The Fuse

India Scales Back EV Ambitions, But Heads in Right Direction

by Matt Piotrowski | March 28, 2018

  • India’s oil demand set to double by 2040
  • Only 350 public charging stations currently in India
  • Total auto sales grew by 9% in 2017

The Indian government has had to temper its electrification goals. Last year, New Delhi announced plans for the country to go all electric by 2030, but now it is seeking a more realistic goal of reaching 30 percent of all sales by the end of next decade. Infrastructure challenges and criticisms from auto companies, along with the realization that the original target was far-fetched, have brought about the adjustment. Even though India’s vision of an all-electric future is bumping up against reality, the country is moving in the right direction to diversify its car fleet as population grows and demand for oil rises faster than in any other market.

Electric vehicle (EV) sales in India have so far underwhelmed, registering just 0.02 percent market share in 2016, according to the International Energy Agency. One estimate says that only 1,300 EV passenger cars and 44,000 electric bikes were sold from 2016-17. To put those numbers in context, total passenger vehicle sales last year were approximately 3.2 million, up by more than 9 percent versus 2016. In contrast to India, consumers in the U.S. bought some 200,000 EVs in 2017, while China accounts for half of the global market. Indian automakers reportedly lobbied hard against the aggressive EV targets because of the anticipated costs for necessary investments, expanded volumes, and new models, while the country’s oil companies, predictably, also resisted the plans. In India, price is the biggest factor slowing penetration, since consumers have to pay double for EVs compared to conventional vehicles.

India is seeing positive developments on the electrification front. It has recognized that it needs to resolve infrastructure constraints, and the government is looking to change regulations for installing electric charging stations.

That said, the country is seeing positive developments on the electrification front. It has recognized that it needs to resolve infrastructure constraints, and the government is looking to change regulations for installing electric charging stations. Under the current system, only power providers can sell electricity, but charging stations may soon be exempt of this rule, easing a major hurdle for EV adoption. Still, India has a long way to go on the charging front in order to bring about widespread acceptance, spurring skepticism it can even reach the 30 percent by 2030. There are now only 350 public charging stations (versus 57,000 gas stations) in India. Factor Daily, a tech publication based in India, says: “There have been plans announced by municipality administrations, state governments, and public sector and private companies but they are in the range of only a few dozens, not more. Mass adoption of EVs without thousands of charging stations is a pipedream – something the government is studying plans for.”

The best signs of interest in electrification are occurring in the two-wheeler market, which makes up about 80 percent of vehicle sales. Electric sales of two-wheelers are higher than the passenger car market, but the issue of performance needs to be overcome before a shift on a large scale takes place. Some 18 million two-wheelers are sold every year in India, but only slightly more than 200,000 on the road now are electric. According to a white paper from the Society of Indian Automobile Manufacturers (SIAM), most electric two-wheelers are “low powered,” undermining consumer interest. “It would be necessary that comparable or near equal electric 2-wheelers are developed to penetrate and create a sustainable marketplace,” the authors of the report said.

Oil demand to double

Unlike countries that have successfully introduced EVs with subsidies to entice consumers, India’s have not been strong enough to significantly reduce the high price of EVs and stimulate widespread customer interest. India’s manufacturers have fallen behind other countries, while consumers preferring SUVs during the current period of relatively low oil prices have also slowed EV penetration. Despite setbacks, the county has a strong impetus to remain aggressive on EV adoption: It imports large amounts of crude oil and its transportation sector relies heavily on petroleum. India imports between 4-5 million barrels per day (Mbd) of crude oil, but produces only around 750,000 barrels per day.

The IEA estimates that the number of cars per household in India will increase by a factor of five from now through 2040.

Increased diversity in India’s transportation sector is incumbent with more of its citizens joining the middle class, population growing, and vehicle ownership rising. The IEA estimates that the number of cars per household in India will increase by a factor of five from now through 2040. The economy should grow by 6.5 percent per year, and population will reach 1.63 billion in two decades, up from 1.4 billion now. All of this means India will use a lot more oil, even if EVs penetrate the car fleet quicker than expected. Oil demand is set to rise by 3.3 percent per year, the largest growth of any country. By 2040, it should consume almost 10 Mbd, more than double today’s levels.

Ironically, the less ambitious EV target may turn out to be beneficial for India, since investments can be staggered over the years and the government should see less animosity from carmakers. SIAM, in its white paper, says that shifting to fully electric by 2047 (100 years after the country’s independence) is more convincing. “Partnership of trust between industry and government is the essence,” SIAM says. “The road ahead will need full conviction, hundred percent commitment and total perseverance.”

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