India's 2030 EV roadmap - on course or not?

India's national mission for electric mobility and faster adoption and manufacturing of electric vehicles (EVs) seems to have received its much-needed shot in the arm. Thanks to a few key amendments introduced by the Department of Heavy Industry (DHI) in June 2021 to the FAME-II Scheme, the EV momentum saw a significant revival and gained pace, especially in the wake of the significant slowdown experienced due to the ongoing COVID-19 pandemic.  
 
Key Policy Changes: 
 
One of the most recent and notable amendments in June 2021 includes the extension of the FAME-II scheme until March 2024 (this was earlier valid till 2022). 
 
Other amendments in June 2021 to FAME-II included an increase in the demand incentive for electric two-wheelers (e2W) by 50% to Rs15,000 ($200 approx.) per KWh. Originally, the subsidy provided was vehicle agnostic at Rs10,000 ($135 approx.) per KWh for all EVs, including plug-in hybrids and strong hybrids, except buses. The DHI also increased the cap on incentives for e2W from 20% to 40%.

Also Read: Japan's Nissan Motor has big EV plans in India; mulls production of cars, batteries
 
The Central PSU, Energy Efficiency Services Ltd. (EESL) has also been asked to aggregate demand for 300,000 electric three-wheelers (e3W) for multiple user segments as well as aggregate demand for e-buses in cities with four million plus population (Mumbai, Delhi, Bengaluru, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat, and Pune) on OPEX (operational expenditure) basis.

This revised framework is being viewed positively by the manufacturing companies as this will provide an impetus in demand creation for e2Ws, e3Ws, and e-buses, and will eventually decrease the parity between the traditional ICE (engines) and the EVs.  
 
On April 12, 2021, DHI had also extended the validity of FAME II eligibility certificates for all the vehicle models (e2W, e3W, and e4W) approved under the FAME II scheme for availing the demand incentives. These certificates were earlier valid up to only March 31, 2021, but are now valid for one year from the issue date of the respective certificates for all approved vehicles. 
 
On May 12, 2021, the Union Cabinet chaired by Prime Minister Narendra Modi had also approved the Rs18,100 crore ($2.44 billion) National Program on Advance Chemistry Cells Production Linked Incentive Scheme (proposed by the DHI in December 2020) for battery manufacturing and storage in India. 

This was notified on June 9, 2021, and includes 50 GWh of ACC and 5 GWh of 'Niche' ACC and it is expected that a direct investment of around Rs45,000 crore ($6.06 bn) in ACC Battery storage manufacturing projects. 

The DHI had further explained certain salient features in June 2021. Incentives will be offered to companies that have been allocated an ACC production capacity (cumulative capacity for all beneficiary firms combined is 50 GWh) through the process of inviting the RFP (Request for Proposal). 

The notification provides for the imposition of a penalty in case of any breach of the commitments as submitted in the RFP, the quantum and other terms of the penalty will be provided in the RFP itself. 

The amount of subsidy to be disbursed would be calculated by using a set formula and the allocation of fund would take place year-wise as provided in the notification. Empowered Group of Secretaries (EGoS) chaired by Cabinet Secretary will monitor the PLI scheme, undertake periodic review of the disbursement of funds under the scheme, and take appropriate action to ensure that the expenditure is within the prescribed outlay. 

The PLI Scheme requires each selected ACC battery storage manufacturer to commission the manufacturing facility within a period of two years and set up an ACC manufacturing facility of at least 5 GWh limit. 

Further, the manufacturers are required to attain a domestic value addition of a minimum of 25% and then subsequently increase it to at least 60% domestic value addition within five years. The incentives will be disbursed over a period of five years and the amount of subsidy paid out will be linked to factors like the production, energy density, battery life cycles, and the levels of local value addition. Being unique and ultra-large, this PLI Scheme is likely to be the largest boost to this segment. 

Also Read: Tata Motors to launch 10 new EVs by 2025
 
Market Reactions 
 
The revised FAME-II scheme has received extremely positive remarks and statements from various market players and industry bodies like FICCI & Society of Manufacturers of Electric Vehicles (SMEV).

