India, which overtook Germany to become the fourth largest automotive market in May 2022, is embracing the e-mobility revolution and taking concrete action to electrify its transport sector, particularly roads. The flagship scheme Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) II has provided the much-needed impetus to electric vehicle sales in the country. State governments, too, have made noteworthy progress in establishing a supportive policy landscape with close to 25 states that have notified or drafted EV policies, focusing on demand and supply side incentives to accelerate sales, manufacturing, infrastructure and investments.
These efforts have yielded good results, with EV sales surging 163% in 2021, a three-fold increase from the previous year. While the sales of electric two-wheelers (E2W) in overall two-wheeler sales have already reached more than 3%, the share of registered electric three-wheelers (E3W) in total three-wheeler sales has surpassed 50%. The trend is forecast to keep pace with the current growth with a projected CAGR of 49.79%, leading to annual sales of 191.5 lakh EVs by FY 2030 (as per JMK Estimates). E-two-wheelers alone will account for more than 80% of total EV sales by FY 2030. The lowered upfront costs, their uptake in the delivery segment, and the continued national and state-level subsidies are the likely factors contributing to these sales.
While India’s initial journey towards e-mobility has been encouraging, the current rate of growth of EV sales shows that India is projected to witness sales of 5 crore EVs by FY 2030. However, a report by the Government of India’s think tank NITI Aayog, in partnership with Rocky Mountain Initiative (RMI) India, analyses that if FAME II and other measures are successful, India could realize EV sales penetration of 30% of private cars, 70% of commercial cars, 40% of buses and 80% of two and three-wheelers by 2030. These figures have often been quoted by the Minister of Road Transport and Highways of India, and are considered synonymous with a national vision. When this is converted to absolute numbers, it amounts to 8 crore EVs by 2030. This shows that at the current growth rates, India may not realise these EV sales penetrations, indicating the need for more policy and industry action. India could be 40% behind this vision. Moreover, the required charging infrastructure, in terms of public and semi-public charging stations, to support 8 crore EVs, is close to 39 lakh. Currently, the number of charging stations is too less, of the order of approximately 32 EVs per charging station in India. There has been little movement on establishing charging stations under the FAME schemes, and there is not enough focus on this for the future. For example, not more than 3 or 4 states in India have announced any defined targets in terms of the number of charging stations to be established by their respective policy periods. The targets for EV adoption under different state EV policies are not well aligned with the sales forecast envisaged by Niti Aayog, they have varying timelines and with different numbers of EVs, some states with the percentage of new vehicle registrations to be EVs and others with the absolute number of EVs to be added on roads.
In order to improve India’s chances of meeting these sales projections by 2030, this report makes the following recommendations:
- Targets and incentives across all the State EV Policies should be consistent with the national EV sales projections and incentives.
- Focus on high-visibility cases of the fleet for 100% conversion to electric, such as government fleets and vehicle aggregator fleets.
- Define clear targets for charging stations that pave the way for the establishment of charging stations in different places – petrol pumps, malls, highways, workplaces, residential apartments; capping rental costs for public charging stations; and fixing some percentage of home and workplace charging as EV ready.
- Financing by Banks/State Governments/NBFCs should push for the inclusion of EVs under priority sector lending, the opening of special concessional credit lines for EVs, and tax rebates on EVs.
- Zero-Emission Vehicle (ZEV) adoption to be made mandatory, at least by some percentage, for commercial and government fleets.
It is therefore required that the industry and central and state governments need to bring in key resources, technology, financing, and incentives together to create a self-sustaining EV ecosystem in the country. The future looks promising indeed for the EV sector in India on the back of strong EV sales and accompanying charging infrastructure in the next 7-8 years.
The Indian e-mobility sector has witnessed near-explosive growth in 2021, a covid pandemic notwithstanding. The pent-up demand for new vehicle purchases and the recognition of the cost benefits of electric vehicles along with continuous fuel price rise led to a 200% surge in their sales over 2020. The future also looks bright for this sector as the country is forecast to witness sales of more than 5 crore EVs by 2030 as per this report’s estimates.
This huge EV sales projection however demands an equitable availability of supporting infrastructure. We forecast the number of charging stations required by 2030 to be ~20.5 lakh. Adequate charging infrastructure is the key prerequisite that will define the adoption trends of EVs in India. While EVs are being worked upon by major OEMs, an ecosystem for the development of chargers, charging stations, and other services is steadily being built in India. EV policy incentives of various states as well as central initiatives, including the introduction of FAME schemes along with other factors like lowering of GST rates, have already been able to set up an initial base for a level playing field.
However, a lot of efforts still need to be undertaken to encourage the uptake of EVs in India. The key stakeholders are being encouraged to drive the market growth on the back of proper regulatory mechanisms and industry initiatives and through shifts in market design, business models, and financial structuring. At a policy level, conversion of 100% of the government fleet to EVs should be a must-have mandate followed by mandating at least some percentage of the vehicle aggregator fleet to electric to initiate the momentum of having an increased number of EVs on roads. The state and national EV policies working in consortia is the need of the hour. In order to encourage the adoption of EVs for the general public, financing by banks at lower interest rates; inclusion of E-Cars, meant for personal use, under the FAME scheme for incentives; and availability of a greater number of charging stations is a pre-requisite. For EV OEMs, opening up of special concessional credit lines and introducing additional taxes on ICEs are some of the immediate measures that will offer them cushioning against the higher investment costs that this sector demands.
India stands a good chance of converting its ICE vehicles to EVs. Given the prevalence of small vehicles such as 2Ws, 3Ws, economy 4Ws and small goods vehicles in the country, India has an opportunity to take a leadership role in the electrification of small vehicles. Add to this, huge oil import bills which the country is estimated to save every year, with the conversion of over 3.99 crore two-wheelers in India to EVs. There is a real possibility of getting this done, provided there is enough innovation by the industry, a policy regime that encourages access to the latest technologies, and a sincere effort by the Indian industry to achieve global competitiveness.