Before the COVID-19 pandemic, India’s electric vehicles sector was languishing and rates of adoption were petering out. Now, India could be the next major market for electric vehicles, in large part thanks to commercial EV adoption.
In fact, the subcontinent’s demand for EVs for commercial use alone is expected to increase a stunning 15-fold in the next six months alone. The sudden spike in uptake is being fuelled by the confluence of a number of factors including rising fuel prices, lower EV prices, government support and incentives, and the electrification of fleets for ecommerce delivery.
The Indian economy has seen record fuel prices this year, even as oil prices dipped. The rapid increase in fuel costs is almost entirely due to hikes in both state and federal taxes on both gasoline and diesel. “Central taxes on petrol went up from about Rs 9.48 per litre in April 2014 to Rs 32.9 per litre in May 2020, a nearly 250% increase, per Ministry of Petroleum and Natural Gas data,” Indian new outlet Business Standard reported in July at the height of the fuel price spike. This has hit the transportation and shipping sector especially hard. "[Fuel price hikes are] easy money for the government [but] a slow poison for us," Suresh Khosla, secretary of Bombay Goods Transport Association (BGTA), told Business Standard. "Think of [it in this way]... we are in a Titanic which is about to sink," Khosla told IndiaSpend.
It makes good financial sense, then, that Indian companies are seeking to wean themselves off of traditional fuels. Over the course of 2020, even as the world battled the first wave of the novel coronavirus pandemic, India increased its electric bus registrations by 34%, according to the International Energy Agency’s 2021 global EV outlook report.
At the same time that the Indian government is making fuel prices rise, both state and central government entities are ramping up incentives to make EVs more accessible and affordable. The government is targeting EV sector growth as a means to lower dependence on foreign crude imports and to improve the country’s infamously poor air quality. At present, the Indian EV sector is small, and the commercial EV sector is negligible. But all of that is set to change. Indeed, India counts itself among a handful of countries that have signed on for the global EV30@30 campaign, in which nations aim to make 3 out of every 20 new car sales an electric vehicle by 2030.
Just this year India’s cabinet approved an incentive scheme to the tune of approximately 260 billion rupees ($3.5Bn or €3Bn) over a five-year period, which will go toward the production of EVs (both battery and fuel cell vehicles) as well as domestic drone manufacturing. The Indian government is hoping that this will help India become competitive in the global automobile sector and attract new investment. While Teslas are not available in Indian markets, largely due to their high price point, Tesla has already set up a subsidiary in Bangalore this year and plans to build a plant on the subcontinent.
Currently, India’s transportation sector consumes far less energy per capita than developed countries. “Petroleum product consumption to meet all transport demands in 2009 ranged from 52 GJ/capita in North America to less than 4 GJ/capita in Africa and India where mobility for many people is limited to walking and cycling,” according to the IPCC. As more and more Indians join the middle class, however, growing rates of vehicle ownership pose major challenges to the country’s infrastructure and the climate. India’s cities, already choked with traffic and smog, have much to gain from the widespread adoption of EVs.
The rest of the world, too, has a vested interest in the success of EV adoption in India. This year the IPCC and the UN released a damning assessment report on the state of climate change which showed that humans have already irreversibly altered the climate, and that it’s now necessary to do everything possible to mitigate further damage. As vehicle demand grows around the world, it is absolutely essential to make sure that EVs represent the lion’s share, if not all, of new vehicles hitting the roads.
By Haley Zaremba for Oilprice.com
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