AUTHOR: AM DEVENDRANATH is Vice President, BU Head – AC&R and Energy at Feedback Consulting in New Delhi (India).
Like the solar boom five years back, electric vehicles are causing a similar disruption today in the auto industry globally. India is at the cusp of deciding its future and it is important for everyone to get a 360° perspective of what it means and what would work for our nation. This research paper by Feedback Consulting is an attempt to put all these perspectives in place and make a call on what would work for India. Excerpts:
GLOBAL DEVELOPMENT OF EVh AND WHERE IT STANDS TODAY
Most global observers and researchers are revising their electric vehicle forecasts upward as improving battery costs challenge previous assumptions about growth. A new study by Bloomberg New Energy Finance  has shown that OPEC has drastically increased their EV forecast this year compared to the last year, (1). This is largely due to developments in lithium-ion batteries, driven primarily by China.
China, in fact, has bet heavily on the EV industry for many strategic reasons, including its urgent need to reduce oil imports, pollution reaching significant proportions, and its long held desire to dominate most spheres of business. The auto industry, based on IC Engines, is one industry that it hasn’t dominated yet as it is largely dominated by European, Japanese and American technology. China has worked on this over the last 10 years or so, and has made immense progress. Some highlights include:
:: It has the highest capacity for lithium batteries. It is said to be building capacity for one million batteries a year, and has secured resources around the globe for lithium supply;
:: On the demand side, they have been investing heavily on Government subsidies to drive up demand and have plans to set goals for electric and hybrid cars to make up at least a fifth of Chinese auto sales by 2025, with a staggered system of quotas beginning in 2018;
:: It is going to create a national champion in batteries and is determined to close the gap with Korean and Japanese battery makers by 2020;
:: To reach this ambitious target, the Chinese government offers substantial fiscal subsidies, at both the national and local levels. By the end of 2015, the Chinese national government had poured 33.4 bn yuan (~ $ 4.87 bn) into its EV market, and EV sales skyrocketed from 2,300 in 2009 to 507,000 in 2016. As many as a third of these sales were electric commercial vehicles (buses, coaches, trucks, and vocational vehicles), while electric passenger car sales hit a record of 336,000 in 2016 .
STRATEGIC IMPERATIVES FOR INDIA
There are many strategic imperatives for India today. Some of these have an impact on our choice of going full EV, taking the hybrid to EV route or sticking on to the IC-engine based auto route.
:: Fuel Security: The most important aspect for a developing nation like us is the issue of fuel security. India currently depends on large scale imports of crude to meet most of our mobility fuel needs. India’s gross petroleum import bill, including shipments of both crude oil and petroleum products, rose 9 % last financial year to $ 80.3 bn  on the back of 7 % rise in volumes and a 3 % increase in the average crude price. If the current status quo is maintained, our energy consumption for motorised vehicles will increase from ~ 50 MTOE to over 200 MTOE by 2030 . So, the question of maintaining a status quo on our motor vehicles policy for the long term is invalid and we need to look at every possible route to reduce our fuel consumption.
:: Reduction in Carbon Emissions: Along with fuel security, one other important aspect facing India and its development goals is the urgent need to reduce carbon emissions and meet our climate obligations. If the current status quo is maintained, our carbon emissions from motorised vehicles will increase from ~ 150 mn tonne to over 550 mn tonne by 2030 . So, the question of maintaining a status quo on our motor vehicles policy for the long term is invalid and we need to look at every possible route to reduce our carbon emissions as well.
:: Lower Power Demand: One curious problem, which we have seen in the last three to four years, ever since most of the supply side issues in power generation (coal) were taken care of, is the issue of lack of growth of power demand in the country. Most power plants are operating at a plant load factor (PLF) of 55 % in the country. This, coupled with ambitious renewable energy targets and growth (over 175 GW by 2022), will lead to a serious case of oversupply and the viability of a crucial engine of the Indian economy (power sector) will be in serious question. Planners in the 11th and 12th five-year plans had factored for a growth of 7 % in power demand in India. While it has been stagnant for most years in the last five to six years, FY2017 has shown a growth of 4.08 % over FY2016 . A new source of power demand in terms of EVs will be highly appreciated by the power sector. It may lead to more stable power demand and that too from a ‘paying customer segment’ over the years, and thus increase the viability of the sector.
FUTURE OF INDIA’S MOBILITY
India began to take the emergence of EVs seriously only in 2009-10. In January 2013, the National Electric Mobility Mission Plan 2020 (NEMMP) was launched, with a target of deploying 5-7 mn EVs in the country by 2020. Unfortunately, apart from launching this plan and a few pilot projects, nothing much was done on the ground in terms of implementation of this policy. In April 2015, the new central Government launched the FAME scheme (Faster Adoption and Manufacturing of Hybrid and Electric vehicles) as a part of the NEMMP 2020 to promote the sale of EVs in the Indian market. Under the FAME scheme, the Government would provide certain incentives to lower the purchasing cost of EVs:
:: The scheme has four focus areas – technology development, demand
creation, pilot projects and charging infrastructure;
:: Overall, the Government is expected to spend around Rs 14,000 cr on this scheme, which includes incentives to the customers for purchasing EVs, incentives to the manufacturers for research and development besides developing the charging infrastructure;
:: During FY2016, an amount of Rs 75 cr was allocated for this scheme, which was almost fully utilised. In FY2017, approximately Rs 128 cr has already been utilised;
:: Under this scheme, about 111,897 hybrid/ electric vehicles (xEVs) have been given direct support by way of demand incentives since the launch on April 1, 2015;
:: Department has also approved pilot projects, charging infrastructure projects and technological development projects aggregating to nearly Rs 155 cr;
:: The Union Budget for FY2018 allocated Rs 175 cr for promotion of green cars. The fund would be utilised for establishing 200 charging stations, granting incentives for 1.5 lakh vehicles, 200 electric buses and 1,000 electric government vehicles, besides creating infrastructure for making EVs and research in battery technology. Incentives of about Rs 33-66 lakh are planned for each electric bus, which typically costs around Rs 1-2 cr for CBUs and around Rs 50-80 lakh for the locally-made buses;
:: Under the JNNURM (Jawaharlal Nehru National Urban Renewal Mission), NEMMP (National Electric Mobility Mission Plan) and Smart City plans launched by the Government, various state and local transport bodies are expected to purchase electric buses over the next five years.
