India's Big Push To Go All-In On Electric Vehicles By 2030

Kolkata, India (Getty photos)

Kolkata, India (Getty photos)

With the government fervently pushing “that by 2030, not a single petrol or diesel car should be sold in the country,” India is all set to be the hotbed for electric vehicles (EVs). India’s Minister of State with Independent Charge for Power, Coal, New & Renewable Energy and Mines, Piyush Goyal recently stated, “We are going to introduce electric vehicles in a very big way.”

It is with this intent that the government aims at making EVs self-sufficient, building on the model of Unnat Jeevan by Affordable LEDs and Appliances for All (UJALA).

While there is a sound case for pushing EVs in India, it won't be easy to accomplish. Here’s a look at the current scenario and what this could mean for automobile manufacturers going forward.

Why The Push For EVs?

India is the third-largest crude oil importer in the world, making up about one-third of its total imports by value. This is precisely the reason why fluctuations in oil prices are fundamental to its economy.

“At $60/barrel, India makes annual savings in its import bill of $70 billion compared with the average oil price, above $100/barrel, which prevailed from 2011 until mid-2014. That reduction is equivalent to fourteen times the government budget allocation to the health care,” as per a report by International Energy Agency (IEA). Delving further, the report suggests that India’s demand for oil increases more than growth in any other region or country to 2040, and about 65% of this will come from transportation.

Thus, it’s essential for India to introduce fuel-efficiency standards in sync with strong promotion of alternate fuels.

The second critical reason to push EVs is the steep rise in population levels in the country. It is estimated that there are about 1.2 million deaths in India each year due to outdoor air pollution. While air pollution isn’t solely caused by vehicles, they do make a significant contribution to the emission of deadly gases.

Air pollution results in loss of productivity and premature deaths, which further lead to huge welfare costs.

In India, the total welfare losses were equivalent to about 7.59% (2013, PPP-adjusted) its Gross Domestic Product (GDP), as per World Bank estimates.

How India Hopes To Pull It Off

India is promoting hybrid and EVs to achieve the objective of fuel security, an important element for its economic health, and ensure a cleaner and greener environment for its people.

The road ahead isn’t smooth; there are multiple bottlenecks, including lack of awareness and hesitation among people along with limited infrastructure and lesser explored technological innovation in this sphere.

However, some groundwork has already been done; efforts began with Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME India) scheme, in areas of technology development, demand creation, pilot projects and charging infrastructure.

India already allows 100% FDI under the automatic route in automobile and manufacturing industry. Additionally, there are no minimum investment criteria for the automobile industry, which is a fully de-licensed industry and allows for free imports of automotive components.

To realize its target for 2030, the government may try to incentivize adoption of EVs through lower taxes and duties (to both buyers and manufactures) as well as through attractive interest rates on loans. Further, the government may offer subsides on such vehicles to reduce the cost parity (with traditional vehicles) while pushing for setting up battery plants, among other measures.

Incentives & Investments

India is a lucrative market for automobile manufactures, driven by a huge consumer base and robust demand. The passenger vehicle market in India is growing at a healthy pace and the trend is likely to continue with rising income levels, low penetration level and better financing options. The country’s passenger vehicle market is projected to grow to 13.4 million by 2026, making it the world’s second-largest market, after China as per the government’s Auto Mission Plan, 2016-26.

EVs are far from mainstream in India, and thus there is minimal presence of electric cars, resulting in an unexplored EV market. Thus, there lies great opportunity for automobile players to come in early and grab a share of this nascent market, given the government’s idea to move from away from fossil fuels.

There are only select models of EVs available in India, all from the house of Mahindra Group, Toyota, BMW, and Volvo. With BMW and Volvo catering to very high-end customers, the choice is further restricted.

Tesla (TSLA) is expected to make its much-awaited debut in India in 2017. This will give Tesla a chance to make a strong foothold early on.

We may also soon see other automobile manufacturers launch variants of electric vehicles in India. Overall, India is getting set to leapfrog in the EV segment to create a future that is beneficial both for its economic health and the health of its citizens.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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