The last few months have been critical in terms of the country’s plan to transit to an electrified future for mobility.
The introduction of FAME II (Faster Adoption and Manufacture of Hybrid and Electric Vehicle) and proposed deadlines mandating faster adoption has created a sense of urgency. The conversations and interest in electric vehicles (EVs) are not new. For more than a decade, several companies have been conducting intensive R&D in this space. However, recent government policies and increased public awareness have created an enabling atmosphere for innovation.
Having said that, full electrification of public transport and for more than a quarter of private vehicles by 2030 requires several aspects of mobility to merge seamlessly. The industry faces several challenges that have to be critically addressed before setting definite deadlines.
The numerous milestones proposed in the past few months in terms of EV adoption raise a critical question — what is the extent of work required to ensure that at least the first set of electric vehicles can make the transition seamlessly?
Infrastructure challenge
The first challenge is enabling the infrastructure to support the upcoming demand. This requires an adequate and constant supply of power and a wide network of charging points to support the EV ecosystem.
For long-distance commuters, charging facilities dotting major highways and in major towns/cities are the immediate need of the hour. Range anxiety among users, which remains an inhibiting factor for the adoption of EVs, can be addressed to a certain extent with infrastructural support.
To reduce the overall carbon footprint, we should look for renewable sources of energy such as solar to power such charging facilities. Further, incentives need to be tailor-made to promote such initiatives.
The FAME II Scheme offers nearly ₹1,000 crore in incentives to set up charging stations across India. Under the scheme, the Centre proposes to set up 2,700 charging stations across the country, ensuring at least one station in a grid of three square kilometres. It has also initiated a process to define standards and guidelines for electric charging stations.
However, many companies have already taken the lead to set up charging stations in different cities such as Bengaluru, Delhi, Mumbai etc. The FAME II scheme provides additional incentives for more to join this initiative.
As a new technology, the pace of development henceforth will be multifold. We have to keep in mind that any infrastructure network being set up needs to allow for scalability and adapt to future requirements.
Today a battery costs nearly half the price of an electric vehicle. The debate between optimising range vs cost is put to rest with FAME-II stipulating strict norms for eligibility of incentives by linking them with the capacity of the battery and performance.
Of course, a company might choose not to avail of the incentives offered in FAME-II. The scheme is meant to incentivise public forms of mobility and not necessarily enhance private EV ownership. But battery technology remains an important part of an “EV Conversation”.
Cost-effective battery tech
India, being a price-sensitive market, we will have to ideate on cost-effective battery technologies to supplement this transition. An optimal balance between performance, storage capacity, size and durability vs price and range should be our top priority. ISRO has already begun working on the cost reduction of lithium-ion batteries. It has announced the development of a low-cost li-ion technology earlier in 2019 and shortlisted 15 companies to whom the manufacturing technology will be transferred to. This will result in a reduction of the battery price, which translates into a lower vehicle cost.
Lastly, we also need to explore the possibility of recycling the batteries. A majority of EVs are powered by lithium-ion batteries. These are used extensively in other industries and the smartphone industry. Dedicated policies will lead to effective management of these end-of-lifecycle batteries.
The Centre has also been stressing on the localisation of EV components. Electric and hybrid vehicle manufacturers need to build control units, chargers and AC units, among other parts, locally to qualify for subsidies. All-electric vehicle and hybrid manufacturers are also required to localise the manufacturing of wheel rims integrated with hub motor from October 2019.
Despite the scheme’s stress on localisation, the guidelines do allow imports of key battery components to remove immediate technological challenges and manage costs. However, within a couple of years, import duties on lithium-ion cells and battery packs, are slated to rise, subtly pushing battery manufacturers to begin localisation immediately.
Local manufacturing
Localising battery manufacturing would help reduce these costs further. According to India Energy Storage Alliance (IESA), the country is expected to attract over $3 billion for setting up four ‘gigafactories’. BHEL is already in talks with a multi-national consortium to build India’s first Li-ion gigafactory.
To boost the charger manufacturer industry, the Centre has slashed the GST to 12 per cent from 18 per cent and the EV industry is expecting a host of tax sops in the upcoming budget. This will encourage local manufacturers to participate and offer EVs at competitive prices to customers.
The 2-wheeler and 3-wheeler market along with the public transport segment will adopt EVs quicker in the short term, buoyed by the incentives from FAME II. The adoption in the public transport space would ensure better awareness and quicker infrastructure setup that will trickle down to other segments of the industry. Four-wheeler EVs for commercial and fleet applications will see great traction. Due to the incentives being available, the economies now make sense.
The cost of ownership is lower than running ICE vehicles for these applications. There will also be a significant reduction in pollution as these vehicles cover large distances every day.
Enhancing public transport
FAME-II also focusses heavily on enhancing public transport. This is evident from the allocation of ₹3,545 crore (35 per cent of the overall incentives) towards incentivising electric buses. The Centre recently floated the largest ever tender of 5,000 electric buses and asked for proposals from the State governments.
India is one of the fastest growing countries in the world. With rapid urbanisation and growing per capita incomes, there will be a huge demand for mobility. The increase in vehicle penetration to meet this demand is not sustainable in the longer run. The way people move will change significantly. Mobility solutions for billion people in India will need a fresh look. Multimodal shared mobility is the way forward.
This is a great opportunity for the Indian automotive industry and policymakers to establish a smooth, effective infrastructure for the future and lay the groundwork for a truly smart country.
The writer is CEO, Mahindra Electric