If India is to achieve its target of net-zero emissions by 2070, it must switch from fossil fuel to low-carbon technology, especially in the critical sectors of power, industry and transport. Of these, transport alone contributes to 13 per cent of total greenhouse gas emissions.
Climate and Sustainability Initiative, a Singapore-based research firm, has outlined the net-zero pathway in a new report, ‘India’s Auto Industry – Mapping the Course to Net Zero by 2070’. It focuses on the financial implications of realising a net-zero transition in the auto sector — the investments and costs involved and potential gains in the economic and environmental fields.
The report’s main finding suggests that original equipment manufacturers (OEMs) in various vehicle sectors will need to invest $323 billion to produce EVs alongside existing technologies. Further, to meet the calculated annual battery demand of around 1,716 GWh by 2070 and achieve complete domestic production, manufacturers will have to invest $196 billion until 2070. Eventually, by 2070, the battery demand for all EVs in the country will be met locally by 172 giga-factories of 10 GWh capacity each. To meet the demands locally, this could begin with building a single factory around 2025.
The report recommends that to finance this major transition, policymakers, financial institutions, OEMs and other stakeholders work on solutions, such as first-loss guarantees for financial institutions and green lines of credit for EVs. It suggests both short- and long-term solutions. Policymakers will need to consider alternative financial solutions to develop EV ecosystems, including charging, which can help alleviate the range anxiety associated with EVs and encourage wider adoption, states the report. It adds that since the long-term needs of the sector could outgrow the pace of automobile loan financing in India, focusing on refinancing could help FIs increase their participation in the auto loan market.
Policy changes needed
But once the initial financial effort is put in and the necessary policy changes made to facilitate the switchover to EVs effected, then returns could accrue for the automobile sector and the State exchequer.
According to the report, the investment could generate $14.1 trillion revenue for OEMs till 2070. Additionally, the automobile sector’s transition could lead to revenue collection of $4.1 trillion in GST between 2020-2070.