EVs need regulatory charge

Harsimran Kaur | Updated on May 14, 2021

India must put its electric vehicle transition plans in high gear

Soon after US President Joe Biden took office, he passed an order for an all-electric federal vehicle fleet. Since then, leading auto manufacturers including Ford, General Motors, and Jaguar have announced ambitious targets to sell only zero-emission vehicles in the coming years. Late last year, the UK and China announced bans on selling petrol and diesel cars from 2030 and 2035 onwards respectively.

While India, too, has signalled strong electric vehicle (EV) ambitions, bold policies and announcements from domestic automakers are awaited. India cannot afford to miss the EV revolution given that its automotive sector is one of the largest contributors to national GDP. Recent research by the Council on Energy, Environment and Water (CEEW) also finds that 30 per cent EV sales in 2030 could result in ₹1-lakh crore of oil savings, 1.2 lakh new jobs, and 16 MtCO2 reductions in GHG emissions. So, while the goal is clear, what will it take to realise this ambition?

So far, India’s EV adoption story has primarily been driven by market-pull policies in the form of financial incentives to consumers provided by the national and state governments. While these policies have helped kickstart an ecosystem for EVs, the uptake has only been about 1 per cent of the total new sales.

A strong regulatory push is the missing piece in the policy puzzle to accelerate the transition to EVs. Leading EV markets — China, the EU and the US — have demonstrated the impact of well-designed mandates and strong regulatory standards on bringing about transformational market shifts. India, too, has a strong case to adopt these policy-push measures going forward.

First, India must announce a mandate for manufacturers of two-wheelers (2Ws) and three-wheelers (3Ws) to sell 30 per cent zero-emission vehicles (ZEVs) by 2030. In spite of being the world’s largest market of 2Ws and 3Ws, India’s big conventional automakers have been reluctant to shift to EVs so far in these segments.

China’s New Energy Vehicle (NEV) mandate introduced in 2018 pushed car manufacturers into increasing output of EVs. The mandate also gave an impetus to global automakers to tie up with local Chinese players.

To help Indian manufacturers comply with ZEV mandates, policymakers should lay out annual targets for compliance combined with a credit mechanism, including provisions for banking and trade of credits.

Stringent CAFE standards

Second, India must adopt significantly stringent corporate average fuel economy (CAFE) standards for the 2025-2030 period to nudge car companies into manufacturing EVs. India introduced CAFE standards for passenger cars in 2015, taking effect as two-phase targets in FY18 and FY23.

To comply with the targets, manufacturers have to innovate and adopt incremental technologies such as light-weighting, higher engine efficiency, aerodynamics, or advanced technologies such as EVs. Indian CAFE standards, however, are lenient compared to global regulations. An analysis by the International Council for Clean Transportation (ICCT) shows that Indian car manufacturers could easily achieve FY23 targets without shifting to EVs.

Tightening of CAFE standards has proved to be an effective measure in other leading EV markets. Manufacturers in the EU are heavily promoting EVs to meet the 2021 standards of 95 gCO2/km. This has supported a rise of 137 per cent in EV sales, year-on-year, in a disturbed auto market that was down 20 per cent, year-on-year, overall. Given that this regulatory mechanism is already in place, India too must leverage it to accelerate the supply and uptake of EVs.

While regulatory nudges could accelerate India’s EV transition, the auto industry too must chart out plans for EVs. For a sector that is still recovering from the adverse effects of the pandemic and recouping investments made in the BS-VI transition, the transition to EVs is not going to be easy. But recent government announcements such as the vehicle scrappage policy and the production-linked incentives could be leveraged to capitalise on the immense opportunity that lies ahead for India.

The leapfrog to BS-VI standards in 2020 has shown what a determined regulatory push can achieve. But the job of decarbonising the transport sector is only half done. India must now put its EV transition plans in the high gear to truly achieve the vision of Aatmanirbhar Bharat.

The writer is a Research Analyst at the Council on Energy, Environment and Water

Published on May 13, 2021

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