• UGI USER
  • Jul 12, 2024
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INDIA’S EV LANDSCAPE

Syllabus:

GS 3:

  • Science and Technology- Developments and their Applications and Effects in Everyday Life.
  • Conservation, Environmental Pollution and Degradation

Why in the News?

  • The Indian government is revising its electric vehicle (EV) policy to encourage local manufacturing and attract investments.
  • This includes extending benefits retroactively to previous investors, aimed at boosting the domestic EV ecosystem and positioning India as a leader in the global transition towards electric mobility.

UPSC Topic : INDIA'S EV LANDSCAPE

Source: Maximize

Policy Goals and Objectives

  • Access to Technology: The March policy aims to provide Indian consumers with cutting-edge technology while boosting the overall EV ecosystem.
  • Encouraging Competition: By promoting higher production volumes, the policy seeks to create a competitive environment among EV manufacturers.
  • Cost Efficiency: The initiative is designed to improve the economics of electric vehicles, making them more commercially viable for consumers.
  • Domestic Value Addition: Half of the value addition in manufacturing must occur locally within five years, reinforcing the local economy.
  • Import Duty Reduction: The policy reduced import duties on completely built units (CBUs), significantly lowering costs for foreign manufacturers.
  • Market Leadership: India aims to position itself as a leader in the global transition to electric vehicles, leveraging its large automotive market.
Chronology of EV Policies in India

  • 2010: The Indian government incentivized electric vehicles (EVs) through a scheme by the Ministry of New and Renewable Energy (MNRE), allocating Rs 95 crore to offer up to 20% incentives on ex-factory prices. However, this scheme was withdrawn in March 2012 due to limited impact.
  • 2013: The National Electric Mobility Mission Plan (NEMMP) 2020 was launched to boost EV adoption, enhance energy security, and reduce vehicular pollution. Despite its ambitious goals, the plan remained largely unimplemented, reflecting challenges in execution.
  • 2015: In the Union Budget, the government introduced the FAME scheme with an outlay of Rs 75 crore aimed at incentivizing clean-fuel technology vehicles, targeting the adoption of 7 million EVs by 2020.
  • 2017: The Indian Transport Ministry set an ambitious target for 100% electric cars by 2030. However, following industry concerns about feasibility, this target was scaled down to 30%.
  • 2019: The Union Cabinet approved the FAME-II scheme, with a substantial budget of Rs 10,000 crore, to accelerate EV adoption. This included providing upfront purchase incentives and developing necessary charging infrastructure.
  • 2023: During the 36th GST Council Meeting, the GST rate on electric vehicles was significantly reduced from 12% to 5%. Additionally, the rate for chargers and charging stations was lowered from 18% to 5%, aimed at stimulating the EV market.
  • 2024: The Centre proposed a New Electric Vehicle Policy, which is currently under consultation, indicating ongoing efforts to enhance support and structure for the EV ecosystem in India.

Future Investments in EV Space

  • Government Intent: The government is considering extending the EV policy to offer benefits retroactively, encouraging earlier investments in the sector.
  • Policy Expansion: This expansion aims to attract global players to localize production and foster a robust domestic ecosystem in the EV industry.
  • Incentive Eligibility: Previously, only new facilities set up within three years qualified for incentives; the revised policy extends this to prior investments as well.
  • Formal Announcement: The revised policy is expected to be officially announced in August, based on insights from industry sources.
  • Focus on Localisation: The policy emphasizes local manufacturing to enhance competition and lower production costs for electric vehicles in India.
  • Investment Attraction: The revised framework is designed to attract both domestic and international investments, supporting long-term growth in the EV sector.

Need for Investment and Ecosystem Intervention

  • Investment Necessity: Vehicle purchases are significant investments for Indian consumers, necessitating viable economic conditions for ownership and maintenance.
  • Cost Reduction Impact: A substantial decline in vehicle costs can accelerate the timeline for EV adoption across the country.
  • Structural Disadvantages: India faces structural cost disadvantages in producing critical cell components, necessitating targeted investments.
  • Capital Investment Requirement: Significant capital investment, ranging from $200-500 million, is needed for establishing large-scale battery plants.
  • After-sales Service Challenge: After-sales service remains a critical pain point for EV customers, affecting overall customer satisfaction and business scalability.
  • Infrastructure Support: Investments in charging infrastructure and service networks are essential for supporting the growing EV market.

Policy Alignment with Global Trends

  • Global Similarities: India’s EV policy aligns with initiatives in the U.S., China, and Europe, which also incentivize local EV manufacturing through varied support mechanisms.
  • Case-by-Case Incentives: Similar to global trends, incentives are often provided on a case-by-case basis to encourage capacity building in the EV value chain.
  • High EV Costs: Despite incentives, electric cars in Europe and the U.S. remain 10% to 50% more expensive than traditional combustion engine vehicles.
  • Import Dependency: Europe and the U.S. meet a significant portion of their EV battery demands through imports, highlighting the need for integrated production lines.
  • Investment Efficacy: Experts emphasize that foreign investments must lead to substantial production capabilities and local manufacturing growth.
  • Collaborative Frameworks: Collaboration between government, industry, and academia is vital for advancing research and development in the EV sector.

Challenges in the EV Space in India

  1. High Initial Costs: The upfront cost of electric vehicles remains significantly higher than traditional vehicles, limiting consumer adoption.
  2. Limited Charging Infrastructure: Inadequate charging stations and infrastructure across urban and rural areas hinder the convenience of owning an EV.
  3. Battery Technology: Dependency on imported batteries and limited domestic manufacturing capabilities for key components affect supply chain stability.
  4. Range Anxiety: Consumers often worry about the driving range of EVs, which can be lower than that of conventional vehicles, impacting purchase decisions.
  5. After-Sales Service: Insufficient after-sales support and service networks can lead to customer dissatisfaction and hinder market growth.
  6. Policy Consistency: Frequent changes in government policies and incentives create uncertainty, discouraging long-term investments in the EV ecosystem.
  7. Skilled Workforce Shortage: A lack of skilled labor and expertise in EV technology and manufacturing poses challenges for local production capabilities.
  8. Environmental Concerns: The production and disposal of batteries raise environmental issues, necessitating sustainable practices in the EV lifecycle.

Path Forward for the EV Ecosystem

  • Core Country Focus: Policies should facilitate India becoming a core player in the EV supply chain, not merely a peripheral participant.
  • Technology Transfer: Foreign investments must include technology transfer to enhance local manufacturing capabilities and critical component production.
  • Building Local Networks: Strengthening domestic players is essential to develop capabilities for producing critical EV components.
  • Supplier Network Utilization: Foreign automakers should leverage domestic supplier networks to foster a robust local manufacturing ecosystem.
  • Strategic Production Policies: Future policies must focus on dictating the nature of production and ensuring sustainable investments in the EV landscape.
  • Long-Term Vision: A long-term strategic vision is necessary to align investments with India’s broader goals of sustainability and economic growth.

Conclusion

India’s evolving EV landscape presents both opportunities and challenges. While the revised policy aims to strengthen local manufacturing and reduce costs, sustained efforts are essential to address infrastructure gaps, consumer concerns, and environmental impacts, ensuring a robust and competitive EV ecosystem for future growth.

Source:The Hindu

Mains Practice Question:

Discuss the key challenges facing the electric vehicle (EV) sector in India and suggest potential strategies to overcome them for sustainable growth.

Associated Article:

 https://universalinstitutions.com/how-is-india-planning-to-boost-ev-production/