EV manufacturers like Hero Electric, Revolt Motors, Okinawa, Ather Energy, etc. EV manufacturers Ather Energy, Okinawa, TVS Motor Company, and Ampere Vehicles (a Greaves Cotton unit) have already announced a revision in their prices for e2Ws in light of the modified FAME-II scheme and other EV manufacturers like Mahindra Electric, Hyundai, Tata Motors, BYD, especially in the e2W (electric two-wheelers) and e3W (electric three-wheelers) segments, have either already revised their pricings or are about to follow suit, in order to maintain competition and to pass on the benefits to the consumer. 

Moreover, in a recent closed-room event, the government has also stated that states like Andhra Pradesh, Telangana, Kerala, and Goa, have already placed their orders for EVs (especially, e2W and e3W), gaining traction with EESL. Similarly, Mumbai and Pune are also quickly gearing up to replace their BEST buses with e-buses.  
 
While some of the sections may believe that e4Ws (electric four-wheelers) have been kept out of the recent FAME-II amendments, however, there are various other actions taking place which benefit e4Ws - for example, a number of states have done away with the payment of registration charges for e4Ws (this in itself is a large sum and will attract e4W buyers).

The PLI Scheme will boost manufacturing and shall start showing results in a couple of years (some of the global players like Tesla are already in the process of setting up domestic plants and other existing players are already switching gears towards EV manufacturing and have announced their plans of a complete switch from ICE), charging stations and charging points are being installed all over India (although the pace can be faster, with the country's geography, this may take some time). 

In the FY 2020-21, the overall sales of EVs decreased by 19.9%, from 295,683 units in FY 2019-2020 to 236,802 units in the FY 2020-21 where the e2W sales dropped by 6% and the e4W segment witnessed an astonishing increase of 53% from 3,000 in FY 2019-2020 to 4,588 units in FY 2020-2021. 

It is evident that the government is taking a step approach and is targeting the e2W and e3Ws first as EV adoption in these sectors is easier, faster, and more economical. Also, in a country like India, where the number of e2Ws and e3Ws is very large, a push for this segment is likely to show results faster and hence, this approach from the government. 
 
A number of states like Haryana, Delhi, Karnataka, Kerala, Maharashtra, UP, Tamil Nadu, MP, etc. have also introduced their own state policies and regulations on EVs aimed at growing the manufacture and sale of electric vehicles in their respective states which is now being supported and encouraged by the central government. 
 
There is a worldwide increase in investment in the EV sector by automakers and a general rise in stocks of global auto manufacturing companies. 

Also Read: Gujarat announces EV policy; to give up to Rs 1.5 lakh subsidy on electric cars

General Motors, one of the leading automakers in the world, recently announced an investment of $35 billion through 2025 in electric and autonomous technologies, which is an increase of 75% from last year's $20 billion. 

The global trend on investment in the EV market space can already be witnessed and with the revised policies and initiatives in place, it is only a matter of time before the same gains traction in India as well. It is estimated that by 2025, EVs shall constitute as high as 25% of the global auto sales and this number is likely to be significantly higher by 2030. Globally, while auto sales did take a hit in 2020 with a 16% contraction, however, EV sales took a 40% jump in the same year and 2021 showing continued trends. 
 
Growth of EVs in the Commercial Sector 
 
To start off, most recently, Tata has announced the launch of at least 10 EVs by 2025 which includes commercial vehicles and passenger vehicles. Ashok Leyland has declared its 'mother plant' set-up in India for its EV business with the operations being handled by its UK subsidiary, Switch. 

Similarly, Volvo and Eicher also have plans for pushing their EV business. On the other side, MG Motors has also announced the launch of its next EV by 2023. 

Mahindra plans to launch two EVs in the coming years and aiming to grab 30-50% readiness in the EV space between 2025 and 2030. There are various other e3W players also who are aggressively betting on the e3W segment as that is a lucrative market and can see a lot of traction. 
 
Presently, the EV market in India is dominated by the e-rickshaws, with a number of states focusing on increasing their public transportation fleets to EVs. Large logistics and delivery-based companies are increasingly looking at adopting EVs for their last-mile delivery systems. 

The cost of ownership of EVs has been found to be less than its ICE counterparts and the cost price of electric vehicles which was higher has also been subsidised substantially for the e2W after the remodeling of FAME-II. 

The only issue with EVs is their current market price, versus their ICE counterparts, which is already starting to show a decline. With Petrol and Diesel touching record-breaking highs in India, EVs will be the likely plausible solution. 

Moreover, with air pollution becoming one of the major causes of death in large cities in India and the government promoting the adoption of EVs, there is growing awareness about sustainable development. 

