Molly Ayala
India is making a big push for electric vehicles (EVs) to tackle the problem of air pollution in the country. In 2017, the Indian government announced its intention to move to 100% electric cars by 2030, which was later diluted to 30%. The government has set ambitious targets for the adoption of EVs, including making all three-wheelers battery-operated by 2023 and most two-wheelers by 2025. To encourage the growth of the EV sector, the government has offered incentives to carmakers, reduced GST for EVs, and provided income tax rebates to customers on loans for buying EVs. However, India faces challenges in adopting EV technology due to a lack of charging infrastructure, high import duties, and a lack of renewable energy.
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What You'll Learn
The government's role in incentivising the EV sector
The Indian government has set ambitious targets to accelerate the adoption of electric vehicles (EVs). It has implemented schemes and incentives to promote electric mobility, and introduced regulations and standards. The government has two dominant objectives: to control pollution and take the lead in an emerging industry.
In 2015, the Department of Heavy Industry (DHI) launched FAME, or Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles, which is currently India's flagship scheme for promoting electric mobility. However, FAME-India has achieved little, with about 90% of the vehicles produced from April 1, 2015, to March 31, 2019, being electric scooters.
The government has also taken small steps by announcing a 7% cut in GST for EVs, sanctioning free registration of such vehicles, and offering income tax rebates of up to ₹1.5 lakh to customers on interest paid on loans to buy electric vehicles. It has also offered customs duty exemption on lithium-ion cells, which will help lower the cost of lithium-ion batteries in India as they are not produced locally.
The government is focusing on electrifying public transportation with subsidies, primarily for two-wheelers, three-wheelers, and buses. It has also earmarked $140 million for the development of charging infrastructure. The government has also specified that each 3-by-3-kilometre (1.9 by 1.9 mi) area in cities must have at least one charging station, and one station every 25 kilometres (16 mi) on both sides of highways.
The government is also planning to offer incentives for manufacturing electric vehicles and batteries to boost economic growth and encourage local manufacturing under its Make in India initiative. The push for electric vehicles is coming from the top, with the government taking steps to encourage the growth of the EV sector.
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The need for charging infrastructure
India's push for electric vehicles (EVs) is driven by the need to reduce air pollution and gain a competitive edge in an emerging industry. However, the country faces significant challenges, including the lack of charging infrastructure.
The need for a robust charging infrastructure is critical to support the growing EV market in India. The government has set ambitious targets for EV adoption, aiming for a complete transition to electric cars by 2030. To achieve this, ensuring convenient and efficient charging options for EV users is essential.
The development of charging infrastructure requires significant investment and planning. The Indian government has recognized this need and taken steps to address it. In 2018, the government earmarked $140 million for the development of charging infrastructure. They also released guidelines mandating the availability of charging stations in cities and along highways. Each 3-by-3-kilometer area in cities with populations over four million is required to have at least one charging station, and one station must be available every 25 kilometers on both sides of highways.
To further facilitate the availability of charging options, the government has partnered with companies like Tata Power, Fortum, and Joulepoint, which have installed a range of chargers, including rapid DC and level 2 AC chargers, in various locations such as public access points, workplaces, malls, and highways. Additionally, initiatives like Plugin India aim to promote community charging stations and solar-powered charging points at fuel stations.
The establishment of charging infrastructure is crucial not only for the convenience of EV users but also to build confidence in the technology. By ensuring that charging stations are easily accessible and widely available, the government can encourage more people to make the switch to electric vehicles, contributing to India's goals of reducing pollution and becoming a global hub for EV manufacturing.
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The role of international companies in India's EV industry
India has set ambitious targets to accelerate the adoption of electric vehicles (EVs), with the government aiming to make India a "global hub of manufacturing of electric vehicles". However, the country faces challenges such as a lack of infrastructure and the dominance of the existing automobile industry. International companies have a significant role to play in India's EV industry by bringing in investment, technology, and expertise.
Firstly, international companies can contribute to the much-needed investment in India's EV industry. For example, in 2024, notable EV investment commitments include VinFast with up to Rs. 16,500 crore (US$2 billion) and Tata Motors-JLR with Rs. 9,000 crore (US$1.07 billion). These investments will help develop new EV models, manufacturing facilities, and charging infrastructure.
Secondly, international companies bring technological advancements and expertise in EV manufacturing and battery development. For instance, companies like Ather Energy, a startup that designs and manufactures electric scooters, is investing in developing a robust charging infrastructure. Additionally, companies like Ultraviolette Automotive create electric motorcycles with modern designs, energy efficiency, and advanced features like AI for stability control, anti-collision warnings, and vehicle tracking.
Thirdly, international companies can contribute to India's EV industry by partnering with local businesses and sharing their expertise. For example, SmartE, a startup that runs India's largest fleet of EVs, and Euler Motors, which manufactures commercial three-wheelers, are local companies contributing to the EV ecosystem. International companies can collaborate with such local startups to foster innovation and accelerate the adoption of EVs.
