India’s E-mobility dream rides on 2- wheelers

    • By,
      Snigdha – Student, Kautilya

The UN Framework Convention on Climate Change (COP21) in Paris in 2015 set a goal of limiting global temperature rise to 2 degrees Celsius, but a recent report by the Intergovernmental Panel on Climate Change (IPCC) has already stated current trends that show it will cross the existing limit, which will further exacerbate the effects of climate change.

The transport sector in India emits 13.5 percent of India’s total CO2 emissions. Additionally, India’s trade balance is negatively affected by a bill worth USD 153 billion of petroleum imports.

Electric vehicles are critical components in the fight against Global Warming.

In India, the EV industry is in its early stages, accounting for less than 1% of total vehicle sales. Only 3,24,840 electric vehicles were sold in India in 2021, accounting for less than 1% of total vehicle sales. Additionally, India’s domestic electric two-wheeler market is still relatively small, accounting for less than 1% of total 2W sales in FY21, with just 144,000 units sold.

The Indian vehicle market is majorly dominated by the two-wheelers, with more than 70% of the registered vehicles currently falling under this category. Thus, any effort to address greenhouse gas emissions in the transport sector needs to focus on increasing the adaptation of E2W vehicles.

India’s adoption of electric vehicles has been slow but steady. Uttar Pradesh, Delhi, and Karnataka have become India’s top three states in terms of electric vehicle registrations. The Indian E2W market is predicted to grow exponentially in the coming years. Investment Information and Credit Rating Agency of India Limited (ICRA) predicts that by 2025, the E2W market will account for 8–10% of two-wheeler sales. Furthermore, sales could reach 8 to 9 million units by 2030, making up 35 to 40% of all E2W vehicles sold.

Also, more than 50 E2W start-ups were founded in India and ASEAN between 2011 and 2021, most notable of which are Ola and Ather Energy from India.

Greater efforts however are required to promote and spread E2W. E2W companies need to focus on demand patterns. Aside from the demand for personal use by individual customers, commercial customers have a high demand for E2W vehicles for the last-mile delivery of food, groceries, and e-commerce. There is great potential in the delivery segment; delivery companies such as Ekart, Swiggy, and Zomato can be incorporated into this endeavor. The conventional Indian courier and parcel market is worth USD 4.29 billion. As these commercial and traditional delivery companies use Internal combustion engine (ICE) vehicles for their last-mile delivery, they can easily change to E2W for their last-mile delivery. These delivery companies can be tapped into this initiative as, it will be a win-win situation, as adopting E2W will reduce fuel costs.

Additionally, these businesses can quickly draw in customers through advertising, as the focus of ads has recently shifted to societal values and environmental consciousness. These ads will draw in customers, which will benefit the companies and change customer behavior toward E2W, as individual customer behavior and attitude take time to change.

A study on the impact of public transport on Indian cities shows that nearly 80% of all trips in medium-sized Indian cities like Rajkot and Visakhapatnam (population: 1-2 million) are under 5 km. The intra-city segment can be a targeted market because customers in this market will not have any problems with range anxiety; instead, their main concern would be high fuel prices. As a result, E2W companies can target this market.

However, several obstacles prevent widespread E2W penetration in India. The Indian consumer continues to be cautious regarding EVs because the infrastructure is still in its nascent stage. Consumers switching to EVs have been significantly discouraged by range anxiety and the cost of EVs. With high upfront costs, electric two-wheelers are still more expensive than their ICE counterparts.

India needs to adopt and transition to a new energy vehicle to mitigate Global warming. Initiatives such as National Electric Mobility Mission Plan 2020 and the FAME (Phase 1, 2) Scheme have not delivered the required results. India lacks proper policy planning, government incentives, and technological capabilities. Moreover, some States like Karnataka, Telangana, Tamil Nadu, Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, and Kerala do not offer incentives per kWh battery capacity and incentives per vehicle, which is also hindering the penetration of E2W vehicles.

China illustrates the example of a successful EV story. Despite its late entry into the EV market, China has emerged as a global innovator and manufacturing powerhouse. The central and local governments encouraged and incubated local Chinese EV companies while supporting research and development as well as technological advancement. Chinese policy has focused on direct and indirect incentives, such as infrastructure support, tax breaks for buying EVs, and relaxation of specific rules and regulations.

It is crucial for India to learn lessons from the Chinese electric vehicle (EV) story and adapt it locally for faster penetration of E2W vehicles. In India, E2W will lead the penetration in the EV segment. It will be a driver of India’s E-mobility Dream.

However, this requires government investment in building charging infrastructure; funding research in EV technology; building and training for the manufacturing capacity of EVs; more direct and indirect incentives; and most significantly streamlining the core EV policy.

*The Kautilya School of Public Policy (KSPP) takes no institutional positions. The views and opinions expressed in this article are solely those of the author(s) and do not reflect the views or positions of KSPP.