Niti Aayog, a planning body considered to be India’s most influential think-tank, is sending a report to Prime Minister Narendra Modi, targeted at electrifying all vehicles in the country by 2032. It’s likely to shape a new transport policy, according to government and industry sources.
The 90-page report also encourages the government to back the opening of a battery production plant for electric vehicles by the end of 2018. Another argument is using tax revenue from the sale of gasoline- and diesel-engine vehicles to pay for charging stations that would power the EVs.
Taxes and interest rates would be lowered for those purchasing EVs, and conventional petroleum-powered vehicles would see a cap on how many could be sold.
These policies would be a dramatic shift for one of the world’s fastest growing auto markets.
India may follow a similar route as China.
Like China, India is seeing it big cities become packed with new residents and vehicles as the economy grows. Indians are moving away from agrarian districts and small towns to live in their first flats in the city. While many will ride bicycles and take public transit, personal vehicles are taking off in popularity.
Similar to China’s “new energy vehicles” policy, plentiful subsidies may appear on the market to bolster EV sales. India may remove incentives from hybrid vehicles and keep them attached to plug-in hybrids like the Chevy Volt and battery electric models like the Tesla Model S.
Ever crowded cities bring a new set of challenges including traffic gridlock and air pollution. India’s policy is focused on this demographic trend.
Two other factors come to play. One is the country’s goal to cut oil imports in half, and to reduce carbon emissions tied to the Paris climate treaty. Related: IEA Sees Oil Market Supply Deficit Deepen Significantly This Year
"India's potential to create a new mobility paradigm that is shared, electric and connected could have a significant impact domestically and globally," said a draft version of the report.
EV sales, like in most large vehicle markets around the world, have been slight in India. The segment represents slightly more than 1 percent of new vehicle sales in that market, with Delhi having the largest share. Delhi’s government had enacted the Air Ambience Fund to subsidize clean air strategies including EV purchase incentives.
As for now, Mahindra & Mahindra is the largest seller of EVs in the nation. The Mahindra e20 small electric hatchback is the top seller in India for that segment.
Most of the EVs are built in country, such as the Mahindra e20 and e-Verito, and Maruti Suzuki electrified models. The BMW i8 import is another top seller in that market, as is the Volvo XC90 plug-in hybrid.
Tesla plans to open shop in India this year. When asked about that plan on Twitter, CEO Elon Musk posted that it will take place soon. “Hoping for this summer,” he tweeted.
Tesla’s contact with India inspired a visit from government officials to Tesla’s corporate campus in California during fall 2016. The prime minister and a delegation toured the facility and invited Tesla to join India’s campaign to become a renewable energy hub.
One area of particular interest for the Indian officials was Tesla’s Powerwall battery energy storage product. India has a serious problem in consistently delivering electricity to its crowded cities and small villages. Powerwall could help store needed energy supply. Related: 3 Reasons Natural Gas Is Heading A Lot Higher
India has been looking into alternative energy sources for years. The U.S. Department of Energy reported that India was the fourth largest consumer of crude oil and petroleum products in the world in 2015, after the U.S., China, and Japan. The country depends heavily on imported crude oil, mostly from the Middle East, similar to China. More than 80 percent of its crude oil demand is being met through foreign oil suppliers.
The Indian government has been pushing for increasing domestic fuel sources reducing foreign imports, improving air quality, and reducing carbon emissions in fast growing cities. That can come from renewable energy replacing coal, more domestic oil production, liquefied natural gas for commercial vehicles, and compressed natural gas for light-duty vehicles. Electric vehicle transportation is being added to the list.
To raise those new vehicle sales numbers way beyond 1 percent for EVs will be a real challenge. High battery costs keep the price of the cars too high, even when government subsidies wash away a chunk of that sticker price. Lack of a charging infrastructure keeps the “range anxiety” in place for drivers afraid of running out of electric power before they arrive at their destination.
Those challenges will raise the bar on the government finding necessary support to adopt the ambitious policy. Backing will need to be assisted by major companies, such as automakers and energy suppliers, willing to establish presence and capital in the growing market.
By Jon LeSage for Oilprice.com
More Top Reads From Oilprice.com:
- Production Cuts vs Innovation – Why OPEC Has Lost The Oil Price War
- Why Goldman Thinks You Should Go Long On Oil
- Oil Edges Higher As OPEC Reaches Consensus On Cut Extension