Charging Ambition

 

 

ELECTRIC VEHICLES (EVs) are the future of mobility. But they are not the present. In a free market, consumers would still opt for conventional vehicles given the difference in cost. That is the case in India. However, government intervention can accelerate the penetration of EVs. Norway and China are ready role models. Is it worth going down that path for India?

Last year, Norway became the first country in the world where the total number of electric cars exceeded the total number of petrol cars. Significantly, nine of 10 cars that are being sold today are electric. The government has legislated that all cars sold by 2025 would be zero emission, and it was an early mover in giving tax incentives to consumers to buy electric. There was even free parking between 1999 and 2017. The government also built an extensive public charging infrastructure. In addition, legislation has been passed that gives EV owners the right to provision of charging infrastructure in apartment buildings. Interestingly, many of the tax incentives are being rolled back over the last two years after achieving targets.

China’s story is different from Norway’s. The country is now the largest producer of EVs in the world by some distance. Even domestically, EVs are over 40 per cent of new vehicles being sold. Chinese EV makers have footprints across the globe. The government has played a major role, weighing in on both the consumers’ and the producers’ sides. There are tax reductions and rebates available to consumers who purchase EVs. However, China’s goal has been larger than the mass adoption of EVs. It wants to be a leader in the production and technologies of EVs, a sunrise sector. Billions of dollars in subsidies have been directed at producers, both for vehicles and batteries. As with most state support in China, some is explicit (cash) and some is implicit (concessional land and power). The end outcome is that the price of an EV is roughly equivalent to the price of a similar-sized conventional vehicle, enabling consumers to make the switch. China has viewed EVs not just as a climate mitigation strategy or better air quality strategy but as a way to boost its economic growth, job creation and technological capability.

India has been less ambitious in its policies towards EVs. As a result, only 5 per cent of new vehicle sales are EVs, with a big chunk coming from two-wheelers where around 15 per cent of new sales are EVs. Consumers are given limited subsidies, mostly in the form of concessional or free registration, but these are being cut back before a critical minimum penetration is reached. The Ministry of Heavy Industries has run successive schemes, most notably the Faster Adoption and Manufacturing of E-Vehicles (FAME), and now the PM E-Drive, but these have limited funds by global standards (the latter has allocated around $1.2 billion over two years) and have focused on public transport and public charging infrastructure, indeed sensible first uses of funds.

If one looks purely at climate goals, there may be a case not to rush EV penetration. As long as thermal power is the dominant source of energy, in charging EVs too, the overall climate impact may not be big enough. In any case, the energy transition is a gradual process. Second, India has a large and robust conventional vehicles industry which contributes significantly to GDP, jobs and exports. It may not make sense to force a sudden disruption.

On the other hand, a greater penetration of EVs has its upsides. It can improve air quality. It can save on oil imports. And it can help develop a sunrise industry. All worthy goals.

India should be more ambitious. First, the government should make it cheaper to buy an EV. For a limited number of years, the sales of EVs and batteries, as well as charging services, could be exempt from GST. Parking in public places can be free. Second, make it easy to run an EV. That needs a countrywide public infrastructure and legislation for private but common infrastructure, particularly in apartment

buildings where a majority of potential users live.

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