Electrifying personal vehicles is about much more than demand incentives — the Delhi example shows why

Delhi’s electric vehicle (EV) share was 11.78 per cent out of all newly registered vehicles in India in 2023-24. While the national capital was unable to meet its target of 25 per cent electrification by 2023-24, it was the first to cross the 10 per cent mark in 2022-23. By the end of the last financial year, it boasted the highest EV share compared with other states.

In 2020, the National Capital Territory of Delhi implemented a comprehensive EV policy, setting ambitious targets supported by purchase subsidies and tax rebates for both private and commercial vehicles. This policy included scrappage incentives for replacing old vehicles with EVs and support for retrofitting companies to convert conventional vehicles.

Notably, Delhi was the first to include battery-swapping station operators in its policy, offering direct financial aid for setting up charging stations and managing battery sales. Its extensive charging network covers over 97 per cent of developed areas in 3 kilometre by 3 kilometre  grids.

Mandates in the city include converting public transportation, paratransit, e-commerce and delivery fleets to electric. The website for Switch Delhi campaign by the Delhi government to promote the transition to EVs serves as a key resource, providing information on policies, incentives, charging station locations and even an EV savings calculator.

However, despite all these measures, Delhi is struggling with the uptake of personal vehicles in the electric segment. Electric private cars currently account for 3.03 percent of all cars. Personal two-wheelers have a higher share, 9.84 per cent. But this pales in comparison to commercial segments such as cabs (38 per cent), buses (57 per cent), passenger three-wheelers (86 per cent, including e-rickshaws) and goods three-wheelers (77 per cent).

Electrifying personal vehicles is arguably more crucial than commercial vehicles due to the sheer numbers and the passenger kilometres travelled using personal vehicles in cities. For context, between 2011-12 and 2023-24, the share of personal vehicles registered in Delhi was 92 per cent.

Furthermore, because personal EVs do not travel on fixed routes, the infrastructure required for them will be much more widespread than that required for commercial vehicles. Thus, aiming for the transition of personal vehicles can build a foundation that supports broader electrification goals.

Individual choice versus regulatory mandates make electrifying personal vehicles inherently more complex than electrifying commercial vehicles. It is easier to find a way to regulate corporate choices via top-down mandates and educate organisations about cost-benefit analyses and long-term savings from using EVs. Regular commuters, on the other hand, need strong incentives and assurance to tame their reluctance.

Demand incentives alone are insufficient to sustain a market. Fiscal and non-fiscal incentives such as those provided by Delhi’s EV policy primarily appeal to early adopters and those already inclined to go electric and maybe even a small share of individuals influenced by the growing visibility and hype around EVs. But they may not sufficiently address the broader concerns of the average consumer.

Many potential buyers are still put off by the higher upfront costs of EVs, limited charging infrastructure, range anxiety and uncertainty about long-term costs and vehicle performance, according to a survey conducted among EV owners by Delhi-based think tank Centre for Science and Environment.

Longer charging times and compatibility issues at different charging stations were also cited as hindrances by a considerable portion of the sample.

Overcoming these challenges requires more than demand incentives. Charge point operators are not in the business of making consumers feel comfortable about buying EVs. For them to invest in setting up infrastructure, utilisation must be high at the location to maximise returns. Increased utilisation in a residential area necessitates the presence of more private vehicles.

To sum up, fiscal stimulus alone cannot work, as shown by the minimal growth and stagnation in private vehicle electrification in Delhi despite a strong policy with demand incentives. According to the consumers, the primary reasons are limited charging options, uncertainty in vehicle technology and long-term costs associated with EVs. However, due to low demand for private vehicles, private charging operators and vehicle manufacturers are reluctant to invest heavily in the EV ecosystem.

The issue has come full circle, back to where it started.

Need for both the carrot and the stick

A systematic overhaul is required to break the demand stagnation. The onus must be placed either on manufacturers to innovate and create compelling products and/or on consumers to shift their preferences and adopt these new technologies.

In other words: A supply side regulation like a zero-emission vehicle (ZEV) mandate, and/or a demand-side restraint measure such as a low-emission zone (LEZ).

A ZEV mandate requires vehicle manufacturers to dedicate a certain percentage of their portfolio to EV models. This method works because it overcomes two critical challenges to EV adoption: i) low availability of diverse EV options for the buyers ii) low consumer awareness towards the technology.

If the automakers fail to meet the required targets, they may be fined, or they may need to buy “credits” from companies exceeding their targets. Typically, ZEV mandates are applied to larger regions, such as a state or a nation, and affect all manufacturers producing and selling vehicles in the region.

LEZs target specific geographies that are smaller in size, like a city. An LEZ restricts the entry of higher-emission vehicles against a penalty in case of non-compliance while incentivising individuals who switch to EVs.

A ZEV mandate helps in increasing the market supply of EVs, driving down costs through economies of scale and making EVs more affordable. Lower upfront costs lead to a rise in consumer demand, encouraging further investment from private charge-point operators in related infrastructure, such as charging stations. Additionally, the ZEV mandate sets long-term targets for the industry, ensuring consistent progress.

The LEZ approach directly influences consumer behaviour by creating a localised environment where driving conventional internal combustion engine vehicles becomes less attractive or more expensive.

This pushes consumers to consider alternative transportation options, including the adoption of EVs that are typically exempt from these restrictions. As demand for EVs in these areas grows, businesses and governments are more likely to invest in supporting infrastructure and services, such as expanded charging networks and maintenance facilities.

In both cases, the initial increase in demand triggered by these policies initiates a positive feedback loop. With more consumers purchasing EVs, manufacturers and governments are motivated to address remaining challenges like high costs, limited charging infrastructure, and technological limitations, ultimately making EV adoption more seamless and widespread.