The Aakhya Weekly #117 | India Powers Forward: Embracing an Ambitious Electric Vehicle Future

In Focus: India Plugs into an Electric Future with Ambitious EV Drive

by Swapneel Thakur

India achieved another major milestone last month in accelerating electric vehicle adoption with the launch of the PM Electric Drive Revolution in Innovative Vehicle Enhancement, commonly known as PM E-DRIVE. This key initiative provides demand incentives for electric two-wheelers, three-wheelers, ambulances, trucks, and other emerging EV categories. For a country like India, electric vehicles (EVs) offer a distinct opportunity to shift towards cleaner energy sources while reducing reliance on oil imports.

Despite such forward-looking policies and the clear intent of the government to accelerate the EV transition, India’s EV adoption rates are still far behind its target of achieving 30% by 2030. According to industry data, India’s EV market penetration remains in the single digits, with FY23 noting 6.3% penetration. This raises a critical question: why, despite having some of the most innovative policies in place, does India lag so far behind its EV adoption goals? Several factors contribute to the slow uptake of EVs in India, ranging from infrastructure limitations and high upfront costs to challenges in building consumer awareness and market readiness. India can achieve its ambitious EV goals by fine-tuning its policy framework and addressing deeper structural issues that hinder widespread adoption.

High Upfront Costs and Price Sensitivity

One of the biggest barriers to mass EV adoption in India is the high upfront cost of electric vehicles, especially when compared to conventional internal combustion engine (ICE) vehicles. While demand incentives under schemes like FAME-II have made EVs more affordable, the total cost of ownership remains a major concern for the average Indian consumer. 

The price of batteries, which make up 40-50% of the total cost of an EV, is a key factor driving up vehicle prices. Although global battery prices have been declining, they are still relatively expensive for price-sensitive Indian consumers. In the absence of large-scale domestic battery manufacturing, India remains reliant on imports of nickel and cobalt, making it difficult to achieve cost parity with ICE vehicles. Moreover, India’s auto market is predominantly driven by the two-wheeler and small-car segments, where affordability is paramount. While demand incentives have made electric two-wheelers somewhat competitive, electric four-wheelers remain prohibitively expensive for most buyers. For many middle-class families, who form the bulk of India’s car-buying market, purchasing an EV is still considered a luxury rather than a necessity.

For India to lead in EV adoption, affordable battery solutions are essential. Lithium iron phosphate (LFP) and sodium-ion (Na-ion) batteries stand out for their potential. LFP batteries offer durability, safety, and thermal stability, even though they have lower energy density than cobalt-based alternatives. Their cobalt-free composition makes them cost-effective, and ideal for Indian EVs. Na-ion batteries, while lower in energy density and cycle life, are cheaper and more resilient to material cost fluctuations. Na-ion technology offers a promising, cost-effective alternative for driving down EV prices and reducing supply chain pressures given sodium’s abundance in India.

Insufficient Charging Infrastructure 

A robust and extensive charging infrastructure is essential for the success of any EV ecosystem. However, India’s charging infrastructure remains woefully inadequate, particularly beyond the major metropolitan areas. Although the government has made efforts to promote the establishment of charging stations and aims to have at least 46, 397  public charging stations across India, the pace of deployment has been slow with the country only reaching more than 6000 until this year.

For a country as large and geographically diverse as India, the availability of charging stations is critical to addressing range anxiety, one of the primary concerns of potential EV buyers. In urban areas, charging infrastructure is gradually improving, but semi-urban regions, where a significant portion of India’s mid-tier earning families reside, remain underserved.

The lack of charging stations also affects commercial fleets, including electric buses, trucks, and taxis, which are crucial for scaling EV adoption. Commercial vehicles require fast-charging solutions that minimise downtime and maximise operational efficiency, but India is still in the early stages of developing this infrastructure. 

