The Future of Electric Vehicles

The Future of Electric Vehicles

K.M. Chandrasekhar

A decade ago, we were struggling with solar power. We knew that renewable energy sources were good for us, but we did not know how to integrate it into our system, which was heavily thermal based.The story of the growth of power generation in India is itself a tale that is mind boggling in its scale and intensity. The linkage of coal with power provided a growth mechanism that took us away from the years of long power cuts and high energy costs and brought us to an entirely different situation.

The growth of renewables is another story. I was told, as Cabinet Secretary, that we must find a way to produce and sell at least 1000 MW of solar power. We held a meeting of a committee of Secretaries.The problem seemed intractable as the cost per unit was seventeen rupees, far in excess of the cost of thermal energy, not to speak of hydel energy. We cracked our brains and finally came up with a solution. We decided that the largest power producer in India, the National Thermal Power Corporation, would buy the power, blend it with all the power they produced from thermal sources and sell their entire production, at perhaps marginally higher, but not noticeably higher cost.

Today the situation is dramatically different. The power deficit in the country, according to government sources, has declined from 10.1% in 2009-10 to 0.4% in 2019-20. While coal continues to dominate, producing about 70% of our needs, the share of renewable energy has grown disproportionately and accounts for more than 78000 mw of installed capacity as in April this year. A record low bid price of ₹2.44 per unit for solar power was received in Bhadla, Rajasthan. Solar capacity increased 370 percent in the last three years. New methods of generating and connecting solar energy have been developed. The target of 20 GW of solar power production, set for 2022, was achieved four years ahead of schedule.

Are we now on the cusp of a similar revolution in the use of electric and hybrid vehicles? The National Electric Mobility Mission Plan, announced by the Ministry of Heavy Industry in 2013, aims to achieve a sale of 6 to 7 million units year on year from 2020 onwards, as against 42000 units in 2012-13 and 20000 hybrid and electric vehicles in 2013-14. A scheme for Faster Adoption and Manufacturing of ( Hybrid and) Electric Vehicles( FAME) was launched in 2015-16 and a later version, FAME 2, recently.

We are perhaps more ready for change than many other countries when they embarked on similar projects. We can learn from the experience of developed countries who have been on this endeavour for nearly half a century now. We have a predominantly young and adventurous population, willing to adapt to new lifestyles and to venture into untrodden paths. We are committed to the global goal of reduction of carbon emissions and we know full well that ten percent of our emissions come through our antiquated transport system. As oil reserves dwindle worldwide, we have necessarily to look at cheaper, more plentiful energy alternatives. We have a federal system of governance where the Central Government as well as State Governments have come out with policy initiatives for promoting electric and hybrid mobility.

Despite its early start, the success of electric vehicles all over the world has been varied and mixed. Norway has the largest per capita electric vehicle market in the world, with a market share of 39 percent. As against this, the market share of Indian electric vehicles is only 0.06 percent. Norway started almost 50 years ago,with a concept development plan, spanning the years 1970 to 1990. Prototypes were then developed by private enterprises with financial support from the research council of Norway. The next ten years comprised the test phase when vehicles began to be used by vehicles and organisations. The first set of incentives also started in the form of exemption from registration tax, annual vehicle license fee and toll road charges. The market introduction phase started in 2009 with the arrival of the Buddy and Kesey models, followed by big manufacturers like Mitsubishi, Peugeot, Citroen and Nissan..Transnova, a governmental organisation, came into existence in 2009 to support reduction of carbon gas emissions in the transport sector. The number of dealers in electric vehicles increased and a set of incentives was evolved to make purchase price of electric vehicles roughly comparable to those using internal combustion engines and removing the disadvantages perceived by customers in the use of electric vehicles. Another important development was support for establishment of charging systems. An innovative measure was opening up bus lanes for use by electric vehicles. As demand increased, prices fell and the difference in price vis-a-vis fossil fuel based cars also disappeared.

Japan, on the other hand, followed a more government led model, with the Ministry of International Trade and Industry( MITI) driving the programme along with the Ministry of Transport and the Environmental Agency. MITI guides industrial development in phases through “visions”, where the objective and barebones strategy is laid down, which then becomes the base for R&D, financing, legal changes and strategy. As in Norway, Japan’s effort started in the seventies with a market expansion plan for battery powered vehicles being put in place in 1976. A government-industry R&D Programme was started around the same time. The next step forward was the Eco-Station project launched in the year 2000 to set up 2000 fuelling stations for vehicles using clean energy. This was followed by a decision to reduce 10 percent of public vehicles by low emission vehicles. To incentivise purchase, 50% of the incremental cost of purchasing low emission vehicles was subsidised. The R&D programme, meanwhile, continued, confining itself not only to electric vehicles, but encompassing other sources such as hydrogen. New models came into the market such as Toyota Estima, Toyota Prius and the Crown. In this process, Japan has acquired a solid knowledge base in low emission vehicles but could not really make a sizeable dent on the internal market for vehicles using internal combustion engines.

All over the world, from Australia to Asia, Europe to South Africa and to the US and Latin America, a number of countries have devised a wide range of measures to stimulate the use of low emission vehicles. The measures include subsidisation of purchase price, exemption from taxes and fees, free use of bus lanes or fast lanes, facilities for charging at public places, free parking at city centres and many others, varying from country to country. There has been some forward movement, but not enough. The convenience of an internal combustion engine, its range of use and its familiarity is yet to be matched by electric vehicles or any of its variants.

