To cut emissions in the country, the transport sector is in a phase of transition. The endeavour is to shift as fast as possible from fossil-powered vehicles to electric vehicles (EVs). For this, government support is critical in several areas, including the setting up of a pan-India charging infrastructure.

While these may seem early days, EV adoption is slowly gaining traction with sales expected to top two million during 2023-24. The government’s support for start-ups and original equipment manufacturers (OEMs) in an import-dependant segment could play a significant role in the effort to electrify 70 per cent of all commercial cars, 30 per cent of private cars, 40 per cent of buses and 80 per cent of two- and three-wheelers by 2030.

Government support

Economics of scale and localisation are expected to reduce manufacturing costs and make EVs more affordable, while the rise in fossil fuel costs could disincentivise the purchase of internal combustion engine (ICE) vehicles. Though higher upfront cost differential between EVs and ICE vehicles is a key barrier, early parity could be a trigger for growth.

“The electric vehicle adoption and setting up of charging infrastructure currently face a chicken and egg situation where vehicle owners fear range anxiety and charging point operators fear poor utilisation due to low adoption,” notes Rohan Rao, Partner, KPMG in India. He adds: “In this transition, two-wheelers and three-wheelers are at the forefront of EV adoption. The EV adoption in two-wheelers for the next two-three years shall be contingent on government support till parity is achieved.”

Commercial users are currently at the forefront of EV adoption. However, significant penetration can only be achieved with large scale EV adoption for personal use which is expected to pick up once battery and component prices go down. Given the reducing cost curves across battery, motor and other major vehicle components, and more OEMs entering this space, EV adoption in India is likely to see significant tailwinds in the coming years. This will be particularly in the two- and three-wheeler segments.

The good news is also that the Central and State governments are now prioritising replacing their ageing public transport fleets with electric buses to decarbonise intra-city transport. Under the National Electric Bus Programme, about 50,000 electric buses are expected to be deployed in the next 7-8 years. Trials on high density inter-city routes are also expected with the introduction of buses with a 400-450 km range per charge.

Charging infrastructure

At present, there are barely 5,000-6,000 charging units. But things are changing. Innovative models for private and public charging, on-the-go charging stations at fuel stations are happening. A whitepaper by Alvarez and Marsal in 2022 pointed out that India has to set up 46,000 EV charging stations by 2030. With a large automotive industry, India is ripe for innovation and rapid adoption of EVs. Some industry subsegments can grow at 50-100 per cent annually over the next five years if supply chain, product safety, product and battery innovation, charging infrastructure and financing obstacles are removed.

“All the oil and gas majors in India are aggressively setting up EV charging stations. IOCL, HPCL and BPCL have set up a number of charging stations and these companies have tie-ups with multiple OEMs, charger manufacturers and fleet operators for support and technology transfer. These OMCs have plans of installing 20,000-plus charging stations by 2027, pursuing EV as a serious opportunity,” says Rao.

For electric two-wheelers and cars plying within cities, range anxiety is not a major challenge with intra-city travel limited to 30 to 50 km a day. However, it is a concern for inter-city travel. Therefore, both the government and companies are planning EV fast-charging corridors along national highways. The effort is to upgrade existing highways to integrate one EV charging station per 50-100 km.

By all accounts, the EV segment needs longer-term government support to encourage organisations and end-customers. Manish Saigal, Managing Director at Alvarez & Marsal India, says: “While the government is determined to make India the global hub for EVs, consumers are seeking cleaner options for mobility; e-commerce and other progressive freight businesses have already announced aggressive sustainability targets for electrification of their fleets.” The stage is set and all stakeholders are awaiting the big push. If all goes well, the targets set for EV penetration are likely to be achieved by 2030.