A recent statement from the Indian Union Transport Minister, warning the car makers to be prepared to be bulldozed by legislation if they don’t start producing all-electric cars by the year 2030, has created quite a storm within the automobile industry. I believe that it is rather an ambitious plan for a developing country like India. Even a developed nation like the United Kingdom only plans to ban the sale of all petrol and diesel vehicles by the year 2040.
Now, to speak of the challenges which lie ahead of this mission. India currently has 10,000 odd electric cars (passenger vehicles) on road and in a market that sells close to 25 lakh vehicles powered by tradition diesel and petrol engines annually, the number seems daunting. The task would involve to first ramp up production, bring down the cost and most importantly set up the necessary infrastructure in place for massive charging requirements.
Can India do it – a question which plagues my mind? I certainly believe that we can! But uncertain policy changes and shifting goals posts every few years has seriously impacted numerous car makers’ expansion plans in India. The change in the tax structure of different segments of cars sold, tightening emission norms and a total ban of certain kind of vehicles has instilled fear among automakers, prompting them to consider halting all future expansion until the Government gives a definite roadmap for the industry. Major carmakers have the electric technology ready to be put to mass production, what they are looking for is support from the Government to provide a solid roadmap to justify their investment in any market.
With this sweeping policy change of electrifying all new cars sold by 2030, the Indian government sure has the work cut out for them and sure it’s going to be hard. From installing massive infrastructure for recharging these cars to making India profitable for car makers to invest in electric technology and its production and providing tax exemption and other incentives for its mass consumption, the Government really needs to start stepping on the electric- pedal to achieve this ambitious target in little over a decade’s time.
One of the major concerns which persist is the cost of production of batteries, which now constitutes about 40% of the cost of an electric car. Modern electric cars use lithium-ion batteries which are more efficient and provide an extended driving range. Since lithium-ion contains rare earth elements such as lithium, cobalt and nickel, they are expensive to manufacture. Even though the battery technology progression gives us hope along with the price drop (over 80% over the past five years) witnessed by lithium-lion battery, it still costs about $200 per kWh now. This is further expected to fall to $100 per kWh by 2030. Research has indicated that sodium-ion batteries can achieve similar results and with lesser rare earth elements involved. Furthermore, it can be produced at much lower costs.
All this technology is promising however, we would benefit the most if these batteries are manufactured in India. With little research in battery technology undertaking in India and the absence of a single manufacturing unit, these batteries at the moment, are to be imported which further ups the cost of making an electric vehicle in India.
Let’s move to the topic of how other countries are being able to accelerate the adoption of electric vehicles? For example – take Norway – it has a 29% electric car market share. Is it because that the population is environment-conscious or is it more of an economic decision that is encouraging people to ditch fossil-fuel cars? In fact, in all other countries leading the list after Norway – Netherlands, Sweden, China, France and the United Kingdom, the surge in the usage of electric-cars is mainly due to the incentives and tax relaxations provided by the respective Governments.
In Norway, electric cars are exempted from acquisition tax of up to $11,600, 25% Value-Added Tax (VAT) on car purchases and relaxation on road tolls and ferries. Furthermore, electric vehicles are also provided free charging and parking facilities across the country. In fact, more than 70 per cent people in Norway migrate to an electric vehicle due to economic reason than say environmental concerns. Why won’t you if a Tesla comes cheaper than say a BMW 5-series?
We are not saying incentives and tax-relaxation are the only way forward in a country like India, where the size of the industry (number of cars sold) would become a huge economic burden for the Government to bear alone. Changes should be structural – investing more in battery technology to bring down the cost significantly, encouraging car makers to localize electric vehicle production by providing reasonable tax relaxations, working with private players to provide extensive charging facilities for these electric cars, and most importantly – providing incentives and tax relaxation to consumers to embrace electric car technology without them having to pay a hefty premium over traditional options.
All this will be futile if we keep on relying on tradition coal-powered electricity generation method to facilitate the electric-vehicle revolution. India has to make a drastic switch to renewable sources of energy generation such as solar, wind, hydroelectric and safe nuclear options to achieve lesser emissions in total.
Also, advancement in alternate fuel-powered cars such as hydrogen fuel-cell and biofuels should be of utmost priority to systematically bring down the number of cars being sold which are powered with fossil fuels by the year 2030. The Government through legislation, should phase-out and promote scrapping of cars older than 10 years. It would be highly desirable to not have a single car that runs on fossil fuel by the end of the year 2039. Let’s all hope and work together towards a cleaner tomorrow!