How Are Hefty Government Investments Driving Electric Vehicle Demand in India?

 The government of India approved Phase-II of the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle (FAME) Scheme for 3 years commencing from 1st April 2019. The scheme has an outlay of Rs.10,000 crore. This phase aims to put 7,000 e-Buses, 55,000 e-four-wheeler passenger cars, 5 lakh e-three wheelers, and 10 lakh e-two wheelers on the roads of India. These numbers may vary in the future. This scheme will only incentivize advanced battery and registered vehicles. 

Thus, the incentives being provided by the central government will support the Indian electric vehicle market growth during 2020–2030. Additionally, the central government is offering subsidies on the purchase of electric buses, passenger cars, three-wheelers, and two-wheelers. The surging government support can be primarily attributed to the rising environmental concerns and soaring air pollution levels in the country. According to the 2020 World Air Quality Report, 22 of the top 30 polluted cities of the world are in India and most of the pollution in these cities can be ascribed to automotive fuel combustion.

India Electric Vehicle Market - P&S Intelligence

Nowadays, Hero Electric Vehicles Pvt. Ltd., Okinawa Autotech Pvt. Ltd., TVS Motor Co. Ltd., Olectra Greentech Ltd., Lohia Auto Industries, Ather Energy Pvt. Ltd., Terra Motors Corporation, Ashok Leyland Ltd., Saera Electric Auto Pvt. Ltd., Mahindra Electric Mobility Ltd., Electrotherm (India) Ltd., Tata Motors Ltd., and Toyota Kirloskar Motor Pvt. Ltd. are offering electric variants of two-wheelers, three-wheelers, passenger cars, and commercial vehicles to Indian customers. At present, the sales of e-three-wheelers exceed that of other EVs, due to the extensive demand for last-mile connectivity in the country.

According to P&S Intelligence, Gujarat dominated the Indian electric vehicle market in the recent past, due to the escalating environmental concerns, surging need for first- and last-mile connectivity, rising air pollution levels, and increasing government support toward EV production and adoption in the state. Furthermore, Uttar Pradesh is also expected to witness a significant sale of EVs in the coming years. The state will witness booming sales of electric two-wheelers and three-wheelers in tier 1 and tier 2 cities to bridge the first- and last-mile connectivity gap. 

Thus, the escalating government support in the form of subsidies and incentives will boost the production and sales of EVs in India in the coming years.

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Indian Government Investing INR 10,000 Crore To Drive Electric Vehicle Sales

In April 2019, the Indian government launched Phase 2 of the FAME India scheme with a total investment of INR 10,000 crore; phase 1 of the Fame India scheme was launched in 2014 with an investment of INR 795 crore, which was later increased by another hundred crores. The funds are being used to subsidize electric vehicles (EV) in the country, so that the problem of air pollution can be tackled. As per P&S Intelligence, government support is vital for the Indian electric vehicle market, as without it, EVs would be out of the reach of the masses.

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Compared to the long-proven internal combustion engine (ICE) technology, electric propulsion is slightly cost-intensive to achieve. This is majorly because of the high cost of batteries, which makes the overall EV expensive. Moreover, the vehicles also need to be equipped with a high-voltage charging mechanism, which further escalates the purchase cost. This is why the government is not only offering purchase subsidies and tax rebates on EVs, but also bearing a major portion of the cost for research and development (R&D), to come up with cost-effective EV technologies.

Seeing the success of e-rickshaws and potential customer base for other EVs, a lot of companies have entered the Indian electric vehicle market, including Lohia Auto Industries, Hero Electric Vehicles Pvt. Ltd., Electrotherm (India) Ltd., Saera Electric Auto Pvt. Ltd., Ather Energy Pvt. Ltd., Okinawa Autotech Pvt. Ltd., Tata Motors Ltd., Mahindra Electric Mobility Ltd., TVS Motor Co. Ltd., Toyota Kirloskar Motor Pvt. Ltd., Olectra Greentech Ltd., Terra Motors Corporation, and Ashok Leyland Ltd. They are signing sales agreements not only with public transportation agencies, such as Delhi Transport Corporation, but also private shared mobility companies, including Uber and Ola, to increase the penetration of clean-energy automobiles.

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Hence, bolstered by government support, sales of EVs in India will definitely pick up in the coming years.

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