An ambitious vehicle electrification roadmap needs regulatory targets and ZEV supply mandate to bring more certainty in investments and markets
Istock photo for representation On the occasion of World Electric Vehicle (EV) Day, global attention is on the theme of this year, which is ‘sustainable electric-mobility to speed up transition to sustainable transport with consumers, businesses, and policies’. As such strategies for the consumers and industry are already evolving in India, it is time to take stock and decide what more is needed to speed up this transition.
A scalable change requires well-defined regulatory target and zero emissions vehicle mandate (ZEV mandate) to provide long-term policy visibility for investment commitments across all subsectors of electrification. This can effectively leverage other existing policies on consumer incentives, production linked incentives, charging infrastructure, and financing.
The intended voluntary target is 30 per cent electrification by 2030. But higher level of ambition has also been advocated in different fora. For instance, alongside the fourth Energy Transition Working Group meeting under India’s G20 Presidency in July this year, the stakeholder conference held by Niti Ayog underscored the importance of EV ecosystem when Amitabh Kant, the G20 Sherpa mentioned that 100 per cent electrification of two- and three-wheelers, and 65-70 per cent of buses by 2030 is desirable.
India has also signed on to the global zero emissions vehicle declaration for 100 per cent transition to zero emissions by 2030-2040 timeframe with specific focus on two-three wheelers. India is also a member of the ZEV Transition Council that represents 17 largest vehicle markets.
Against this evolving ambition, the current level of new fleet electrification is 5.31 per cent nationally (as of August 2023). A few states have seen higher penetration such as 12 per cent in Delhi, nine per cent in Goa, and eight per cent in Chandigarh.
The commercial vehicles have electrified more — 17 per cent of commercial three wheelers, and 5 per cent each in other commercial vehicle segments including buses. Two-wheeler electrification is more aggressive at 16 per cent as opposed to only one per cent in cars.
The uniqueness of India’s trajectory is the focus on electric buses for zero emission mass commuting that has higher potential to displace oil. The Union Ministry of Heavy Industries and Public Enterprises estimates that by 2030, India could emerge as the second-largest electric bus market in the world if four out of 10 buses sold are electric.
Buses being procured under different schemes including Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME II), Grand challenge, National Electric Bus Programme phase 1, and state government procurement in Maharashtra and Tamil Nadu, add up to 19,340 e-buses. The recently launched ‘PM-eBus Sewa’ will add another 10,000 electric buses.
This kindles optimism. Yet all existing policy instruments related to electrification including demand incentives, fuel economy regulations, financing strategy, and the EV policies of about 30 state governments need to get stronger. Even that may not add up, unless regulatory targets and a ZEV mandate policy are included in the policy trajectory.
Global experience have shown that just consumer incentives are not sufficient for achieving scale. A mandate for the original equipment manufacturers (OEM) that requires them to sell a minimum specified number of ZEVs as a share of their overall sales annually, is necessary.
Global experience shows that such sales requirement can put downward price pressure on electric vehicles as manufacturers would compete to be compliant with the sales requirements. This can stimulate investments and innovation to diversify the product range, have more flexibility in planning and also build consumer confidence.
Only purchase incentives and purchase requirements — as is the current practice — will force consumers to compete for a limited number of products and increase prices. Lower cost curves with ZEV mandate can make the programme more revenue neutral reducing the need for government subsidy.
There is no reason why ZEV mandate cannot be considered in India. The Society of Indian Automobile Manufacturers (SIAM) has already stated a voluntary target of 40 per cent electrification of new vehicle sales by 2030 and all new vehicle sales by 2047.
The Centre for Science and Environment has carried out a stakeholder perception survey jointly with City Forum to assess the preparedness and willingness of the industry to accept ZEV mandate. Clearly, their perception is linked with their projected forecast of market growth.
The majority of two- and three-wheeler OEMs expect 40 per cent growth per annum over the next five years. Those who produce only e-two-wheelers expect even higher growth due to improved price parity and lower total cost of ownership.
Car manufacturers, on the other hand, expect not more than five per cent growth per annum over the next five years. They do not expect price parity to happen soon and feel that low consumer demand, high upfront cost, inadequate public charging, low battery range, low level of innovation, and limited models are slowing down the market.
E-bus OEMs see a likely growth of up to 20-30 per cent over the next five years but expect continued support and inclusion of private bus operators as their consumer base. Bus OEMs attribute the current growth to subsidy and readiness of state transport undertakings to adopt e-buses.
Overall, the OEMs while not disagreeing with the ZEV mandate strategy, prefer a lower bound ZEV mandate that can be implemented in a phased manner during 2025-2030.
Two-three wheeler manufacturers are more supportive of ZEV mandate. Four-wheeler and bus manufacturers are more conditional in their support and would prefer to begin at the level they are selling today and ramp it up as the market grows.
The consultation shown that the preferred mandate differs for different segments beginning at two per cent for two-wheelers, five per cent for three-wheelers, and one per cent for cars and buses now, but ending in 2030 at 25 per cent for two-wheelers, 50 per cent for three wheelers, 5 per cent for cars and 15 per cent for buses.
However, sustained fiscal support will continue to matter. There is also growing interest in carbon credit trading mechanism to provide more flexibility and revenue. Those who overachieve their ZEV sales target can trade their credits with the laggards to help them meet the target.
This also allows a new revenue stream from banking and trading of credits. The National Automotive Policy, 2018 has already recommended banking and trading of carbon dioxide (CO2) credits by vehicle manufacturers. The Bureau of Energy Efficiency (BEE) is developing this mechanism for fuel economy regulations. But such a mechanism needs to be a robust and transparent to be effective.
The International Energy Agency in its 2023 report on ‘Transitioning India’s road transport sector’ has estimated that an ambitious transport sector policies including electrification can reduce energy demand by 30 per cent and avoid 60 per cent of the expected carbon dioxide emissions in 2050.
At this crossroad of the low carbon pathway, an ambitious electrification roadmap needs regulatory targets for fleet-wide electrification and ZEV supply mandate to bring more certainty in investments and markets.
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