Until 2016, the NEMMP 2020 was extensively handled by the Department of Heavy Industry (DHI). This year, a major inter-ministerial discussion on this included the PMO, Niti Aayog, DHI, ministries of Power, Road Transport & Highways, Urban Development, Petroleum and Finance. From this emerged a need to look at transforming mobility in the country and reduce the dependence on fossil fuels and imports obligation on the country. One of the key pillars of this transformative mobility – laid down in the report titled “Transformative Mobility Solutions for All” – is the emergence of EVs and the EV infrastructure that will be needed.
This report sets out the future direction from not just an auto industry perspective but looks the future of mobility and the key essence of this plan is to move towards a mobility solution for India by 2030, which is shared, connected and electric. The report looks at various modes of transportation in terms of private and fleet ownership, and has provided for a roadmap of each element to move towards EVs. The report calls for an early movement of fleet-operated vehicles to electrified powertrain as it makes more economic sense to them rather than private owners, as is shown in (2) .
With the Government rolling out GST, EVs will now attract a 12 % tax, while hybrids fall in the 43 % tax bracket. This has led to a lot of heartburn in the auto industry, and stakeholders are now demanding reduction of GST on hybrids.
THE LIKELY IMPACT
From a long-term national perspective, the policy may make sense, but the immediate impact of the policy on the Indian auto sector may be unsettling for many reasons. Most of the Indian auto and auto ancillaries are based on IC-based (internal combustion) technology and are doing well in this segment. Most of these players were planning to shift to hybrids first, and then plan for EVs in the distant future. The FAME scheme in 2015 further pushed the Indian auto industry towards hybrids, and most MNC firms had made serious investments and plans to launch hybrid vehicles in the country. The rollout of GST, however, has sent a clear signal to the Industry that India will move towards EVs and may look at hybrids in between.
One positive aspect that remains is that the private four-wheeler segment will still require a longer time to move towards EVs, and this could push hybrids with some policy interventions. This will also help the Indian auto sector to utilise the existing investments on this technology.
This will necessitate the Indian auto sector to relook at our skills and the ecosystem we have built over the years. The industry will need to move with the changing times and prepare itself to cater to the promised growth in EVs. This will also need considerable investment – Rs 1.8 lakh cr  – in setting up EV infrastructure, such as charging stations, in the country. There will be a considerable play for electronics design and manufacturing in this sector going forward.
IDEAL ROADMAP FOR INDIA
India moving towards EVs is an ideal decision. Today, we are in the same stage as we were in the solar industry five years ago. In these five years, we’ve seen how Chinese solar imports have dealt a death blow to our panels manufacturing industry and the Make in India story is a non-starter here. We need to make sure that we do not get trapped in a similar situation in the EV story, as there is every possibility that China will be presenting a huge competition to the Indian industry in this business as well.
There will be an urgent need for a strong policy framework to promote Indian manufacturing and support from the Government to make our Indian stakeholders move towards EV gradually. There is an urgent need also to help Indian suppliers move towards making EV components in India. There will be a series of support initiatives required to develop products, testing infrastructure and also to reskill our huge workforce in this area.
The Government has already taken a lead and is promoting the power PSUs to set-up EV charging infrastructure in the country. We would need more action on getting lithium-ion battery manufacturing in India, and not be a nation of assemblers with core imports from China. This would need serious work in securing the raw materials for battery manufacturing. The EV charging infrastructure would need serious investment and this investment should be directed towards ‘Made in India’ chargers. This would also help our electronics manufacturing in a big way. There will be a need to set-up global technology centres in motor design and manufacturing, and we should encourage global firms to invest in India in this.
 July 17, 2017, Everyone Is Revising Their Electric Vehicle Forecasts Upward—Except Automakers – https://www.greentechmedia.com/articles/read/everyone-is-revising-electric-vehicle-forecasts-upward
 Subsidy fraud leads to reforms for China’s EV market, Published Tue, 2017.05.30 | By Hongyang Cui, http://www.theicct.org/blogs/staff/subsidy-fraud-reforms-china-ev-market
 April 26, 2017 – ET Energy world - India’s petroleum import bill rose 9 per cent last fiscal, import dependency of crude rises to 82 percent - http://energy.economictimes.indiatimes.com/news/oil-and-gas/-indias-petroleum-import-bill- rose-9-per-cent-last-fiscal-import-dependency-of-crude-rises-to-82-percent/58380805
 Page 8 of Niti Aayog and RMI report on Transformative Mobility Solutions for all
 Page 8 of Niti Aayog and RMI report on Transformative Mobility Solutions for all
 July 7, 2017, Economic Times - Power demand healthy, excess supply a worry http://economictimes.indiatimes.com/articleshow/59481472.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
 Niti Aayog and RMI report on Transformative Mobility Solutions for all
 Govt needs to spend about Rs 1.8 lakh crore in electric vehicle infrastructure to meet 2030 target - http://www.zeebiz.com/companies/news-govt-needs-to-spend-about-rs-18-lakh-crore-in-electric-vehicle- infrastructure-to-meet-2030-target-19919