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Thursday, December 7, 2023

Electric vehicle industry- issues and solutions

The global electric vehicle (EV) market is developing at a rapid pace. In terms of EV volumes, overall electric vehicle reached a global share of 8.3% (including battery electric vehicles [BEVs] and Plug- in hybrid electric vehicles [PHEVs]) in 2021 from 4.2% in 2020 amounting to 6.75 million vehicles on the road. Studies suggests that by 2030, the global electric vehicle stock (excluding two/three-wheelers) will reach nearly 145 million vehicles and will account for 7% of the global vehicle fleet.

Bharat’s EV scenario

The Indian automobile industry is the fifth largest in the world and is expected to become the third largest by 2030. As per India Energy Storage Alliance (IESA), Bharat’s ndian EV industry is expected to expand at a CAGR of 36%. Dependence on conventional energy resources is not a sustainable option as Bharat imports close to 80% of its crude oil requirements and more over our population is growing rapidly and consequently the demand for vehicles is also expected to grow significantly.  

NITI Aayog is aiming to achieve EV sales penetration of 70% for all commercial cars, 30% for private cars, 40% for buses and 80% for two and three-wheelers by 2030, in line with the country’s goal to achieve net zero carbon emission by 2070.

The EV push in Bharat opens huge business opportunities across three key segments – transportation, infrastructure and energy. This opens avenues in EV franchising, EV OEM market, battery infrastructure, solar vehicle charging and battery swapping technology among several others. It is estimated that the complete transition to EVs in Bharat requires a total investment of US$ 267 billion (Rs.19.7 lakh crore) in EVs, battery infrastructure and charging infrastructure.

According to the Ministry of Skill Development and Entrepreneurship (MSDE), the EV industry could create 10 million direct jobs by 2030 in addition to 50 million indirect jobs in the EV industry.

Major policy initiatives by the Government

  • FAME India Scheme: Faster Adoption & Manufacturing of (Hybrid &) Electric Vehicles (FAME) India was launched in 2015 for promoting growth and early adoption of hybrid and electric vehicles in the country. FAME-II scheme was launched in Bharat with a budget outlay of US$ 1.3 billion (Rs. 10,000 crore) to support 1 million e-two-wheelers, 0.5 million e-three -wheelers, 55,000 e-passenger vehicles and 7,000 e-buses. The government extended the scheme until 2024, as announced in Union Budget 2022-23.
  • PLI Scheme:  Production Linked Incentive for Advanced Chemistry Cell Battery Storage (PLI-ACC) scheme. The scheme is expected to boost Bharat’s battery infrastructure. Union Cabinet has approved a total outlay of Rs. 18,100 Crs for the scheme in March, 2021, which would be disbursed to beneficiaries over five years once the manufacturing facility is set up.
  • Battery Swapping Policy:  on April 22, 2022, NITI Aayog released a draft battery swapping policy which will be valid until March 31, 2025. The policy will be implemented over a period of 1-2 years from the date of launch of the policy and will cover all metropolitan cities with a population greater than four million. The second phase will be implemented over 2-3 years from date of launch of the policy and will cover all UT’s and major cities with a population greater than 5,00,000.
  • Other Initiatives-
    • Tax exemption of up to Rs.1,50,000 under section 80EEB of income tax while purchasing an EV (2W or 4W) on loan.
    • Reduction of customs duty on nickel ore (key component of lithium-ion battery) from 5% to 0%.
    • State- wise reduction of road tax and other incentives.

The proposed major shift from internal combustion engine (ICE) vehicles to EVs requires expansion of infrastructure facilities, including charging stations, and vehicles that could provide a higher range (KM range with a single charge).

Benefits of EVs

Switch over to EVs will certainly benefit the nation in many ways as it is eco-friendly, will reduce the dependency on oil imports (87% of Bharat’s automotive fuel is met by imports), indigenous component manufacture will increase the GDP, and several others.

Challenges of EVs

Lack of charging infrastructure, expensive e vehicle cost, uneven electricity supply and lack of awareness about the benefits of electric vehicles are some of the major challenges for electric vehicles in Bharat.

The cost of owning a traditional ICE (internal combustion engine) car is around Rs. 5-6 Lakhs but the minimum cost of electric cars (top 10 electric cars) in Bharat is more than Rs.10 lacs, which is too high for Bharat’s middle-class majority by any standards.

Not all vehicles launched to date are equipped with flash charge technology. Similarly, not all charging stations have a proper fast charger, and the number of existing charging stations which is very low.