Moreover, international companies can help address the challenges related to battery technology. India lacks the domestic supply of cobalt and lithium, essential for new battery technologies. By establishing local manufacturing facilities, international companies can help secure the supply chain for these critical components and reduce the country's reliance on imports.
Finally, international companies can assist in developing the charging infrastructure in India. As noted by Arunabha Ghosh, CEO of the Council on Energy, Environment and Water, a push from a policy perspective is required to support the startup ecosystem in this regard. International companies can invest in and collaborate on developing a robust network of charging stations, making it more convenient for Indians to adopt EVs.
In conclusion, international companies play a crucial role in India's EV industry by bringing investment, technology, and expertise. Their contributions will help India achieve its ambitious targets for EV adoption, reduce pollution, and establish itself as a global hub for EV manufacturing.
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The impact of high import duties on EV affordability
India has set ambitious targets to accelerate the adoption of electric vehicles (EVs), with the government aiming to control pollution and take the lead in an emerging industry. However, the country faces challenges in adopting electric vehicle technology due to a lack of infrastructure and high import duties on EVs, which impact their affordability.
The high import duty had a direct impact on the price of EVs, making them less affordable for Indian consumers. With a duty of 110%, the cost of importing EVs was more than double the original price, which was already high due to the advanced technology involved. This made it challenging for manufacturers to enter the Indian market and offer competitive pricing, especially for premium or luxury EVs.
Additionally, the high import duty created an uneven playing field between imported EVs and locally manufactured ones. Local automakers had an advantage over global players, as they did not face the same level of tariffs or local manufacturing requirements. This may have discouraged foreign manufacturers from entering the Indian market, reducing the variety and availability of EVs for consumers.
However, the Indian government recognized the need to reduce import duties to attract top EV manufacturers and boost the economy. In 2023, the government introduced a revised EV policy, slashing the import duty from 110% to 15% for premium electric cars priced above $35,000. This policy change is expected to make premium EVs more affordable and attract global automakers like Tesla and BYD, which have been eyeing the Indian market but hesitated due to high import duties.
The reduced import duty is also anticipated to have economic benefits, including boosting domestic manufacturing, creating jobs, and strengthening India's position as a leading EV maker. By lowering the import duty, the government is encouraging both import and domestic manufacturing of high-end electric vehicles, demonstrating its commitment to creating a competitive market for EVs in India.
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The importance of strong policies and their effective implementation
India has set ambitious targets for electric vehicle (EV) adoption, aiming to tackle air pollution and establish itself as a global hub for EV manufacturing. However, the country faces challenges, including a lack of infrastructure, high initial costs, and limited renewable energy sources. To address these issues and drive the transition to EVs, strong policies and effective implementation are crucial.
Firstly, policies should focus on incentivising the development and adoption of EVs. The Indian government has already introduced incentives, such as income tax rebates for customers purchasing EVs and customs duty exemptions on lithium-ion cells to reduce battery costs. These incentives can encourage consumers to make the switch to EVs and stimulate the growth of the EV market in India.
Secondly, policies should address the lack of charging infrastructure, which is essential for the widespread adoption of EVs. The government has recognised this challenge and is taking steps to improve the situation. For example, guidelines have been established, mandating the availability of charging stations in cities and along highways. Additionally, the government has earmarked funds for the development of charging infrastructure and is encouraging the establishment of community charging stations through initiatives like Plugin India.
Effective policy implementation is also critical. The Indian government has demonstrated its commitment to the EV transition by offering subsidies and tax rebates for EV buyers and manufacturers. However, there have been challenges with policy execution, as seen with the FAME-India policy, where manufacturers abused incentives and failed to adopt modern battery technologies. To ensure successful policy implementation, coordination between government, industry, and consumers is necessary.
Moreover, policies should consider the potential impact on the existing automobile industry and its workforce. A balanced approach is needed to encourage the adoption of EVs without causing significant disruption to traditional automakers and their employees. The Indian government has acknowledged this concern, with Prime Minister Narendra Modi stating that EVs and internal combustion engine vehicles can coexist in the Indian market.
Lastly, policies should address the high import duties that make EVs from international companies unaffordable for many Indian consumers. Lowering these duties could increase the accessibility and affordability of EVs, accelerating the transition.
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Frequently asked questions
India faces several challenges in its transition to electric vehicles. The country lacks the infrastructure and financial resources that other leaders in electric mobility have. India also does not possess the technology or minerals required for electric vehicles and their batteries. The high import duty on foreign electric vehicles also makes it difficult for leading international companies to enter the Indian market.
The Indian government has implemented schemes and incentives to promote electric mobility. The government has also introduced regulations and standards, such as the FAME-India policy, which aims to increase the supply of and demand for electric vehicles. The government is also focusing on electrifying public transportation and offering subsidies for the purchase of electric vehicles.
Some electric vehicles available in India include the Hyundai Kona, the Audi e-tron, the MG Motor India eZs, the Mahindra Treo, and the Tata Power rapid DC chargers.
India transitioning to electric vehicles will help to reduce air pollution, which has reached emergency levels in cities like New Delhi. The transition will also help India become a leader in an emerging industry and reduce its dependence on oil imports.
