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  • Writer's pictureThe Financial Literacy Cell

Is India Gaining Momentum on the E.V. Game?

The revolution from internal combustion engines towards the Tesla's in this world now seems inevitable. And India doesn't seem much behind in this race or does it?

India currently trails a lot behind other important EV (Electric Vehicle) markets like China, Europe, and the United States. In 2019, the worldwide EV stock reached 7.2 million units, with China accounting for 47 %, Europe for 25%, and the United States for 21%. Only 600,000 units were sold out throughout the rest of the globe, with only 170,000 units sold in India. But looking at the population and the market size India has in the automotive sector, the future forecasts are astronomical. This can also be observed by the willingness of foreign players like Morris Garages (MG) and Tesla to get a bite of the market share.

EVs are currently attracting a lot of attention in the Indian market. The electrification of road transport serves multiple purposes. It's a green industrial approach that helps the economy to recover after a pandemic. Its goal is to cut oil imports while bolstering energy security. It's also crucial for lowering pollution and combating climate change. It is a key component of Global Net Zero objectives and a significant carbon emission reduction measure, second only to the greening of power sectors. While electric vehicles accounted for less than 0.5% of Indian car sales in 2019, stock levels are not a good indicator of the country's readiness or interest. In 2017–2018, India sold 69,000 units and 143,000 units in 2018–2019. This indicates a rapid rate of growth, which is anticipated to accelerate in the next years. Two-wheelers accounted for nearly 97.5% of all-electric vehicles sold in India, indicating a particularly robust market in the two- and three wheeler segments. Since the outbreak, the central government and state governments have implemented a number of positive policies. The government, for example, has subsidized the deployment of e-buses and charging stations on a national level. On a state level, Telangana has waived road tax and registration fees for the first 200,000 two-wheeler EVs, while Gujarat will provide government subsidies to students buying two-wheeler EVs and rickshaw drivers and self-employed people buying three-wheeler EVs. Delhi also launched a progressive electric vehicle policy in 2020, which includes purchase incentives based on battery range and category. These initiatives are promising, but they require more streamlining and cooperation between the policies of central government, state government, and local (municipal) government. However, this seems unimpressive in contrast to global EV investment.

Before the pandemic, automakers had planned to invest at least USD 300 billion in electric vehicles over the next 5 to 10 years. More over half of the money was earmarked for operations in China, with the rest split between Germany, the United States, South Korea, Japan, and France. India must develop the appropriate policy framework and incentives in order to become a significant EV investment destination.

With the government's FAME (Faster Adoption and Manufacturing of Electric Vehicles) programme, it has begun to do so. The programme, which began in 2015, was designed to encourage EV usage as well as encourage manufacturers to create EVs in India. The government allocated USD 130 million in subsidies to support the purchase of electric two-wheelers and three-wheelers, as well as hybrid and electric automobiles and buses, in the first phase of FAME. In terms of sales, the first phase was largely seen as a success. The second phase of FAME saw a significant increase to USD 1.4 billion in EV subsidies, with around 85% going to subsidies and 10% to charging infrastructure. It began in 2019 and is supposed to last till 2022. Accelerating local manufacturing was once again a key component of this phase. However, two years later, the outcomes are not as expected. Only around 10% of the EV adoption objective for Phase 2 had been met by early 2021.This is due to a slower evolution of the domestic component manufacturing market and regulatory requirements for fiscal incentives that keep EV costs too high, according to the Society of Manufacturers of Electric Vehicles. In addition, the absence of accessible funding and an uncertain medium-term regulatory environment continue to hinder private investment.

As a result, India's electric vehicle revolution is still in its early stages, and policy emphasis has shifted to deployment and investment rather than local manufacturing requirements. The government has also developed a production-linked incentive programme to encourage companies to start producing electric vehicle batteries in the United States. To alter the regulatory environment in a way that enables such deployment and value chain investment, an updated examination of investor, trade, and skill gap barriers is required. This could also be the ideal time to begin policy coordination and design for end-of-life EVs, particularly in terms of urban mining and EV battery reuse and recycling. India is likewise unprepared for end-of-life electric vehicles. To be honest, just a few of the top players are.

E-waste accounts for over 70% of hazardous garbage in landfills throughout the world. In 2019, only 94,000 metric tonnes of lithium-ion batteries (LIBs) were recycled worldwide, the majority of which came from portable consumer gadgets. EV batteries, on the other hand, will begin to flood the end-of-life battery market in the next decade. According to the World Economic Forum, in order to recycle half of those EV batteries by 2030, recycling capacity will need to increase by a factor of 25. The EV battery recycling sector, on the other hand, is now suffering from a variety of issues, ranging from profitability due to relatively low primary raw material costs to changing chemical compositions of EV batteries and inefficiencies in the recycling process. While China has explicit criteria for removing, draining, dismantling, and storing used EV lithium-ion batteries, the United States, Europe, and Japan are still grappling with a regulatory framework that would allow for economic recycling. The number of patents in the field of EV battery recycling has risen considerably in the previous decade, indicating the potential for innovation.

India can overcome several EV battery recycling barriers with the correct incentives and policy framework, and become a major participant within the next decade. The market for end-of-life LIBs is predicted to grow to 705,000 by 2025 and 9 million by 2040, with the majority of these being EV LIBs.

India, like China, has a large EV growth market and, as a result, will be able to rely on a steady supply of end-of-life batteries in the future. India, unlike China, lacks global supply networks for primary materials like lithium and cobalt, necessitating urban mining and recycling in order for the country to become a large-scale EV battery manufacturer.

The earliest steps of EV LIB recycling are also only partially automated, necessitating a significant amount of physical labour. India may have a comparative advantage over other key participants in this area, as well, because it has a huge population and lower labour costs than Western countries. However, the effectiveness of circular economy initiatives cannot be assured.

China spent a decade to create its regulatory framework in order to become the market leader in LIB recycling. From improving battery collection, transport, and storage regulations to coordinating battery-handling training programmes, India's government has a lot of work to do— from crafting labelling and traceability requirements to clarifying contractual and ownership models, and from improving extended producer responsibility to facilitating clustering and joint ventures that can drive efficiencies. It is undeniable that electric vehicles will alter global road transportation, with India serving as a massive deployment market. India should strive to become a manufacturing centre that can contribute to both EV value chains and battery recycling, which is both rational and important. To do so, the government must first identify and address hurdles, then alter its legislative and institutional frameworks to accommodate those barriers and attract more private investment.

By - Tanishq Sajeev

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