Kick-starting the Electric Vehicle market in India – Where We Are, What More Needs to Be Done

connected car accelerator

With Prime Minister Narendra Modi of India, there are no half-measures. It is safe to say that PM Modi was not kidding when he said that he said that his government was determined to kick-start the electric vehicle market in India.

Why? India produces very little oil of its own and imports most of its oil from the Middle East. The nation’s oil bill amounts to $87.7 billion. PM Modi has set an ambitious target of reducing the nation’s oil exports by $60 billion and bringing down carbon emissions by 37% by nudging the nation’s automobile industry to towards the production of electric vehicles.

The Indian government expects 100% of all vehicles used for public transport and 40% those used for personal mobility to be electrically powered by 2030. But it is clear that there are going to be many hurdles ahead and will take a concerted effort by the government, industry and the public to make PM Modi’s vision a reality.

The Story So Far

The Indian automobile market is already the fourth biggest in the world and growing fast because of a large middle class with higher disposable incomes. Over 21 million gasoline-vehicles are sold in India every year. 39 out of 55 top international car makers have manufacturing plants in India, and in terms of production, India is all set to leapfrog to the fourth position globally, just behind the U.S.,China, and Japan.

A full conversion from gasoline cars to electric vehicles requires some doing. It is not so easy to transform such a large market just like that. This requires more than just a push from the government through policy changes.

The switch to electric vehicles requires popular support from the public, a serious commitment from the industry and setting up of an infrastructure worth hundreds of billions of dollars to power the electric vehicles.

As of today, only 1% of the cars sold in India today are electric vehicles. This has to change, and change fast, especially at a time when oil prices are on the rise once again, with Brent Crude prices crossing the $70 barrier recently.

Challenges Ahead

Local Manufacturing has to pick up

One challenge is to enforce the change locally, through the Indian automobile industry. Indian companies should take up the challenge of the conversion to electric vehicles head on. This is all the more important as the automobile industry in India employs millions of people.

The government cannot afford to have a situation where Indian consumers are forced to buy electric cars from Chinese or Finnish manufacturers because of the failure of the Indian companies to keep up pace with the demand for such vehicles. Indian companies such as Mahindra & Mahindra and Tata Motors have already embraced this challenge, with plans of taking on industry behemoths such as Tesla Motors.

Stopping Information Theft

Foreign suppliers are very important to India’s burgeoning electric market and currently contribute about 80% of the technologies and components required by the industry.

One major issue foreign companies have about collaborating with Indian manufacturers on production of electric vehicles is backdoor information leak or information theft.

Strict safeguards need to be put in place in terms of government regulations and policies to prevent backdoor information leak, copyright violations or information theft. Trust is very important in the automobile industry and under no circumstance can this be violated.

Affordability

Indian consumers don’t like to spend too much on cars. They prefer to buy small to medium-sized cars that offer the right balance between affordability and sophistication.

They certainly wouldn’t be interested in an expensive electric vehicle such as Tesla Model X which costs between US$132,000 and US$144,000.

For an electric car to take off in India, it has to be large enough to fit a family of five, and priced between US$5,000 and US$6,000. That’s a tough ask for automobile companies.

Infrastructure

The biggest challenge by far is the setting up of a charging infrastructure to power more than 200 million vehicles across the country by 2030. This requires 90 billion units (BU) of electricity. India currently generates 1,107 billion units (BU) of electricity.

Large public sector companies such as NTPC Ltd, Bharat Heavy Electricals Ltd (BHEL) and Power Grid Corp. of India Ltd have already drawn up big plans to make this happen.

But the fact remains India’s power infrastructure is already stressed and the full conversion to electric will require hundreds of billions of dollars worth fresh investment in the nation’s power sector.

Final Thoughts

Every decision PM Modi has taken so far, whether it was the much talked about demonetization of high-value currencies, introducing one common and uniform Goods and Services Tax (GST) for all the states in the country, or more recently, electrifying 100% of all villages in India has been about bringing transformational changes to his country.

None of these decisions were easy, especially so in a chaotic democracy such as India and neither will be the move to go electric and transform India’s massive automobile sector. This takes some doing and no small amount of chutzpah. But there is no question that with oil prices on the rise again, the switch from gas to electric vehicles has assumed a greater urgency than ever before.

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