White Paper On The Future Of Electric Vehicles In India
Electric vehicles (EVs) are growing in popularity and certainly in mind space in India. They are cleaner and more efficient. Their slow growth, however, is still considered just a market problem: The end-user should choose on the basis of what it costs to buy and run, or how it performs, etc.
Market forces do matter, but there is also a need for government and policy inputs to increase the numbers. EVs, after all, operate within broader energy and transportation ecosystems with their own distortions. Unless we understand Indian-use cases, drivers (in both senses of the word), limitations, and opportunities, we risk ambitious targets that remain aspirational.
Electric Vehicles in The Indian Context
Indians are famously valued conscious. This is why consumers love diesel cars, despite their higher MRP and pollution relative to petrol counterparts. Even at today’s low oil prices, running a diesel sedan can cost about Rs3.8 per kilometer versus petrol’s Rs5.5. In contrast, CNG costs roughly Rs1.9/km, but it’s not widely available. The cost of EVs depends on electricity price, which varies significantly. At Rs7/kWh (kilowatt-hour) of power, they cost only about. This saves consumers driving 5,000km per year over Rs.20,000 annually and taxis much more as they drive 10-15 times as much.
The catch is the upfront cost. EVs are expensive, primarily because of the battery. A single kWh of electricity is enough to go about 6km, so a 200km “full tank” range requires about 35 kWh of battery. Today’s prices for lithium-ion batteries are about $250/kWh globally, which comes to Rs5.7 lakh in battery costs, excluding import duties. Even with an eight-year lifespan and a 12% interest rate, justifying the battery costs on per kilometer savings alone means one would have to drive over 35,000 km per year. Doable, but not for everyone. However, when batteries are Lead Acid, then prices fall to $100/kWh, then EVs can become a game-changer.
Range turns out to be key: 5,000km per year is only about 15km per day on average, while an urban taxi may do 300km daily. Higher range means not only more battery cost but weight as well. In an ideal world, we would have a smaller battery pack and simply recharge periodically. In practice, taxi and fleet vehicles can only charge overnight, and even private users may have limits on charging options. Without fast-charging infrastructure—fast-charging an EV requires much more power than household 15 amp sockets, which can only offer about 3 kW of power, so 35 kWh takes almost 12 hours to charge—one inevitably has “range anxiety”. Unlike the US, most Indians don’t have a personal garage. Hence, widespread and battery brand-agnostic public charging infrastructure becomes a key policy choice.
Electric Vehicles Should Be a Win-Win for Stakeholders
The power grid is also a key stakeholder in the ecosystem. Not just where but when does someone charge? The worst-case scenario is consumers coming home after work and plugging in at the same time, which also happens to be the grid’s demand peak. One solution is charging consumers a variable rate based on time of day, but that isn’t yet the norm for most users in India, and certainly not households.
Done right, EVs and the grid can have enormous synergy. Not only can EVs charge whenever there is “surplus” power, but they also have a battery useful for absorbing variable renewable energy. They can even offer backup power for the grid. This is one reason we should create a new electricity consumer category for EVs, one that includes aggressive time-of-day pricing (cheap charging when power is surplus). Otherwise, we risk commercial users attempting to charge EVs on subsidized residential power prices. Or worse, utilities disliking EVs if they hurt their viability, to the extent that they don’t provide essential support (this already happens with renewables).
Not only are EVs efficient—with regenerative braking capturing energy otherwise wasted and also due to the inherent efficiency of motors, especially at low speeds—they pollute less. We should value such environmental co-benefits, not just carbon reductions (which are roughly an eyewash), but avoiding local air pollution. We could compensate for cleaner vehicles through reduced registration charges, or even aim for mandating EVs for taxis and selected (urban) public transport vehicles. These are often diesel, and thus far worse polluters.
There are other distortions to consider. Over half of petrol’s pump prices are for taxes. Petrol taxes are 1% of GDP (gross domestic product) and diesel, 2%. Fully switching to EVs means affecting some 2% of GDP. Of course, oil is predominantly imported, so moving to EVs should be a worthwhile trade-off. Plus, over time, more and more electricity will come from renewable sources.
There are other ways to spur EV’s population, including dedicated charging spots in all residential and commercial, and discounted or free parking. Free space can be provided by OIL PSUs on their retail outlets in cities and highways to encourage small entrepreneurs to set up charging stations. Solar energy-based multiple charging stations can be created along the highways at petrol pumps, dhabas, food courts, etc. These business owners will attract EV owners to consume their products if they are providing free charging.
The long-run goal isn’t just to make vehicles electric but to reduce personal driving. This means urban redesign for walking/biking, more shared services, and more and better public transport (convenient and fast enough that the rich will also choose it). Instead of trying to pick technology winners, the government mainly needs to create the right frameworks and help overcome “network effect” problems, covering both the grid and charging infrastructure. Innovation is already happening in these areas.