Gearing Up For A Sustainable Move Towards E-Mobility

Taking Stock FAME Sustainable Move E-Mobility
Gearing Up For A Sustainable Move Towards E-Mobility

In India, the move towards electric mobility has recently been underlined by Niti Aayog’s announcement to go all-electric by 2030. Complementing this initiative is the Faster Adoption and Manufacturing of Electric vehicles (FAME) scheme, which intends to offer significant financial and infrastructure-related incentives to the automobile industry in having an operational eco-system in place for complete electrification.

The FAME India Scheme was implemented from 1st April 2015, with the objective to support hybrid/electric vehicles’ market development and the manufacturing eco-system. The first phase of the scheme, which came to an end last month, has helped with the sale of 45,000 EVs till March 2017. Out of the total units sold, two-wheelers accounted for a sizeable chunk of 40,000 units and the remaining 5,000 units comprised electric cars.

HARNESSING INHERENT POTENTIAL

The auto sector believes that electric mobility has massive potential and is pinning its hopes on early strategic changes in policy, which would push wider adoption of e-mobility. The Union Cabinet intends to take a call on the issue soon and Niti Aayog has estimated that India can save up to 64 % of its energy demand for road transportation and reduce carbon emissions by 37 % by 2030, if it works towards an electric mobility future.

However, the Society of Manufacturers of Electric Vehicles (SMEV) has recently raised concerns regarding confusion over the continuity of the government’s incentives to promote e-vehicles under FAME 1. Commenting on the current predicament, Sohinder Gill, Corporate Director, SMEV, and CEO, Hero Electric, said, “The recent news that the electric vehicle mission has been moved from DHI to NITI Aayog came to us a surprise, and has led to confusion and uncertainty on the fate and the timing of FAME 2.”

Reinstating the industry’s urgent need for clarity, Gill added, “The industry is seeking assurance from the government on continuity in the EV mission and that the tapering or withdrawals of initiatives should be forewarned at least a year in advance, so that the industry can adjust its business plans accordingly.”

FAME 1 Scheme created significant optimism in the EV Industry. The investment and interest in EVs has grown manifold, particularly on the assurance of DHI that NEMMP is a long term plan, unlike MNRE scheme 2011 that was abruptly closed, leading to a total collapse of the EV industry. Prominent players like Hero Electric, Mahindra and many others have allocated major resources towards electric mobility on the back of assurances that FAME 2 will seamlessly take up from where FAME 1 left off. Electric two-wheelers are a priority segment and need to be promoted heavily as per Niti Aayog. However, the majority of apartment owners, who are prospective buyers of these e-vehicles, do not buy these because of the lack of charging stations or battery swapping facilities.

Ashok Leyland’s Circuit Series made-in-India electric bus

POLICY BOTTLENECKS

The implementation of GST impacts the battery segment, which supports the EV sector. The tax levied varies from 12-28 %. (While lead acid and lithium ion batteries attract 12 % each, when fitted to an EV, the rate of taxation goes up to 28 %.) “While our aspiration is to make this zero, the immediate requirement is to bring it down to 12 %,” Gill said.

There are also issues with the road tax as it varies from State to State. “Imagine the prospect of purchasing an electric two-wheeler for Rs 60,000 to Rs 80,000 and running it for 20,000 km per year without having to spend a rupee, except on charging and basic maintenance. This will be a compelling proposition for any buyer,” Gill added.

The industry is foreseeing a situation where most of the last mile connectivity in metros could be provided by electric vehicles and all e-commerce players could also consider using EVs for last mile transport and delivery. State governments could also deploy EVs for providing public transport to airports, railway stations and other key locations.

The government is mulling incentives that include exemption of EVs from toll-tax and road-tax if individual States agree to the plan, enhancement in cash incentives for buyers, to offset EVs’ relatively higher purchase price (which could be as high as 2.5 times that of petrol/diesel vehicles), addressing battery charging and range related issues so that EVs can travel at least 100 km on one full charge, special incentives for setting up lithium-ion battery plants in India and the extension of FAME scheme from October 1, 2017.

Commenting on the government’s idea to exempt electric vehicles from certain taxes, Gill said, “Having exemption on toll and road tax will be a State decision but it will be good if there is uniformity and standardisation across the country at one single rate. With GST rollout, lithium-ion batteries bought separately as first replacement are attracting 16 % more tax from the earlier 12 % level. This will add to the cost for electric vehicle users. Addressing this issue is vital as these batteries have given the sales push to electric vehicles.”

