Why Electric Vehicles Will Dominate the Transportation Industry in India

Why Electric Vehicles Will Dominate the Transportation Industry in India

As the world moves towards a sustainable future, clean fuel becomes the ideal choice. New problems require new solutions and electric vehicles (EV) is undoubtedly the right choice. There are challenges in developing an EV industry that needs to be addressed. However, the advantages outweigh the tribulations.

What is India’s strategy? What are its plans for a future that’s driven by electric vehicles and fueled by lithium?

India wants to make this transition primarily because of two reasons. (1) Electric vehicles are the future and (2) India needs cleaner air. The government has put its plan in motion since 2019. They have announced a tax cut to encourage people to buy such vehicles.

This resulted in sales growing by 20% (in 2019) in just one year.

The central government of India launched the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme for a two-year period focused on technology development, demand creation, pilot projects and charging infrastructure. 

Under phase II of FAME, the government will be largely focussing on the deployment of electric buses on the Indian roads. Around 5595 electric buses have been sanctioned to 64 cities and the related STUs. The government-backed Energy Efficiency Services Ltd (EESL)  has issued tenders for 20,000 EVs to be deployed across the country for government use.

The total number of EV sold in 2019 was 1.56 lakh, of this 1.52 lakh for two-wheelers, 3400 were electric cars and 600 electric buses in India. The year 2021 is expected to be a defining moment for electric vehicles(EV) in India. Most major automobile players are launching electric vehicle models in 2020. The experts say that the biggest market is still for two-wheelers. India aims to increase the number of EV by 30% by the end of this decade.

So there’s a plan in place, there is demand but there’s also a problem. 

There’s no lithium in India. While India manufactures most of the components of an electric vehicle, it relies on other countries like China, Taiwan and Japan for lithium-ion batteries. This import adds to the cost of an EV making it more expensive which results in low sales overturn. This stands in the way of India’s goal of becoming a global hub for producing EV. 

Currently, China holds that spot. It is the world’s largest electric vehicle maker but countries are now distancing themselves from china. For India, it’s an opportunity both to expand its manufacturing sector and to become self-reliant. 

The task before India is four-fold.

  • First, access lithium outside china 
  • Second, to process lithium i.e to make lithium-ion batteries domestically
  • Third, to find alternatives to this technology because lithium reserves are limited
  • Fourth, to become the world’s top manufacturer of electric vehicles

The government aims to develop India as a global manufacturing centre. Hence, the GST on electric vehicles is reduced from 12% to 5%. The Indian government has undertaken multiple initiatives to promote manufacturing and adoption of electric vehicles in India. With the government’s support, electric vehicles have started penetrating the Indian market. However, availability of adequate Charging Infrastructure is a prerequisite for accelerated adoption of electric vehicles in India. The government has already announced a US$ 1.4 billion plan to pave the path in 2019 and a lot has happened since. 

  • India is setting up its first lithium refinery in Gujarat. 
  • A joint venture called khanij bidesh India limited has been formed between three state-run companies. Its objective is to acquire lithium and cobalt mines from overseas.
  • India has inked a pact with an Argentinian firm for lithium.
  • India’s second-biggest traditional battery maker Amara Raja is looking to build a lithium-ion assembly plant.
  • Suzuki motor corporation along with Toshiba and Denso are setting up a lithium-ion battery manufacturing plant in India.

India strategy – It has plans of becoming the world’s top EV manufacturer. India has identified the challenges and accordingly come up with a long-term plan. One that goes beyond EV and Lithium to incorporate alternative fuel infrastructure for consumers at home.

Most nations are still dependent on Chinese products and supply chains. India aims to reduce this dependency to achieve self-reliance or Atma Nirbhar Bharat. The government has planned to develop a long term strategy – one industry at a time to achieve self-sufficiency.

India’s transport minister, Nitin Gadkari summed it up at NuGen Mobility Summit in 2019. He stated that EV is the future. It is cost-effective, pollution-free and indigenous. The current market price of electric vehicles is very high but it will gradually reduce. To explain this further, he gave an example of mobile phones at the time when they were first manufactured.

Initially, the cost was very high. With the increase in the number of manufacturers the market price fell. India is rich in its technical expertise, research study and registering patents regarding the new technology. This will enable the EV industry in India to grow and prosper. 

Nitin Gadkari also mentioned that EV is the future. It will hit about 10% of the global passenger vehicle sales by 2025. This means that 10% of all the vehicles sold in the world will be electric by 2025. At this rate, the sales will rise to about 60% of the vehicles sold globally by 2040. 

Takeaway

At the moment, India is still importing lithium from china. It will take some time for India to set up a fully functioning lithium-ion battery manufacturing plant. Until then, it will continue to import from Argentina. It could also complement import and production in a ratio, favouring production at home.