Electric ambitions

Meaningful transition to EVs will be challenging

Electric vehicles (EVs) are the centre of attraction at the ongoing Auto Expo in the National Capital Region with manufacturers showcasing new models and concepts. Some automakers believe the transition to EVs in India will be much faster than anticipated until recently. On its part, the government is supporting this transition through various means. The sale of EVs, as a result, has grown in recent years. In 2022, for instance, India witnessed over a 200 per cent increase in EV sales to cross the one-million mark. Given the interest of automakers in the segment, it is reasonable to expect that adoption will increase in the medium term. However, looking at the enthusiasm at both the policy and industry levels, a note of caution is perhaps warranted.
 

In this context, Toshihiro Suzuki, representative director and president of Suzuki Motor Corporation, rightly noted on Wednesday that even though global attention was on EVs, India must look for alternative solutions, particularly given the power situation. EVs are one of the solutions to make mobility carbon-neutral and India can also look at other options, such as hybrid, flex fuel, hydrogen, and ethanol. Although it can be argued that Maruti Suzuki has been slow in deciding to compete in the EV segment, it is worth noting that India should not bet on one technology, particularly at policy level. The government should not pick winners in terms of technology, and allow market forces to determine what is feasible and scalable. The government is currently supporting EVs in multiple ways.
 

The adoption of EVs has largely been driven by the government’s Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) scheme. Several EV manufacturers are in fact concerned that FAME II will end on March 31, 2024. As an analysis published in this newspaper showed, on average, every electric two-wheeler and four-wheeler gets a subsidy of about Rs 45,000 and Rs 3 lakh, respectively. Discontinuing government support would clearly increase the price of EVs significantly. Thus, there would be pressure on the government to continue the support, especially because a number of start-ups are involved in this area. However, as adoption increases, pressure on the exchequer will go up. For sustainable growth, therefore, it is important that EVs are able to compete in the market. Further, the segment is part of the government’s production-linked incentive scheme. Individuals are also allowed to claim a deduction in income tax on interest payable up to Rs 1.5 lakh on a loan for buying an EV.
 

Aside from the fiscal-support issue, there are other aspects that need attention in the attempt to increase EV adoption. For instance, coal is likely to remain a significant source for power generation in the foreseeable future. This means for a large part, vehicles are effectively being shifted from petrol and diesel to coal, which may not help attain aggregate emission targets. There are other fundamental challenges as well. As a 2021 report by the International Energy Agency noted, clean energy transition “means a shift from a fuel-intensive to a material-intensive system”. Mineral input in a standard electric car, for example, is six times that of a conventional car. Increasing global demand for such minerals can make sourcing a challenge. It is possible that EVs will remain dominant in the mobility transition as other alternatives need more research and development, but it makes sense to keep options open.