India is projected to become the third largest automotive market by 2020. However, it currently has one of the lowest electric vehicle (EV) penetrations in the world; making it an obvious market for future EV growth. Currently, the EV industry is at an early stage – comprising less than three percent of total vehicle sales but projected to grow at a double-digit rate for the coming years. More than 90% of electric vehicles sold are low-speed two-wheelers. Most existing electric vehicles use lead-acid batteries, however, now the market is moving towards lithium-ion batteries.
The Faster Adoption and Manufacturing of Electric and Hybrid vehicles scheme (FAME) by the Government of India is game changing and has started showing results in recent years. FAME was announced in 2013 to promote the manufacturing of electric and hybrid vehicle technology, with initial plans shaped till 2020. The scheme’s focus has been on four areas: technology development, demand creation, pilot projects and charging infrastructure. Phase-1 of FAME commenced on April 1, 2015 and was extended till March 31, 2018. According to the Government of India as of August 24, 2018 around INR 264 crore (US$ 37 million) worth of incentives were given out and a total of 226,557 vehicles benefited from the scheme. During 2017-18, 47,912 two-wheelers, 2,202 three-wheelers, 185 four-wheelers and 10 light commercial vehicles were supported under the FAME scheme. The major beneficiary in FAME 1 has therefore been those interested in two wheelers; now we see a visible shift and change in the second phase of the FAME 1
In March 2019, the Indian government announced an outlay of INR 10,000 crore (US$ 1.43 billion) for FAME 2 to boost the number of EVs in India, a phase set to run for 3 years. INR 1,000 crore (US$ 143 million) has been earmarked specifically for setting up EV charging stations in India. The project will incentivize the purchase of 7,090 electric buses with an outlay of INR 3,545 crore (US$ 500 million), 20,000 hybrids with INR 26 crore (US$ 3.7 million), 35,000 four-wheelers with INR 525 crore (US$ 75 million) and 500,000 three-wheelers with INR 2,500 crore (US$ 359 million). FAME 2 will also offer incentives to manufacturers to invest in developing EVs and its components, including lithium-ion batteries and electric motors in India.
According to FAME calculations, Gujarat is the Indian state with the second-largest number of EVs, following Maharashtra. The state government is providing additional subsidies for EVs by linking these to social benefits, such as a special subsidy to school and college-going students to purchase electric two wheelers and people with disabilities given an additional subsidy for buying EVs. Similarly, schemes are designed to give incentives to auto-rickshaw drivers to move to battery-operated three-wheelers. For the transport of school children, battery-operated vans are given special financial assistance to increase the safety of their commute, in addition to controlling noise and air pollution.
On June 18, 2019, the Ministry of Road, Transport and Highways for the Government of India issued a draft notification proposing all electric vehicles to be exempt from paying road tax for vehicle registration. The proposed exemption of road tax will apply to all categories of vehicles – two-wheelers, three-wheelers and four-wheelers sold in India. However, it will be only implemented if it gets converted into a final notification.
In June 2019, the National Institute for Transforming India (NITI Aayog) advocated the sale of only electric vehicles in India after 2030. Considering the air pollution issues in India, the central government is also planning to sell only electric three-wheelers from April 2023 and electric two-wheelers under 150cc capacity from April 2025 onwards. Additionally, the Indian government is pushing the adoption of EVs to bring down its oil imports and curb pollution so it can meet its commitments under the Paris climate agreement.
There are clear future prospects for EVs in India. However, the country must develop skills and capabilities in manufacturing lithium-ion batteries whilst it also builds a robust charging infrastructure. The benefits of battery-operated EVs are significant, including reducing urban heat island impact, avoiding contribution to air and noise pollution and being cheaper to run throughout its lifecycle. As such, it is clear that India’s automobile paradigm is shifting to e-mobility in a firm and steady way.