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An improvement in the air quality was the only positive impact of the strict restrictions imposed in the wake of the COVID-19 pandemic. Delhi, one of the world’s most polluted cities, witnessed a 48% reduction in nitrogen dioxide (NO2) emissions during the national lockdown, of which reduction in tail-pipe emissions were a major component. People across the nation avoided public transport due to the fear of contracting the virus. In a bid to continue the sight of cleaner skies and pure air in Indian cities, the need of the hour is to promote electric mobility.
Globally, Electric Vehicle (EV) adoption, in particular, is driven by the involvement of the government and its policies. For example, the US President in February 2021, ordered the government fleet to be electrified, resulting in the American automobile companies pushing the game with aggressive ad campaigns for their EV offerings. The central and state governments in India have also been in the electrification race by introducing policies including the FAME scheme, the Vehicle Scrappage Policy, mandating the use of EVs by government officials, and creating a sound charging infrastructure network.
While the sale of e-cars has not seen much progress compared to other vehicle segments, the pandemic urged the potential buyers in India to choose cleaner EV variants in the 4-Wheeler segment, witnessing a 53% increase in sales in FY 2020 (Figure 1). E-car adoption in India is currently driven by demand aggregators operating in the B2B and B2C model and Energy Efficiency Services Limited’s (EESL) bulk procurement model under the National e-Mobility Programme. EESL has been engaged in decarbonising the government’s fleet by leasing e-cars procured in bulk from manufacturers and achieve economies of scale. Although this model was met with shortcomings in achieving the set target due to a substantial lack of e-car variants, limited range and insufficient demand from organisations, EESL fairly brought e-cars into the limelight and substantially facilitated their adoption by fleet operators.
Many start-ups venturing into the electric ride-hailing and car rental market in India have partnered with EESL for leasing electric cars in their fleet. Affordable service subscriptions ranging from an hour to 3 years and flexible operation being offered by rental and ride-hailing services could help Indian cities skip right over the age of private (combustion-powered) vehicle ownership to one where e-mobility prevails.
Estimating the economic viability of a vehicle is majorly dependent on its upfront purchase cost and daily utilisation. Commercial vehicles travel five times more than their private counterparts, easing their Total Cost of Ownership (TCO). Coupling this with lower operation and maintenance cost compared to the rise in fuel prices of ICE variants, e-cars used for commercial purposes gives a dead-heat competition to even CNG variants.
Despite the absence of FAME-II subsidy for private e-cars, the TCO per km becomes less than petrol and diesel vehicles for the average daily travel distances of more than 100 km (Figure 2). Currently, FAME-II subsidies available for e-cars in a commercial application and high vehicle utilization are among major facilitators in the adoption of e-cars by aggregators and fleet operators.
Although the electrification of fleet 4-wheelers has gained momentum, the scale of finance required in EV business remains a major barrier. Traditional bank lending options limit the scope of funding expensive EVs, which necessitates high upfront contribution from investors and places start-ups with limited credit history and higher risk profile at the crux of this paradigm. To lower these costs, innovative financing mechanisms and business models for e-cars could be explored to encourage new entrants in the business.
E-car adoption in India is presently spearheaded by the B2B segment with many start-ups reaping benefits of higher utilisation of EV fleet followed by the B2C or private segment. However, large-scale adoption of e-cars would not only require financial incentives and innovative business models to deal with the higher purchase costs but also the development of a robust charging network. Even though the challenges and recommendations mentioned are essential for promoting EVs, other measures that can be followed up are:
Anshika Singh is a consultant with the Electric Mobility team at WRI India.