Who will lead India’s transition in adopting electric vehicles

Asian Age, October 30, 2018

By Pradeep S Mehta and Samir Bhattacharya

According to the World Health Organisation, 14 of the planet’s 15 most polluted cities are in India.

In order to reduce rising oil imports and greenhouse gas emissions, the government of India is considering a 30 per cent penetration of electric vehicles (EVs) across two-wheelers and four-wheelers throughout the country by 2030. It has been providing substantial support in that endeavour. However, catapulting this transition from fossil fuel-based towards electric-based transport systems will also require altering the mobility-related consumer behaviour.

In order to overcome the inertia and motivate consumers to opt for electric vehicles, both the Union and state governments are considering numerous options to prepare the industry for this mass transition towards EVs.

However, consumers’ willingness to purchase still remains a rather grey area. The move towards the electric mobility space cannot be successful unless consumers are convinced about the benefits of a sustainable mobility transition.

In March 2015, the government had launched the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme with the objective of promoting the purchase and usage of electric vehicles in the country. The policy was extended till the end of September 2018. Under this scheme, the government has given financial support for electric or hybrid vehicles worth Rs 256.93 crore. Further, a grant of `280 crore has been sanctioned for nearly 500 electric buses in nine major cities in the country.

The government is currently scaling up its efforts by revising the FAME scheme and coming up with a new version to push the promotion of EVs. FAME-II will have a much bigger corpus of `9,300 crore for five years. The government is also considering liberalising import norms by removing the restrictions on price and engine capacities, as well as the mandatory local testing conditions to encourage more global players. Recently, the government slashed the GST charges for electric batteries. Fringe benefits such as green number plates, and a deduction in toll and parking charges are being explored and expected to be implemented soon.

Be that as it may, even this humongous effort may not suffice for a substantial transition to electric mobility. Despite the large amount of subsidy during FAME-I, the uptake of electric vehicles, especially among private car owners, still remains abysmally low. In the absence of a clear government policy nudge, the sluggish move towards electric mobility is being driven only by personal choice and the concurrent rise of oil prices in the international market.

Albeit, the biggest challenge for the mass adoption of EVs isn’t only the lack of adequate charging infrastructure, range anxiety (mileage between each charge) and the higher initial cost compared to fossil fuel variants. It is also the lack of public awareness concerning the importance of shifting to a eco-friendly transportation model and its associated benefits. In terms of the charging infrastructure, we are seeing the choked petrol pumps dispensing CNG.

Thus, before the government continues to implement its master plan, there is one big question it has to answer first: Will consumers bite? Consumers’ willingness to purchase is the most important factor for the transition towards and mass adoption of electric vehicles. Hence, it is crucial to understand the purchasing behaviour to predict the variables which will influence the willingness of consumers and inform policymakers and businesses alike.

In several market surveys, Indians have expressed their interest in buying EVs. Yet this interest has not been translated into any concrete action. While the upfront cost remains the major impediment towards sustainable mobility transition, Indian consumers at the micro level are also influenced by the lack of choices in the EV market. Although most of the automobile manufacturers in India have pledged to move towards electric mobility, at the moment there are only about ten electric/hybrid car variants available in the market, compared to 54 in the US and over 100 in China.

Consumers’ willingness to purchase EVs can be affected by several factors which include internal factors such as demographics, social influence, consumers’ personal choices, etc, as well as external factors such as performance, efficiency, service delivery, etc. A range of non-technical and economic factors such as the symbolism of EV purchase, environmental prioritisation and so on can be particularly important to EV consumers.

One way forward is to develop a standard for EVs under the environment ministry’s Ecomark, which is now being rejuvenated. Ecomark is a market instrument which empowers consumers to push industry to produce environmentally friendlier goods and services. Such labels are quite popular in many developed countries of the world and are slowly entering developing countries as well.

According to the World Health Organisation (WHO), 14 of the planet’s 15 most polluted cities are in India. The transport sector accounts for about 90 per cent of the GHG emissions and consumes about 15 per cent of total energy, mostly sourced from coal, diesel and petroleum. This sector has considerable potential for reducing energy use and mitigating its impact on climate change. However, the government’s active stance will not produce the desired results unless it can actually convince consumers to use it. Thus, while the government needs to keep playing the role of being the driving force in its early stages, mere doling out of subsidies without considering these dynamics will not suffice. India’s dream of a climate-friendly future hinges ultimately on its consumers, who need to lead the transition.

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