To accelerate EV adoption, India must adopt a multi-faceted strategy to expand its charging infrastructure. This involves fostering private sector involvement, forming public-private partnerships, and ensuring both urban and rural regions are well-served. Integrating EV plans with current urbanisation initiatives like the Smart City and City Logistics Policies could enhance infrastructure development. The PM GatiShakti NMP could also be leveraged to strategically map charging points across cities, providing a strong foundation for charging networks. Additionally, the government should consider innovative options such as battery swapping stations for two- and three-wheelers, offering a fast and cost-effective alternative to traditional charging methods.

Rural Area Focus

While urban India has seen increasing interest in electric vehicles (EVs), rural areas, which are a significant portion of the population, remain largely unaffected by the EV revolution. This is a critical oversight, as rural India represents a vast consumer market and is home to many small-scale transport operators who could benefit from the lower operational costs of EVs. Electric two- and three-wheelers, in particular, offer an affordable, eco-friendly alternative to conventional fuel-powered vehicles, with the potential to revolutionise rural transport. 

However, the lack of charging infrastructure, insufficient awareness, and limited affordable financing options continue to hold back rural EV adoption. To address this gap, policies and incentives must be specifically tailored for rural areas with zonal provisions. Providing low-interest loans for electric two- and three-wheelers, along with subsidies for establishing charging points in rural communities could significantly boost uptake. Government initiatives should also prioritise integrating EVs into rural public transport systems, which would showcase the viability of electric mobility in non-urban settings.

Fleet electrification, particularly for commercial vehicles like taxis, delivery trucks, and buses, presents another opportunity. Targeted incentives for fleet operators, such as tax breaks and reduced financing rates, combined with public-private partnerships, can accelerate fleet electrification, driving broader EV adoption across India.

Adopting a Whole-of-Government approach

India's target of 30% EV adoption by 2030 is ambitious yet attainable, driven by initiatives like FAME II and PM E-DRIVE, which underscore the government's commitment to policy innovation. However, significant structural challenges remain in achieving widespread EV adoption. 

While promoting EVs is essential, long-term sustainability hinges on addressing battery recycling and reuse, areas where India is still in its infancy. Currently reliant on imported EV batteries and materials, the country faces supply chain constraints. With only two gigawatt-hours of recycling capacity, India must expand this by 60 times within the next eight years to meet demand. The short lifespan of Li-ion batteries (7-10 years) raises concerns about resource depletion and environmental impact, requiring sustainable sourcing and environmentally responsible extraction practices. Furthermore, the energy-intensive nature of battery production increases dependence on coal-powered grids, making a shift toward renewable energy crucial, along with responsible disposal of hazardous waste.

Despite progressive central government policies, the success of EV adoption varies widely at the state level. States like Delhi and Gujarat have implemented comprehensive EV policies, offering subsidies, tax waivers, and charging infrastructure support, while others lag, creating an uneven playing field. States that fail to offer sufficient incentives or infrastructure risk slowing the national transition toward the 30% EV target.

To address this, the central government must collaborate more closely with states to harmonise policies and provide financial and technical support to those lagging in EV adoption. A more consistent framework would include financial aid for infrastructure development and state-specific EV incentives. A comprehensive strategy is needed, to address high upfront costs, limited charging infrastructure, consumer awareness, and rural electrification. With coordination between central and state governments and private sector engagement, India can achieve its goal of a cleaner, sustainable future.

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Top Stories of the Week

Strategic Planning for Captive Berths and Land Use in Major Ports

​The Ministry of Ports, Shipping, and Waterways is actively finalising new policies aimed at enhancing operational efficiency, promoting investment, and streamlining the setting up and management of port facilities for major ports in India.​ These strategic initiatives are integral to improving the global competitiveness of Indian ports within the maritime sector.

The proposed policies will facilitate the extension of captive berths, specifically targeting facilities dedicated to users such as oil and gas companies. This targeted approach is designed to optimise berth management, alleviate congestion at major ports, and ultimately benefit stakeholders across the supply chain. The focus on maximising efficient land use at major ports will enable the development of underutilised areas, thereby significantly increasing cargo handling capabilities and operational flexibility.

In addition to these reforms, the new land utilisation policy will prioritise the establishment of port-related industries on vacant land owned by major ports, fostering projects such as townships, marinas, and tourism facilities. To support these endeavours, the policy will standardise port land valuation and establish consistent lease rental rates, potentially offering concessional rates for initiatives that enhance port infrastructure.

