The clean makeover of India’s transportation systems: Reasons for optimism

Aayushi Jain, Director of Policy and Government Partnerships, Bounce
Reading time: 4 minutes
21 June 2019

India is on the cusp of the electric mobility revolution and with the new government now in power, the country is seeing it both as an opportunity for economic growth and for drastically reducing carbon emissions. The recent national budget saw India investing $US 1.2 Billion into electric vehicles (EVs) as well as all major global Original Equipment Manufacturers (OEM) announcing the launch of new electric vehicle models. And so, it is evident that the Indian electric mobility market is ready to take off and explore different business models and invest in local deployment. Policies too are shaping up with both central and state governments creating clear pathways to support the deployment of electric vehicles in their jurisdictions.

However, India needs a transformative and collaborative approach to accelerate large scale adoption of electric mobility. Identifying opportunities and addressing core challenges is the first step to shifting our transport ecosystem to one that is reliable, affordable and - most importantly - clean.

Capitalizing on the global electric mobility revolution

Electric vehicle sales in 2017-2018, both two and four-wheelers, account for less than 0.3% of the total new vehicle sales in India (SIAM, SMEV data). Even if FAME 2 (India’s national subsidy program for EVs) achieves its target of 1.5 million EV sales by 2022, the share of electric vehicles in new sales would be at best 2%.

Like any other country, the primary barriers to adoption in India include upfront high purchase cost of EVs in comparison to Internal Combustion Engine (ICE) vehicles, limited availability of vehicle models and the lack of charging infrastructure. Right now, the typical EV purchase cost is anywhere between 1.5x to 2.5x of the ICE equivalent model.

On the other hand, OEMs in India have taken an apathetic approach to this technology trend, resulting in less than 10% of the total new models announced in India over the next three years to be electric. The large-scale production of EVs is staggered due to debates on what comes first, charging infrastructure or EVs. As a result of this tug of war, both ends of the equation have stagnated the on-ground local deployment numbers. This nexus of cost, convenience and commitment have kept consumers away from converting into EV users.

An opportunity to boost environmentally friendly economic progress

Rocky Mountain Institute published the India Leaps Ahead report in 2017, outlining how shared, electric, and connected electrification of passenger transportation can lead to a reduction of India’s import bill by US$ 60 Billion by 2030. An enormous amount that can not only be invested back in the local economy but also reduce India’s dependency on oil imports, which is currently as high as 80%.

Similarly, the share of road transport in the logistics industry is US$ 200 billion, out of which 60% is the fuel expense alone. Lawrence Berkeley National Lab analysis suggests that electrification of trucking in combination with solar based charging infrastructure procured through power purchase agreements can reduce the fuel expense by 80%. This reduction in fuel expense itself would add another US$ 100 billion to the Indian economy and reduce prices of the goods that have high share of logistics cost.

India has 22 of the 30 most polluted cities in the world. This presents a great risk for the environment as well as the human health in the country. Making India’s passenger mobility shared, electric, and connected, it can cut its transportation-energy demand by 64% and transport carbon emissions by 37% by 2030, in comparison to 2015.

There is always an argument that EVs do not help reduce emissions as they merely shift vehicular emissions to the thermal power plant stack, thereby shifting the burden from urban to rural areas. However, a recent IEA report clarified that overall, the world would benefit from converting to electric, even with the current share of renewables in the power mix.

Given India’s commitment to reaching 175 GW of clean energy generation by March 2022 and clean energy investments, mostly related to solar power projects, adding up to US$ 7.4 billion in the first half of 2018 (BNEF report), India is fast accelerating to a cleaner grid. With this uptake in renewables, combined with local storage infrastructure and fast evolving vehicle to grid capabilities in EVs, India’s grid efficiency in the future will be strengthened. Also, conversion to electric vehicles can increase thermal plant PLFs from 60% to 90%, due to additional capacity utilization leading to reduction of cost of power by US$ 0.014/unit. Adding all this up, soon we will drive EVs on a clean grid, making it 100% decarbonized and reducing India’s dependency on oil imports.

Leading the electric mobility transition

The recent FAME 2 announcement in early 2019, as well as ongoing discussions on having only EVs sold after 2025, sends a clear signal to global and local markets that India is all in for the electric transformation. However, to successfully implement this many issues need to be resolved, including supply side bottlenecks.

Both China and California have developed and deployed Zero Emissions Vehicles (ZEV) mandate frameworks that require OEMs to manufacture a certain percentage of their production as electric vehicles. Grasping learnings from the ZEV mandate frameworks and how they pushed the envelope on adoption, it is time Indian policy makers think about building a similar framework to ensure the increase in availability of EV models as well as local manufacturing.

India’s Smart Cities Mission can be another key lever to accelerating electric mobility in India. Given the active dialogues smart cities across India are engaged in locally, each of them can lead the way in defining the electric mobility vision for their city by setting up an EV task force. This task force can be across multiple agencies and become a role model in converting their own fleet of bus, truck and cars.

The private sector can also play an important role in accelerating the transition to EVs. The Climate Group's global EV100 initiative brings together leading companies such as SBI, Wipro and BYPL to switch their own fleets to electric by 2030. Many are also installing charging infrastructure for customers and employees, helping to address practical challenges while sending an important demand signal to manufacturers.

In conclusion, accelerated adoption of electric mobility is a huge opportunity for India to move towards an equitable clean transportation system. This opportunity can be capitalized on by businesses, entrepreneurs, philanthropists and policy makers coming together to accelerate the makeover towards a shared, connected and electrified transportation future.

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