Why 2022 can be a watershed year for EV adoption in India

The global automobile industry is witnessing a paradigm shift to electric vehicles (EVs), and India’s nascent EV industry has joined this turn of the tide. Ever-rising fuel prices, clubbed with rising pollution, are pushing India to adopt EVs at a rapid pace.

All signs indicate that 2022 will be the tipping point in EV adoption. But which sector will lead the charge? Contrary to popular belief, it is the commercial vehicle sector, with its large volume of three-wheelers and small four-wheelers, which will be the driver of India’s EV revolution in 2022.

Adoptions of EVs in the commercial vehicle sector is most likely to see a faster turnaround owing to its ability to support India’s first and last-mile connectivity - for delivery and mobility purposes.

Range anxiety continues to be a pain point for EVs due to the lack of charging infrastructure that does not allow for long-distance travel. This is where primarily e-rickshaws or electric three-wheelers come into play. In India, three-wheelers are a common sight, carrying either passengers or packages helping to breach the last-mile connectivity gap.

Sustainable solution to India’s last-mile delivery and commute

As per World Economic Forum, the demand for urban last-mile delivery is likely to increase by 78 percent by 2030. In India, companies from sectors like ecommerce to FMCG are inclined towards adopting electric three-wheelers as an eco-friendly and efficient solution for last-mile delivery.

Electric three-wheelers offer excellent maneuverability on vehicle-laden roads in urban areas. Furthermore, unlike their fuel-guzzling counterparts, they has relatively lower running and maintenance costs for shorter transits.

With effective integration of technology to streamline and accurately plan workflow, deliveries, facilitate fleet management and allow scalability, electric rickshaws are the best solution for last-mile deliveries.

Electric rickshaws also play a major role in India’s broken mobility landscape by helping bridge the gap of first and last-mile connectivity. As many as 82 percent Indians do not even own a vehicle. Shared mobility through electric rickshaws does not only offer the perfect solution to first and last-mile commute, but also helps to reduce the carbon footprint.

India is one of the countries to support the global EV30@30 campaign, which aims to transition at least 30 percent vehicle sales to EV by 2030. Decarbonisation of the commercial transport sector does offer a promising start. But is India’s current EV ecosystem ready for the transition?

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Reality check: India’s EV ecosystem

The transition to electric mobility to meet the EV30@30 goals is a promising global strategy. However, major steps need to be taken. There is a need for a targeted approach to help fuel the adoption of EVs, specifically two-wheelers, three-wheelers, and small four-wheelers in the commercial segment.

Where are the gaps?

Lack of clarity in policies

There continues to be a lack of clarity in various policies and schemes that are introduced by the government. The Ministry of Road Transport and Highways (MoRTH) recently introduced a battery-as-a-service business model that allowed for the sale of EVs without pre-fitted batteries.

This policy allowed the delinking of the cost of the battery and the vehicle. Batteries can account for almost 40 percent of EV cost. However, this led to confusion – would EVs sold without batteries qualify for the subsidy? Furthermore, there is no clear cohesive plan of action between the Centre and the local governments to fuel EV adoption.

Subsidies and Incentives

Currently, subsidies and investments offered for EVs are only available in 13 states. There are a lot of limitations to the subsidies as well.

More states need to be actively involved, not just through the introduction of subsidies and incentives, but also through prioritising quick disbursements of the same to bolster the adoption of EVs.

Lack of proper financial assistance

Banks have been slow in offering assistance with financing the purchase of EVs as they are unsure about the risks in a segment that is still in a nascent stage. If the Niti Aayog proposal that categorises loans to purchase EVs under the priority sector lending (PSL) segment submitted to the RBI comes to a pass, it will help the segment get credit at lower interest rates.

It is critical for India to shift to EVs in the coming years as we are the world's fourth-biggest emitter of carbon dioxide with over 1.9 tonnes of CO2 per head of population in 2019, after China, the US, and the EU. With a target to cut carbon emission to net-zero by 2070 and meet the EV30@30 goal, the steps taken to bolster EV adoption in 2022 will impact the development of the EV ecosystem in India.