India’s automotive landscape is working on a transformative shift, driven by the urgent need to reduce carbon emissions and foster energy independence.
The rise of electric vehicles (EVs) has garnered significant attention, both from policymakers and consumers, as a cleaner alternative to traditional internal combustion engine (ICE) vehicles. While EVs dominate the conversation around future mobility, at one time hybrids were discussed as middle ground between the two. The complexities of this shift, the role of policy, and the comparative benefits of EVs and hybrids requires a more critical understanding.
Hybrids seem to have been sidelined by the government’s electrification drive, with GST for hybrids set at a high 28 percent, compared to just 5 percent for EVs. Additional tax/cess takes this number upto 48 percent. Some stakeholders argue that hybrid vehicles, particularly strong hybrids, can serve as an effective transitional technology, offering reduced emissions without the infrastructural challenges that EVs face. While this perspective has merit, the government’s policy focus is evidently future-oriented, prioritising long-term electrification over short-term gains through hybrids.
FAME II is Out, PM E-Drive is In: The New EV Push and Policy
India’s government has taken an aggressive stance toward promoting EVs, with priorities reflected in policies such as the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme Phase-II. Under FAME II, subsidies were offered for both electric two-wheelers and four-wheelers, making EVs more financially viable for consumers. Instead of FAME II scheme, the new buzzword now is PM E-Drive. The Production Linked Incentive (PLI) scheme has set the stage for domestic battery production, a critical step in reducing the costs of electric vehicles and addressing India’s reliance on imported battery technologies.
The Indian government has approved a EV policy aimed at promoting the country as a global hub for electric vehicle (EV) manufacturing. A minimum investment of Rs 4,150 crore is required, with no cap on maximum investment. Companies have a three-year timeline to establish manufacturing facilities and begin commercial EV production, with a requirement to achieve 50 percent domestic value addition within five years. The policy also allows limited imports of EVs at reduced customs duty for manufacturers setting up plants in India. The initiative aims to boost local EV production, reduce reliance on oil imports, and enhance India’s EV ecosystem.
Lifecycle Emissions
From an environmental perspective, EVs offer clear advantages over ICE vehicles, particularly in terms of lifecycle emissions. Several studies have highlighted that electric vehicles produce 40 percent fewer emissions over their lifetime compared to ICE vehicles. India’s focus on renewable energy is essential to its electric vehicle (EV) push, aiming to decarbonise both manufacturing and vehicle usage. Scaling up integration of renewable sources into the grid is a sustainable path. Manufacturers are also shifting towards green production processes, reducing emissions from factories. Investments in clean energy partnerships support this transition. Focus on stable renewable energy supply and large-scale storage solutions ensure consistent power for the growing EV sector.
The environmental benefits of EVs are sometimes questioned due to the resource-intensive nature of battery production. While it’s true that battery production has its own environmental costs, EVs have a lower overall carbon footprint than ICE vehicles over their lifetimes. Improvements in recycling and the use of renewable energy in manufacturing processes continue to reduce the environmental impact of EV production. Ongoing improvements in battery production processes aim to reduce their environmental footprint further.
Battery recycling is an area seeing progress. While early batteries posed recycling challenges, current practices have advanced. Manufacturers are refining processes to recover valuable materials, with the goal of minimising waste. The industry is actively addressing these concerns, reducing the risk of environmental harm from batteries. The challenge lies in scaling up the infrastructure to handle large volumes battery disposal, second life use, and reuse, responsibly.
Hybrids, on the other hand, present a lower carbon footprint compared to traditional ICE vehicles, but their environmental impact is not as favourable as fully electric vehicles when powered by a clean grid. While hybrids can reduce fuel consumption and emissions by up to 30 percent, they do not fully align with India’s long-term decarbonization targets. This limitation casts doubt on their viability as a long-term solution. Furthermore, the dual powertrain in hybrids introduces additional complexity and costs, making them less attractive for large-scale deployment in a cost-sensitive market like India.
From Oil Imports to Lithium: A growth opportunity
The adoption of EVs holds significant potential for India to reduce its dependence on imported oil, which accounts for a substantial portion of the country’s trade deficit. With rising oil prices and volatile global markets, electrification could offer economic relief, potentially saving billions in oil imports annually. Additionally, the local manufacturing of electric vehicles and battery components, spurred by initiatives like the PLI scheme, could create new jobs and boost India’s automotive sector.
From a business perspective, the EV shift opens up significant investment opportunities in India. Companies in automotive, auto ancillaries, battery technology, semiconductors, and renewable energy sectors, and more stand to gain from the growing demand for electric vehicles and supporting infrastructure. With government policies encouraging local production, businesses are incentivised to invest in EV manufacturing, battery plants, and charging networks. This could strengthen India’s position as a global hub for EV production, attract foreign investments, and foster innovation in sustainable technologies. Long-term, this investment is expected to drive growth in allied industries, boosting India’s economy.
Expansion of Charging Infrastructure
Concerns about public charging infrastructure are understandable, especially since the network is still developing. However, significant strides are being made to expand charging points, particularly in urban areas. For most EV owners, home charging covers their regular needs, but the growing number of public charging stations is making long-distance travel more feasible. Governments and private companies are working to address this gap.
Charging infra presents an opportunity for innovation. Companies are exploring battery swapping technologies as an alternative to conventional charging stations. Battery swapping can significantly reduce downtime for EV users and alleviate concerns about the range, but it requires standardisation across manufacturers to be effective. Furthermore, renewable energy-powered charging stations offer a dual benefit of reducing emissions while simultaneously addressing the energy demands of a growing EV fleet.
