India is the fifth largest car market in the world and has the potential to become one of the top three in the near future — with about 40 crore customers in need of mobility solutions by the year 2030. That is one side of the coin. The other side is that the country needs a transportation revolution. The current trajectory of adding ever more cars running on expensive imported fuel and cluttering up already overcrowded cities suffering from infrastructure bottlenecks and intense air pollution is unfeasible. India’s cities will choke. A transportation revolution will have many components — better “walkability”, public transportation, railways, roads — and better cars. Many of these “better cars” will likely be electric.
The transition to electric mobility is a promising global strategy for decarbonising the transport sector. India is among a handful of countries that supports the global EV30@30 campaign, which aims for at least 30 per cent new vehicle sales to be electric by 2030. Prime Minister Narendra Modi’s advocacy of five elements for climate change — “Panchamrit” — at the recently concluded COP26 in Glasgow is a commitment to the same. The PM espoused various ideas, like renewable energy catering to 50 per cent of India’s energy needs, reducing carbon emission by 1 billion tonnes by 2030 and achieving net zero by 2070, so that future generations can lead secure and prosperous lives.
The push for EVs is driven by the global climate agenda established under the Paris Agreement to reduce carbon emissions in order to limit global warming. It is also projected to contribute in improving the overall energy security situation as the country imports over 80 per cent of its overall crude oil requirements, amounting to approximately $100 billion. The push is also expected to play an important role in the local EV manufacturing industry for job creation. Additionally, through several grid support services, EVs are expected to strengthen the grid and help accommodate higher renewable energy penetration while maintaining secure and stable grid operation.
The global electric mobility revolution is today defined by the rapid growth in electric vehicle (EV) uptake. It is estimated that two in every hundred cars sold today are powered by electricity. This phenomenon is today defined by the rapid growth in EV uptake, with EV sales for the year 2020, reaching 2.1 million. The global EV fleet totalled 8.0 million in 2020 with EVs accounting for 1 per cent of the global vehicle stock and 2.6 per cent of global car sales. Falling battery costs and rising performance efficiencies are fueling the demand for EVs globally.
It is estimated that by 2020-30 India’s cumulative demand for batteries would be approximately 900-1100 GWh, but there is concern over the absence of a manufacturing base for batteries in India, leading to sole reliance on imports to meet rising demand. As per government data, India imported more than $1 billion worth of lithium-ion cells in 2021, even though there is negligible penetration of electric vehicles and battery storage in the power sector. While India is yet to grab the opportunity, global manufacturers are betting high on battery manufacturing and fast moving from gigafactories to terafactories.
With recent technology disruptions, battery storage has great opportunity in promoting sustainable development in the country, considering government initiatives to promote e-mobility and renewable power (450 GW energy capacity target by 2030). With rising levels of per capita income, there has been a tremendous demand for consumer electronics in the areas of mobile phones, UPS, laptops, power banks etc. that require advanced chemistry batteries. This makes manufacturing of advanced batteries one of the largest economic opportunities of the 21st century.
The government of India has taken various measures to develop and promote the EV ecosystem in the country, ranging from the remodeled Faster Adoption and Manufacturing of Electric Vehicles (FAME II) scheme (Rs 10,000 crore) for the consumer side to production-linked incentive (PLI) scheme for Advanced Chemistry Cell (ACC) ( Rs 18,100 crore) for the supplier side, and finally the recently launched PLI scheme for Auto and Automotive Components (Rs 25,938 crore) for manufacturers of electric vehicles.
Thus, all these forward and backward integration mechanisms in the economy are expected to achieve robust growth in the coming years and will enable India to leapfrog to the environmentally cleaner electric vehicles and hydrogen fuel cell vehicles. This will not only help the nation conserve foreign exchange but also make India a global leader in manufacturing of EVs and better comply with the Paris Climate Change Agreement.
All three schemes cumulatively expect an investment of about Rs 1,00,000 crore which will boost domestic manufacturing and also facilitate EVs and battery demand creation along with the development of a complete domestic supply chain and foreign direct investment in the country. The programme envisages an oil import bill reduction of about Rs 2 lakh crore and import bill substitution of about Rs 1.5 lakh crore.
I hope the PM’s vision will push both the public agencies and private entrepreneurs to embark on a collaborative journey that will benefit the country.
This column first appeared in the print edition on December 1, 2021 under the title ‘Driving into the future’. The writer is the minister for heavy industries, Government of India