By Pulkit Khurana
India could pick up significant insights from its northern neighbour in promoting its electric vehicle sector and ensuring it remains well on course for meeting the ambitious 2030 goals.
On 12 May 2021, the Government of India announced Production Linked Incentives (PLI) of Rs 18,100 crore for its ‘National Programme on Advanced Chemistry Cell (ACC) Battery Storage’. This would help achieve the 50-gigawatt hour (GWh) manufacturing capacity.
This is a landmark move towards becoming ‘Aatmanirbhar’ (self-reliant) in Electric Vehicles (EVs). To date, due to the lack of ACC domestic manufacturing facilities, India has been dependent on importing almost 100% of cells for electric vehicle batteries and most of these have been from China. The initiative will also help reduce the costs of EV, imparting the much-needed impetus for achieving the audacious 2030 goals set by Niti Aayog. The PLI outlay is only 1.5% of the US$180 billion of investments required to achieve these goals.
To compare the 50 GWh goal, in 2019, China– the largest producer of ACC and batteries– had 73% of global capacity or 230 GWh. It can be argued that our steps are quite late and inadequate. But these are the right steps in the direction of resolving issues in the battery supply chain.
China has more than 5.5 million New Energy Vehicles (NEVs) such as cars, buses and heavy-duty trucks. It also has 300 million-plus electric 2-wheelers on the road. India stands at less than 0.1% of that while selling roughly 5000 NEVs annually. Interestingly, more than 90% of its numbers were sold in the last five years in China. Therefore, though the numbers are huge, it indicates we can similarly leapfrog and electric adoption could become exponential from here onwards.
Three critical steps contributed to the massive adoption in China. Firstly, the purchase incentives or subsidies rolled out from 2009 onwards. India has its Faster Adoption and Manufacturing of Hybrid and EV (FAME I and FAME II) scheme, which is providing the necessary incentives and ensuring that electric vehicles become more affordable for users.
Secondly, there was the largescale ACC manufacturing for batteries of these vehicles, where India has decided to act via the recent PLI scheme. Lastly, how the government and private players resolved the charging infrastructure challenge in China.
From 2016 onwards, China moved aggressively towards building its charging infrastructure. The State Council plan mandated charging points at business districts, residential complexes and public places. Interestingly, where the private sector was concerned, what worked well in resolving this problem is battery swapping. Nio– a battery swapping company for cars– does more than 150,000 swaps a month. EHuanDian and Gogoro combined to do more than 1 million swaps every day for two-wheelers.
China has even notified battery swapping standardization for cars, which will be effective from 1 November 2021. This is based on standards used by Nio and no curtailment of subsidies on swappable cars. While companies such as Gogoro plan to enter India soon, the Indian industry needs to adapt and move faster on this $206 billion electric vehicle opportunity and work on indigenous solutions.
India has announced some robust policy measures so far for electric vehicle adoption and towards making battery swapping more attractive. One such policy move was also to allow vehicles to be sold separately from batteries. Some other steps India can take include a reduction in GST on batteries to 5% (at par with electric vehicles) from 18% and passing the electric vehicle subsidy benefit in this case to battery suppliers.
Finally, India can also systematically disincentivize the sale of lead-acid batteries to promote Li-ion batteries, as we now enter the ACC manufacturing era. This provides a demand boost to these new manufacturing units while also benefitting vehicle users in the long run. China curbed lead-acid manufacturing by levying heavy taxes and making it tougher to procure licences to manufacture them in the last decade. The recent draft policy goes to the extent of banning them from even low-speed vehicles and not registering vehicles using lead-acid batteries.
India is creating a conducive regulatory environment for electric vehicle adoption. Although a few years behind, the nation is poised to achieve its 2030 targets. Backed by favourable regulatory tailwinds, Bharat-centric innovation and rapid execution, India Inc. should now take the driving seat in our journey to electrify all vehicles.
(Pulkit Khurana is the Co-founder of Battery Smart.)
(Disclaimer: The views expressed in the article above are those of the author’s and do not necessarily represent or reflect the views of Autofintechs.com. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.)