PM E-DRIVE Scheme allocates allocating Rs 3,679 crore in subsidies for electric two-wheelers, three-wheelers, ambulances, trucks, and emerging EVs, benefiting millions. Aadhaar-authenticated e-vouchers simplify the subsidy process for buyers and manufacturers. Rs 500 crore is allocated for e-ambulances, with standards set by key ministries. The scheme also earmarks Rs 4,391 crore for procuring over 14,000 e-buses, Rs 500 crore for incentivising e-trucks, and Rs 2,000 crore for public charging infrastructure. This includes installing 22,100 fast chargers for electric cars, 1,800 for e-buses, and 48,400 for two/three-wheelers in high EV penetration cities and highways.
Batteries at the Heart of the EV Evolution
At the heart of the EV revolution is battery technology, which represents both a challenge and an opportunity for manufacturers. Current lithium-ion batteries offer sufficient range for most users. Electric vehicles (EVs) are often perceived as limited in range, restricting their usefulness for long trips. But many modern EVs are capable of covering over 300 km on a single charge. For city dwellers and most drivers, this covers routine trips with a significant buffer. For longer journeys, some planning is required, especially where charging infrastructure remains sparse, particularly in rural regions. As the infrastructure grows, the potential of EVs as practical alternatives increases.
Innovations in battery technology, such as solid-state batteries, promise to help the EV market by offering higher energy density, faster charging times, and improved safety. Concerns about battery degradation are common. Modern EV batteries are designed to last longer, with manufacturers backing their durability through warranties stretching up to 10 years. While some capacity loss is inevitable over time, this is often minimal in the first few years of use. Modern day EV technology is engineered for long-term utility, reducing the fear of immediate wear and tear. Long-term maintenance costs may still weigh on potential buyers, but warranties provide a measure of security.
Charging times are a major talking point for potential EV owners. For most users, overnight home charging fits easily into daily routines, ensuring the vehicle is ready by morning. While it’s true that charging at home can take several hours, fast-charging infrastructure is evolving rapidly. Today, fast chargers can replenish a significant portion of a battery’s range in under 30 minutes. Fast charging stations, on the other hand, are essential for well-planned long-distance travel, making waits less of an issue.
Strong Hybrids: Clever Compromise or Expensive Detour?
While the government’s focus remains heavily skewed towards fully electric vehicles, hybrids offer a potential compromise, particularly for markets where charging infrastructure is underdeveloped. Strong hybrids, which can operate on electric power for short distances and switch to ICE for longer trips, provide a practical solution for consumers who are not ready to fully commit to an EV. However, the higher upfront cost of hybrids, combined with the lack of government incentives, has limited their appeal in India.
Critically, hybrids may be seen as a marginal solution, rather than a long-term answer to India’s mobility challenges. As battery technology improves and charging infrastructure expands, the relevance of hybrids may diminish. Additionally, the environmental benefits of hybrids, while significant, may not align with India’s goal of achieving net-zero emissions by 2070. For these reasons, the government’s focus on electric vehicles, rather than hybrids, appears to be a more strategic decision for long-term sustainability.
India’s EV Race: Can Domestic Makers Keep Up?
India’s domestic automotive industry is making significant strides in the EV space. Competing with global players presents both a challenge and an opportunity for local manufacturers. While these global players bring advanced technology and brand recognition, they also raise the competitive bar, pushing domestic manufacturers to innovate and improve their offerings.
The global EV market is highly competitive, with countries like China dominating the space in terms of production and innovation. India can learn from China’s experience, particularly in terms of the multitude of electric cars/brands available, scaling up battery production and building a necessary charging infrastructure. Collaboration between the government and private sector will be crucial in ensuring that India can grow competitively to meet domestic needs.
Balancing Environmental and Economic Objectives
India’s push towards electrification is not just about reducing emissions; it is also about economic growth and energy security. By investing in domestic manufacturing and reducing oil imports, India can strengthen its economy while simultaneously addressing environmental concerns. However, this transition must be carefully managed to avoid negative impacts on industries that are heavily reliant on ICE vehicles, such as auto components and oil refining. The role of hybrid vehicles in this transition remains a contentious issue. While hybrids offer some environmental benefits, their long-term relevance is questionable in a world that is moving towards full electrification.
The environmental benefits of EVs are sometimes questioned due to the resource-intensive nature of battery production. While it’s true that battery production has its own environmental costs, EVs have a lower overall carbon footprint than ICE vehicles over their lifetimes. Improvements in recycling and the use of renewable energy in manufacturing processes continue to reduce the environmental impact of EV production. Ongoing improvements in battery production processes aim to reduce their environmental footprint further.
Are EVs out of reach for the average Joe? The idea that EVs are prohibitively expensive is changing. While the initial purchase price may seem higher than some ICE vehicles, the overall cost of ownership is trending downward. Lower running costs, along with government incentives, are making EVs a more accessible option. As production scales up, price competitiveness improves, making them a realistic consideration for more segments of the market.
Government Policies: The Catalyst for EV Adoption
The future of EVs lies in continuous improvement, both in performance and infrastructure, making them increasingly viable for a wider range of users. While EVs offer lower long-term costs for high-mileage drivers, those who drive less frequently may find it harder to justify the higher upfront expense. For urban commuters who can take advantage of home charging, and timely fast charging, the balance leans more favourably.
Government policies play a crucial role in the wider adoption of EVs. Subsidies, tax breaks, and investments in charging infrastructure are making EVs a more attractive option for consumers. However, these policies are not yet evenly distributed across regions, and there is still a need for greater support in areas with fewer resources. Policymakers must continue to focus on expanding infrastructure and providing essential support to ensure that EVs become a viable option for a greater number of drivers in a timely manner.
Source: Electric - rushlane.com