Moreover, the Central Government is set to launch the Cruise India Mission to accelerate the growth of India's maritime sector, encompassing deep sea cruises, coastal cruises, river cruises, and yacht activities, along with enhancing coastal and river assets such as island lighthouses. These collective efforts are expected to contribute to a dynamic growth trajectory in shipping and logistics, further driving the nation's economic development.

In FY23, Manufacturing Jobs See 7.5% Rise: Govt Survey

The Annual Survey of Industries (ASI) by the Ministry of Statistics and Programme Implementation (MoSPI) reported a 7.5% rise in employment in India's manufacturing sector for 2022-23, reaching 1.85 crore workers, up from 1.72 crore in the previous year. Employment levels surpassed pre-pandemic figures (2018-19) by over 22.14 lakh. Additionally, the average emolument per worker increased by 6.3% compared to 2021-22.  

The manufacturing sector grew across key metrics such as invested capital, input, output, gross value added (GVA), and employment. GVA expanded by 7.3% in 2022-23, driven primarily by industries like basic metals, coke and refined petroleum, food products, chemicals, and motor vehicles. These industries contributed 58% of the sector’s total output, with a combined output growth of 24.5%. The number of factories also increased from 2.49 lakh in 2021-22 to 2.53 lakh in 2022-23, marking the first full year of recovery post-Covid-19.

At a press briefing on the ASI data, NITI Aayog CEO B.V.R. Subrahmanyam remarked that the impact of the pandemic had been "wiped out." He noted, "The data shows that we have now overcome the Covid shock, and the manufacturing sector is on the upswing. These figures come as a surprise to us as well."

Maharashtra led the states vis-a-vis GVA, followed by Gujarat, Tamil Nadu, Karnataka, and Uttar Pradesh, with these top five states contributing over 54% of the total manufacturing GVA. They also accounted for 55% of the sector's employment. Fixed capital increased to ₹41.2 lakh crore, while invested capital rose to ₹61.4 lakh crore in 2022-23. The survey fieldwork was conducted from November 2023 to June 2024.

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A Few Good Reads

• As Make in India completes 10 years, check out this The Hindu piece on how it has fared.

• Vivek Kaul argues that the current IPO frenzy in India is driven by limited investment options and stock market gains since 2020, rather than reflecting the country's true growth story.

• C. Raja Mohan opines that Netanyahu's ambition for a new Middle East through regime change in Iran is unlikely to succeed, warning that “the unintended consequences of his Iran gambit are likely to roil the region.”

•  Hema Swaminathan highlights how gender norms around childcare and patriarchal expectations significantly impact women's labour force participation.

• Why can’t the US impose its will on global trade in electric cars? Alan Beattie explores the limitations of U.S. influence in the electric vehicle market.

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  Event Watch: BMGF's Goalkeepers 2024

  The 2024 Goalkeepers event, hosted by the Bill & Melinda Gates Foundation on September 23, brought together world leaders, influencers, and changemakers in New York City during the United Nations General Assembly (UNGA) week. This annual gathering aimed to address urgent global challenges, focusing this year on combating child malnutrition in the context of climate change. The theme, “Recipe for Progress,” highlighted the pressing need to scale up existing tools, invest in promising research, and support local champions working to ensure every child receives the nutrition required to thrive.

  In 2015, world leaders agreed to 17 Global Goals for Sustainable Development to create a better world by 2030. Launched by the Bill & Melinda Gates Foundation, Goalkeepers is a platform for action toward these goals, uniting leaders to tackle poverty and inequality. This year’s event featured notable attendees like Brazil’s President Lula, UNICEF’s Saul Guerrero Oteyza, and celebrity chef Marcus Samuelsson. Goalkeepers aims to speed up progress on the Global Goals, using compelling stories, data, and partnerships to showcase achievements and bring diverse leaders together to confront major global challenges.

  Read the 2024 report here, and access the Goalkeepers 2024 event by clicking the link below:

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