The average cost of replacing the electric car battery in Bharat is around Rs.3-Rs.5 Lakhs (sometimes even more), depending on the vehicle model.

The need to replace batteries after 8-10 years, makes it really costly to own an EV in Bharat in the current scenario.

Possible solutions

Some of the major problems like uneven electricity supply, lack of charging infrastructure can be addressed by the following measures.

Solar power roads

Bharatiya scientists at Gujarat Energy Research and Management Institute (GERMI) have suggested the construction of roof top solar panels on the roads particularly on national and state highways, which will be relatively less expensive and more durable than the direct solar power roads ventured abroad (China, France and Netherlands) that have solar panels on the surface of the road covered by unbreakable glass. Additionally, these roof top solar power roads provide shelter to the roads leading to lesser repairs and maintenance costs.

These Bharatiya scientists estimated that a PV roof cover over the four-lane 205 km Ahmedabad-Rajkot highway can generate 104 MW of power while the Ahmedabad-Vadodara highway, 93 km long, can reap 61 MW of electricity. On a conservative basis the existing network of national highways (States and UTs) that cover a distance of 1,40,152 KMs (31 st August, 2021) have the potential to generate 92,000 MW to 71,000 MW (92-71 GW) of solar power. Bharat has an installed capacity of 393 GW as on 31 st December, 2021. The current state highways and other road network in Bharat covers a distance of 1,76,818 kms (31 st March, 2020) and 58,98, 827 kms respectively.

Therefore, Bharat’s Road network has an immense potential to generate solar power. State Highways and District roads built under PPP model where the road contractors are struggling to collect toll revenues can be converted into roof top solar power roads that provide scope for alternative mode of revenue generation. These roads also have closer access to grid connectivity.

Solar power roads can be designed as PPP models under revenue collection and sharing basis since the solar power generated by these roads can be sold to both Government and private players. Road contractors may be permitted to sell the solar power to EVs subject to the pricing regulations stipulated by the Government.Necessary number of charging points may be installed on these roads for recharging the battery of EVs.

The ongoing studies and R & D in enhancing the storage capacity of the batteries will certainly lead to a disruptive technological breakthrough in the near future that can substantially reduce the cost of storage and distribution of the solar power in addition to enabling the storage of the solar power during the nights, winter and rainy seasons.

Challenges faced in scrapping of fossil fuel vehicles while switching over to EVs can be addressed by the following retrofitting mechanism.

Hyderabad natives Akbar Baig and Ashhar Ahmed Shaikh converted a Maruti 800 and Maruti Esteem into electric vehicles and found out that the upgrade did not affect the overall performance of the vehicles adversely. They established their Hyderabad-based start-up BharatMobi in 2017. The retrofitting mechanism followed by them addresses two major concerns the country is facing- air pollution, and lack of infrastructure for vehicle scrapping.

The cost of converting the fossil fuel vehicles into electric is around Rs 5 lakh, where besides converting them, the start- up offers a telematics system that allows monitoring of battery temperature, cell temperature and health of the vehicle from a remote computer or laptop. The conversion process takes a week. Few other entrepreneurs have also started this retrofitting models across the country.

According to the National Green Tribunal, 9 million vehicles will have to be scrapped by 2020. By 2030, that figure jumps to around 28 million. The retrofitting mechanism offers a solution to the challenges in vehicle scrapping infrastructure. One need not have to scrap the (fossil fuel) vehicle and instead extend its life span by converting it into electric.

Therefore, let us hope that the government will explore the possibility of the construction of solar power roads and support the initiative of the budding entrepreneurs in converting the fossil fuel vehicles into electric vehicles so that the EV industry will pick up the momentum and overcome the challenges.



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Dr. B.N.V. Parthasarathi
Dr. B.N.V. Parthasarathi
Ex- Senior Banker, Financial and Management Consultant and Visiting faculty at premier B Schools and Universities. Areas of Specialization & Teaching interests - Banking, Finance, Entrepreneurship, Economics, Global Business & Behavioural Sciences. Qualification- M.Com., M.B.A., A.I.I.B.F., PhD. Experience- 25 years of banking and 16 years of teaching, research and consulting. 200 plus national and international publications on various topics like- banking, global trade, economy, public finance, public policy and spirituality. One book in English “In Search of Eternal Truth”, two books in Telugu and 38 short stories 50 articles and 2 novels published in Telugu. Email id: [email protected]


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