The recent Auto Expo 2023, India’s largest motor show, generated significant excitement with the launch of several low- and zero-emission vehicle models, including electric vehicles (EVs), hydrogen, and hybrids. While the event confirmed the auto industry’s growing focus on decarbonization, it also showed that India urgently needs to accelerate budgetary support for zero-emission technologies—particularly EVs, as the most mature and commercially viable segment in the transport sector.
The fact is that decarbonizing the transport sector will be essential for India’s clean energy transition and its journey to achieve net-zero emissions by 2070. EVs are the key technology in this process. Although more and more people across India are adopting EVs, they still comprise a marginal component of all new sales. EVs share in total vehicle sales grew from 1.7% in 2021 to 4.7% in 2022, driven by faster adoption in the two-wheeler and three-wheeler segments. Boosting government spending and adopting favorable policies is therefore crucial to truly unlock the country’s electric mobility potential.
A recent study by the International Institute for Sustainable Development (IISD) and its partners showed that the uptake of subsidies for EVs remains the lowest across energy technologies. Although EV subsidies rose around three times between 2021 and 2022—driven by a concessional Goods & Services Tax (GST) rate on EVs and the FAME-II scheme that supports the electrification of public and shared transportation—they accounted for only 1% of India’s total energy subsidies. Policymakers need to significantly increase spending to support the creation of charging infrastructure across the country, extend the FAME-II scheme’s duration beyond 2024, secure critical mineral supply chains in the medium-term, and support R&D investment into alternate battery technologies, such as solid-state batteries.
The country has already put in place several EV-friendly policies—including the PLI scheme that aims to enhance the competitiveness of domestic EV battery and component manufacturing —which have played a role in accelerating India’s EV ecosystem over the past year. But much more needs to be done.
India still lags behind other key markets such as China, Europe, and the United States, which are also providing generous EV incentives. This competition highlights the need for India to step up support and focus on the two-wheeler and three-wheeler segments, where it already has competitive advantages. The best avenue to boost the economy in the long term is green industrial policy that positions India as a leader in emerging sectors of global growth, like EVs.
What’s more, India must ensure that its EVs are sustainable. That means we need a much cleaner electricity supply system and a circular economy model for dealing with end-of-life waste. EVs will help reduce harmful urban air pollution associated with conventional vehicles, which is the bane of most Indian cities. But their ability to abate coal-related air pollution and net greenhouse gas emissions will depend on the carbon intensity of the electricity system.
This underscores the importance of a clean electricity transition to ensure EV sustainability. However, India can’t afford to just wait for a green electricity supply before supporting EVs—both need to come online together. Coordinated decarbonization efforts across sectors will therefore be the key for India to achieve its net zero emissions target by 2070.
And while EVs will remain the most critical transport decarbonization technology, let’s not forget that they are expected to face range and weight limitations in some niche segments. That’s where green hydrogen can step in and play an essential role in decarbonizing heavy-duty freight and long-haul transport. The recent cabinet approval of the national Green Hydrogen mission is a positive first step in bringing down the costs of this technology in India. The government must continue this trajectory by rapidly rolling out support to build out hydrogen refueling infrastructure across the country and bring down the costs of electrolyzers. It’s not a question whether India should focus on EVs or green hydrogen vehicles to decarbonize its transport system—the country needs both.
As for hybrids, which have long been touted as a solution to India’s poor grid infrastructure given their potential as a ‘bridge’ technology between internal combustion engine vehicles and EVs, their role is likely to be peripheral. Several schemes and initiatives are underway to upgrade India’s grid, such as the Revamped Distribution Sector Scheme (RDSS). Besides, the rapid uptake of EVs in several segments suggests that the bridge is already being crossed.
In the upcoming budget, India shouldn’t forget that the decarbonization of the transport sector and the clean energy transition must come hand in hand. By prioritizing its spending towards the most pivotal transport decarbonization technology, the government can take the lead in driving the uptake of EVs to make them widely accessible for all Indians.
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The 7th edition of ETAuto conclave on February 7 and 8, 2023 will trace the developments in the electric vehicle (EV) ecosystem across products, policy, design, charging, batteries and motors. It will bring together industry leaders, government officials and international experts to discuss and deliberate on the most pressing issues and needs of the evolving EV sector. Nitin Gadkari, Union Minister for Road, Transport and Highways, will be the Chief Guest and address the conclave.