The environmental benefits of EVs cannot be overemphasised, EVs will reduce our carbon footprint significantly and this is being recognised by more and more corporations and governments. 
 
The state EV policies of Gujarat, Punjab, and Haryana also aim at converting their bus fleet to EVs. Haryana targets converting 100% of their bus fleet in Gurugram and Faridabad and Punjab targets at least 25% of the state's bus fleet to be electric by 2022. 

Madhya Pradesh aims to covert 25% of all new public transport vehicles to electric by 2026 while Bihar aims at converting manual paddling rikshaws to e3Ws by 2022. Haryana also focuses on converting all its government vehicles to electric, by 2024.   
 
BigBasket, a grocery delivery company already uses EVs for its last-mile delivery and targets to increase this fleet over the next two years. 

Amazon's CEO has announced its plans to run on 100% renewable energy by 2025 while Amazon India aims to introduce 10,000 EVs in its final-mile delivery vehicles' fleet latest by 2025. 

Even Flipkart has jumped on the bandwagon and announced 100% conversion to EVs by 2030. Ola & Uber, have already started building a separate fleet of electric vehicles.  
 
It is only a matter of time before we see a fleet of ready-to-hire public transport EVs, completely digitised, doing away with the need to own private vehicles.  
 
Future of EVs? 
 
Over the last decade, the government has launched several policies, schemes, and initiatives for promoting and adopting electric mobility solutions in India, mostly under the umbrella of the National Mission for Electric Mobility (the EV Mission) led by the DHI. 

The plans and policies focused mostly on encouraging an increase in manufacturing of affordable, reliable, and efficient EVs which also meet consumer price and performance expectations, through industry-government collaborations, providing subsidies to manufacturers, improving the charging infrastructure, and providing incentives to increase the demand of EVs in India, with the aim to make India a market leader in global EV space.  
 
Despite the multiple efforts of the government, the progress in meeting the policy targets has not been substantial. As per the Bureau of Energy efficacy, less than 1% of the vehicles sold in India are electronic vehicles. The FAME-II scheme was announced in March 2019 with a fund allocation of Rs10,000 crore ($1.35 billion) over a three-year period, but even after two years, the scheme had not achieved the desired results.  
 
However, the government seems to have recognised the hurdles and is taking active steps to revamp the EV policies, recover from the crisis and attain its targets over the next 5-10 years.

Recently, the NITI Aayog and the DHI also met market leaders from all these sectors to take feedback and understanding the concerns of the stakeholders in order to have a more effective implementation of the all-EV by 2030 goal. 

While the EV sector has shown positive movements, there still are certain hurdles that will be worked on by the government along with the industry bodies and players. Therefore, it is likely that the FAME II scheme may be extended beyond 2022 or will be further amended to suit the market movement.  
 
It is evident that despite the impediments in the policies, the market players have geared up and are on the path towards all-EV by 2030. 

Battery & EV manufacturing scale-up has happened and along with the Made in India plans of the government, India is slated to be one of the world's largest exporters in the segment with Hero announcing the completion of export of the first batch of its e-bikes in Europe in June 2021. 

In fact, in the run-up to 2030, it is expected that there will be more than 100 GWh of batteries to be retired and recycled and battery recycling companies like Gravitas, Attero, etc. are already preparing to scale up to handle the rush. 

In the run-up, foreign players are also likely to enter this segment with investments. To charge-up, there will be support required from the 'grid' and India is already racing towards installing a renewable energy capacity of 175 GW by 2022 and 450 GW by 2030 with multiple domestic and international players investing in India's renewable energy sector. 

India also has its climate change commitments which it must fulfill, and the government seems to be on course. 

EV manufacturers have announced a significant increase in production, the big corporates are choosing EVs for their last-mile delivery fleets, the consumers are slowly adopting and preferring electric and hybrid variants evidenced by the rise in demand, and the state and central governments are taking steps to improve the charging infrastructure, provide subsidies and convert public transportation to all-EV. 

The entire EV ecosystem in India seems to have gained momentum and is ready to be a noteworthy contender in the global EV race. 
 
India is racing at warp-speed to be the hub of battery manufacturing and an all-EV environment is definitely on course. 
 
(Dipti Lavya Swain is an EV & RE expert and partner at law firm, HSA Advocates.)