Currently, almost all the batteries being used in electric two-wheelers in the country are imported. There is no single company that has forayed into manufacturing such batteries as the market has not fully evolved yet, because of several bottlenecks. The new government incentives and push towards EVs is expected to provide impetus for the market to develop at a faster pace. This is also expected to encourage global players such as Tesla, Toyota, Nissan and Renault to set up manufacturing units in India, thereby also supporting the Make in India initiative.

The larger government objective through the FAME scheme is to curb the use of fossil fuels in India. By 2030, India may have up to 66 crore vehicles on the road (up from the current 21 crore) and the aim is to have half of these running on electricity by the year 2030. Many recent developments, such as low GST tax rate, subsidies on EVs, and passenger vehicles going electric, India seems to be determined to steadily move towards electric mobility.

Interest in EVs has grown manifold on DHI’s assurance that FAME is a long-term plan

THE EQUATION FOR HYBRIDS

With electric buses now being covered under the FAME scheme’s amendment notification, the scope of e-mobility is expected to gain a significant boost in terms of public transport initiatives as well. As of today, whatever guidelines for e-mobility have been put in place, seem to be driving investment and energy efficiency consciousness in this segment. However, what is important is how the final implementation takes place.

Speaking on electric mobility for buses and the way forward for hybrid technology, Karthik Athmanathan, Vice President, Bus Platform, Ashok Leyland, said “In FAME 2, we are assuming that all positives are expected to be carried forward for electric buses and trucks. As a strategy, we have not entered the hybrid vehicle space. We have a couple of hybrid concepts developed, but will not be investing in them or homologating them going forward. This is because the rate at which the market is changing and government focus is shifting, we do not see too much potential for hybrid products.”

Many in the industry have their concerns regarding the use and operational success of hybrids in a market like India. “Earlier, battery prices were significantly high, hence hybrids made sense. However, with battery prices coming down, the difference in pricing has reduced, thereby making it more viable to opt for e-vehicle technology,” said Athmanathan.

Another issue with EVs is range anxiety, but with global players ramping up investments and R&D in the domain of advanced battery technology, Ashok Leyland expects this issue to be addressed effectively in the foreseeable future. Also, managing a hybrid is a more challenging job. One needs to manage the engine and the electric motor, while with an EV, it’s only the batteries and electric motor that need to be taken care of.

“We are working on clean parallel solutions like fast chargers and battery swapping. While the battery swapping mechanism had attracted criticism initially, we believe we do not have enough evidence that it will not work. Financially, it is an extremely attractive proposition. Whether it makes operational and technical sense, will be judged by its implementation. We have committed a lot of resources on the swap concept and are quite optimistic about fast chargers as well,” added Athmanathan.

Goldstone Infratech has introduced electric buses for Himachal Pradesh tourism

ASSESSING MARKET SENTIMENT

The overall market sentiment for EV technology in India is now optimistic. “At a time when investments were lost or stopped, they have now started pouring in. Industry is now serious about EVs and the market is seeing new products. The EV segment cannot grow on its own, especially in its infancy, as seen in Norway and China. Unless there is seeding or governmental support, not just in terms of direct incentives but also with infrastructure, it is difficult for the EV segment to pick up,” said Gill.

Till the time the FAME scheme was not being promoted and implemented properly, the industry and end customers, who were expecting a radical shift in mobility patterns given the recent hype, were unable to make up their minds about EVs. “That’s why we believe that when the government and industry work in tandem, they will make the change happen,” added Athmanathan.

THE WAY FORWARD

Globally, most OEMs are waking up and seeing green, eco-friendly, electric mobility as the future, but they may be late to the game as they did not anticipate the change would happen so fast. In India, Mahindra has taken the lead with electric passenger cars, while Tata and Maruti may not be too far behind in terms of having the technology and the corporate will to make the move to EVs happen at a fast pace. Other OEMs will also follow, once they see the market for EVs opening up.

Industry experts believe that e-scooters are a low-hanging fruit and can easily be manufactured. All Indian two-wheeler companies are, in fact, close to being ready with e-scooters and e-bikes that are almost ready for production. However, major Indian OEMs have deep pockets, so start-ups in India will have a tough time if they try to compete in the electric automobile segment.

“We are currently investing heavily in our overall R&D, in order to align with the government’s initiatives. Since we want to come out with better offerings, there are some collaborative tie-ups with technology providers who will give us the products, and help us shape our products for the next generation of electric two-wheelers,” concluded Athmanathan.

TEXT: Anwesh Koley