The models followed by China and Taiwan in introduction of electric two wheelers is instructive. In China, the surge in demand for electric bikes was a consequence of the ban imposed on motorcycles in many Chinese cities. In some cities, new motorcycle licenses were not given, in some, certain areas were closed to motorcycles, in some the number of licenses was capped. Electric bikes began to take the place of motorcycles. In Taiwan, on the other hand, the traditional subsidies, tax concessions and support schemes mode was adopted. In Taiwan, the market for low emission vehicles never really took off. Chi-Jen Yang(2010) concludes that “there are several other cases that suggest restrictions on alternatives to electric vehicles might be more effective than a policy of subsidies.” He cites the example of the heavy London Congestion Charge on fossil fuel based vehicles and exemption of alternative low emission cars which resulted in a boom in the market for the latter.

Indeed, there are many, many obstacles that India would have to overcome before our ambitious policy takes off. First, there is a general reluctance to change from the familiar to the unfamiliar. Second, the resistance to change that would inevitably arise from existing manufacturers of vehicles using internal combustion engines, the manufacturers of automotive components and the ecosystem that thrives on repair and maintenance of such vehicles.Third, the fear of customers that a machine with which they are not familiar may develop a glitch on the way and, unlike the ubiquitous Maruti repair shop, there would be no one available to set it right. Fourth, the electric vehicle costs more and is the difference in costs justified by the benefits that may accrue? Fifth, and most important of all, is the lack of a charging infrastructure. We can take our vehicles out, and, whenever, it is low on fuel, pull up at a gas station, and fill up the tank. If the car is charged at home and the charge starts dwindling before we reach home, then what do we do? When the charging infrastructure is not in place, then few would take the risk of buying a battery powered vehicle. This is the classic chicken-and-egg syndrome. Which comes first, the charging infrastructure to support the safe and untroubled running of electric vehicles, or the vehicles to support the economic operation of the charging infrastructure?

The problem in India is further complicated by the fact that ownership of vehicles is highly skewed in comparison to other countries, As many as 79% of the vehicles owned in India are two wheelers. Three wheelers, both of passengers and goods, constitutes 4% and buses and large goods vehicles comprise another 3%. The four wheelers, both of the premium and economy varieties, comprise the remainder.

India’s policy on switchover to electric vehicles evolved only recently and has been driven largely by the NITI Aayog. Our knowledge of past history of electric mobility in other countries can help greatly in developing the contours of this policy. It is clear that a policy based on subsidies and concessions alone cannot take us where we want to reach. Push has to become shove at certain times. Hence, the recent reported recommendation of the NITI Aayog to shift completely to electric bikes by 2023 is a step in the right direction even though it will lead to a great deal of churn in the automotive industry. The focus on public transport in FAME 2 and the method of bidding devised on revenue per kilometre again will lead to much change. The growth of aggregators, the tie-up of vehicle manufacturers with aggregators and the possibility of continuous electronic monitoring of vehicles in use leads to two major growth factors in the three wheeler sector: the prevention of misuse of a vehicle or its loss through electronic watch and the evolution of a “pay as you earn” scheme, where the risk and the returns are shared by the manufacturer, the aggregator and the driver.

The four wheeler sector will gradually gain momentum as the charging infrastructure comes into place. The two wheelers have much less of a problem so far as charging infrastructure is concerned. The batteries are relatively small and can be swapped for fully charged batteries without much difficulty. A couple of startups have already come up in some Indian cities providing this service. The buses too, can have charging infrastructure at their depots and while one bus gets charged, the other can operate. The four wheelers have more of a problem as their batteries are large and at the base, thus making them not amenable to swapping.

The development of intelligent grids, providing grid connectivity in the future, augurs well for the entire sector. The batteries will then not only be used for running the vehicles but as receptacles for storage of power which can then be sold back into the grid when the vehicle is not in use. V2G ( Vehicle to Grid) cars are now in the market.

The Economic Survey that came out on 4th July and the Union Budget of 5th July take us further forward on the road to electric mobility. Both talk in terms of India becoming a hub, a “Detroit” for manufacture of electric vehicles. The Finance Bill provides for income tax deductions for purchase of electric vehicles. The disincentive element for use of gasoline is also there in the form of higher surcharges on petrol and diesel. The carrot-and-stick method is in operation, consciously or unconsciously.

India needs to do more to ensure faster movement towards electric mobility. First, it must bring electricity distribution companies, the discoms, firmly into the picture for creation of charging infrastructure, jointly with vehicle manufacturers,State Governments and local bodies. The possibility of passing through the cost of the whole or part of the cost of such charging infrastructure to electricity consumers has to be examined. Second, the availability of credit has to be enhanced. Financing for electric mobility has to be brought within the ambit of Priority Sector lending of banks. Since lending for renewable energy is already allowed under priority sector lending, low emission vehicles, which serve the same purpose, can legitimately qualify. Third, corporate social responsibility; funding of corporates should be extended also to cover electric mobility and its variants, particularly in the areas of R&D and charging infrastructure. This again is in consonance with the guideline which allows such funding for ensuring “environmental sustainability, ecological balance, protection of flora and fauna…”

A couple of decades in the future, the landscape of the Indian transport industry would have hopefully changed.


Former Union Cabinet Secretary, presently, Chairman, Centre for Development Studies, Trivandrum

(The facts and views expressed in the article are those of the writer.)