India's new focus on electric cars

Is India at the threshold of a new mobility paradigm?

A draft report framed by Indian government think tank Niti Aayog has recommendations aimed at electrifying all vehicles in the country by 2032. Does this indicate that a new mobility policy is on the cards?

Niti Aayog has also recommended lowering taxes and interest rates for loans on electric vehicles, while capping sales of conventional cars. If these recommendations come into place, this would be a shift in policy.

A draft of the 90-page blueprint suggests the government open a battery plant by the end of 2018 and use tax revenues from the sale of petrol and diesel vehicles to set up charging stations for electric vehicles.

The report's focus solely on electric vehicles marks a shift away from the current policy that incentivises both hybrid vehicles - which combine fossil fuel and electric power – and electric cars.

"India's potential to create a new mobility paradigm that is shared, electric and connected could have a significant impact domestically and globally," said a draft version of the report, titled Transformative Mobility Solutions for India, which will be made public soon.

Last year, China announced aggressive measures to push sales of plug-in vehicles including subsidies, research funding and rules designed to discourage fossil-fuel cars in big cities.

Earlier this year, India’s Power Minister Piyush Goyal said: "We are going to introduce electric vehicles in a very big way. We are going to make electric vehicles self- sufficient like UJALA. The idea is that by 2030, not a single petrol or diesel car should be sold in the country.” UJALA is the country's LED program that is aimed at ensuring energy security.

Could India be following China's lead?

The country’s plan to leapfrog hybrid technology could also be prompted by the need to slash oil imports to half by 2030 and reduce emissions as part of its commitment to the Paris climate treaty.

Be that as it may, the shift in policy is worrying car-makers in the country. Officials also acknowledge the blueprint faces challenges. High battery costs would push up car prices and a lack of charging stations and other infrastructure means car makers, who have been consulted on the proposals ahead of publication, would hesitate to make the necessary investment in the technology.

Acceleration of electric vehicle growth would be a disruption for the auto sector and would require significant investment.

India's top-selling carmaker Maruti Suzuki has invested in so-called mild-hybrid technology, which makes less use of electric power than full hybrids, while Toyota Motor Corp sells its luxury hybrid Camry sedan in the country. Mahindra & Mahindra is the only manufacturer of electric vehicles in India.

In 2015, India launched a scheme called Faster Adoption and Manufacturing of Hybrid and Electric Vehicles under which it offered incentives for clean fuel technology cars to boost their sales to up to 7 million vehicles by 2020.

Despite incentives as high as Rs 1,40,000 rupees on some cars, the scheme has not made much progress, with the sales of electric and hybrid cars making up only a fraction of the 3 million passenger vehicles sold in India in 2016.

The scheme, which expired on March 31, has now been extended by six months while a future policy is being worked out.

The new Niti Aayog report, co-produced with US consultancy Rocky Mountain Institute, outlines a 15-year plan, broken into three phases starting in 2017.

"Limit registration of conventional vehicles through public lotteries and complement that with preferential registration for electric vehicles, similar to that in China," the report states.

To kick-start the shift, the report suggests bulk procurement of electric vehicles, building standardised, swappable batteries for two- and three-wheelers to bring down their cost and having favourable tariff structures for charging cars.

"Prioritise battery and charging infrastructure development," the report says, while setting a 2018 goal for setting up a 250 megawatt-per-hour battery plant with an aim to reach one gigawatt of production by 2020.

It also recommends setting up battery swapping stations by 2018, common manufacturing facilities for components and increasing subsidies on all battery electric vehicles to bring them to cost parity with conventional models by 2025.

Other suggestions in the draft report include incentivising the use of electric cars as taxis by lowering taxes, interest rates on loans for purchases and electricity tariffs for fleet operators, and lowering duties on makers of such fleet cars.