the penetration of electric-two wheelers may reach about 72% in FY 2031–32—even with no extension of demand incentives.
  • The sale of electric two-wheelers may cross 220 lakh units in FY 2028–29 under the ‘Optimistic’, ‘Same Performance’ and ‘Battery Cost Challenged’ scenarios. It may reach 180 lakh units under the ‘Technology-Driven’ scenario. Under the ‘Incentive Drive’ scenario, the sale is expected to reach only 55 lakh units in FY 2031.
  • If there is sufficient installed capacity of electric two-wheelers and charging infrastructure, then sale (which finally reaches about 250 lakh units) may at some point even surpass the production under the ‘Optimistic’, ‘Same Performance’ and ‘Battery Cost Challenged’ scenarios.

The report provides important insights into the required infrastructure, manufacturing capability, policies, and technology-development priorities in the area.

The scenarios can be used by government agencies, the industry, and academic/R&D institutions for evidence-based analysis of policies, market scenarios and technology development strategies.

Based on this analysis, we can conclude that India is at a crossroads and a shift to electric mobility, particularly, in the two-wheelers segment, may happen faster than anticipated. There is a positive mindset about electric mobility among the consumers and recent rise in the price of petroleum fuels has played a major role towards this shift. Public awareness about electric mobility has increased. Demand incentives increase the penetration level of electric two-wheelers. But more important issues appear to be the manufacturing cost of the vehicle which is mainly influenced by the cost of the battery. Reduced dependence on the import of electric vehicle components and sub-systems may be one of the crucial factors in enhancing domestic manufacturing capacity along with other policy-related measures.

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During the initial stage, due to the low level of electric vehicle penetration, a higher ratio of charging points to electric vehicles will be required to instill confidence in the minds of the customers. While at a later stage the absolute number of charging points should increase, this ratio may even come down. Such a scenario in any case, is expected to happen.

Apart from the policy and infrastructure-related issues, technology plays an important role in the market penetration of electric vehicles. The results clearly demonstrate how improvement in the performance of the vehicle over a period of three years, along with an improved battery can drastically increase penetration, overcoming the impacts of withdrawal of incentives. Battery cost is another important parameter and technology can play an important role in reducing the cost of the battery and other components, many of which are presently imported.

Certain aspects which have not been discussed in this report, such as resource availability safety etc. may prove to be important issues for the widespread adoption of electric mobility and technology has a key role in addressing these issues. At a certain point of time in future, there may be an appropriate ecosystem for enforcement of regulation toward electric mobility or other clean transport options. But as the
the present analysis shows, there are plenty of opportunities for accelerating adoption of electric vehicles through technological improvements and other interventions.

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