India prioritizes addressing air pollution, one of its biggest environmental issues. In 2019, 70% of the country surpassed the acceptable PM2.5 concentration threshold of 40◦µg/m³ yearly average. 35 of the 50 most polluted cities are in India. Road transport emits NOX and PM2.5. One-third of national NOX emissions and 5% of main PM2.5 emissions came from road transport in 2020. Two-wheelers emit 17% of road transport NOX, whereas trucks emit 55%. Two-thirds of road transport-related PM2.5 pollution comes from trucks. The GOI’s flagship FAME initiative signaled an industry inclination toward electrifying transportation. This incentive-based program and its successor promoted EVs and hybrids while indicating that the future of mobility lies only in the electric, and the Green Mobility Goals are achievable through electric transportation in India.
Electric Transportation in India is Constantly On the Rise
The results are good because India is seeing a rise in EV demand for 2-wheelers, cars, and buses. Electric 2-wheelers increased 422%, 3-wheelers 75%, and 4-wheelers 230% between FY20 and FY21. Interestingly, electric buses have surged 1200% nationwide. NITI Aayog also aims to reach 70% EV commercial automobile sales penetration by 2030.
Thanks to the EV sector’s expansion, India’s EV components industry is flourishing. Crisil predicts a 76% CAGR for the EV component industry to reach Rs. 72,500 crores by 2027. This is fantastic news since private and commercial EVs may fill transportation shortages while reducing or correcting environmental damage.
The investments in electric transportation in India have risen to $673 million
These signals indicate that EV ecosystem OEMs and startups are strengthening a new mobility age. EV startup investments rose from $195 million in 2020 to $673 million in the first three quarters of 2023. There is a global precedent for weaning PLI subsidies and buyer incentives and redirecting funding to feed the next generation of innovation, making it a realistic option for India. Despite these promising advancements in the core EV ecosystem, the country needs more to speed up an electric future. The EV development, distribution, and adoption-linked industries must overcome these problems.
Are the allied industrial domains ready to support electric transportation in India?
A robust partnership between the core EV ecosystem sectors and important actors in related industries can help India transition to a green future. EV dealerships, finance, infrastructure, and insurance are significant allied sectors.
EV Financing
India has made progress in funding passenger EVs. State Bank of India leads with 7.95% green automotive loans. Axis Bank offers 50 basis point reduced EV financing for electric car purchases. However, commercial EV lending has not advanced. Banks and NBFCs should provide lower loan rates to make EVs financially feasible. The financing rate is about double that of combustion cars. Current financing rates should be 4-5% lower or as much as combustion engine autos. Higher rates are deterring commercial EV use.
PSL supports areas the GOI and RBI prioritize for the growth of the country’s essential requirements. Sustainability and carbon emissions are important for India and the world. Commercial EVs help achieve carbon neutrality and sustainability. EV finance should be included in PSL to accelerate EV adoption and provide financing options to customers.
Creation of leasing instrument – customers today want customizable cars, monthly payouts, and ownership periods. Customized automobile funding is difficult with traditional loans. Leasing should be considered official finance. OEMs must support the leasing instrument with product dependability, improved battery life, and guarantees.
EV Insurance
The insurance industry is crucial to EV success. Electric car sales are rising in India, and therefore, insurance companies are also adding green insurance. To accelerate EV adoption, the IRDAI mandated a 15% reduction on necessary third-party coverage for electric cars. The country needs related sectors to respond with incentives like this. In addition, insurance companies might cover public and commercial EV accidents and eventualities. This will speed up fleet owners’ and commercial vehicle operators’ embrace of electric options.
EV infrastructure
Tracking EV infrastructure is also critical. Recent improvements to India’s electric charging infrastructure are evident. Around 77% more public charging stations were operational between June 2022 and February 2023. To improve EV charging infrastructure, solar-powered charging stations are increasing across the country.
India must concentrate on:
- Public policy to enhance charging infrastructure. It can reduce range anxiety. Hence quick charging setup is essential to accelerate EV adoption
- Easy infrastructure installation with a single clearance window
- Private automobiles and EV fleet owners can benefit from public charging infrastructure improvements.
Electric Car Dealerships
Many Indian car dealerships are adapting to the growing popularity of electric automobiles. At least 80% of car dealers in the country want to sell EVs. Dealers want to get into charging infrastructure, battery switching, and car scrapping.
Only by knowing how many dealerships are ready to sell commercial EVs, the country can fill its mobility gaps. Battery swapping is not the ideal thing for commercial vehicles, thus manufacturers should focus on hyper-fast charging battery pack technology to eliminate the need for dealerships and consumers to invest in capital-intensive battery charging infrastructure. Fast charging is changing, and reliable battery chemistry permits full charge for a 100 km range in 20 minutes. It may be time for government incentives to encourage dealerships to sell commercial EVs.
Moving forward: Preparing our allied sectors for electric mobility
Although other EV ecosystem actors are making excellent progress in increasing electric alternative acceptance, India’s EV market is still far from being a global success story. For comprehensive and future-focused growth, the whole EV ecosystem—primary, secondary, and tertiary sectors—must fit together like a jigsaw. Public-private collaborations and policy frameworks are important. If the RBI and IRDAI push banks and insurance businesses to develop EV-friendly products, commercial EV adoption might increase.
A strong mix of governmental policy and private engagement in these areas can help the Indian EV ecosystem compete globally. Indian EVs are closer to flying cars on the abstraction curve a decade ago. The ecosystem’s power has taken us close to an electric mobility future.
