Electric Vehicles in India: Policy, Prospects and Barriers

India’s oil demand has surged, with transportation accounting for 40% of this. It is the world’s sixth largest car market, with over 3 million units sold in 2016. From 2010-15, car sales have been increasing by around 2 million units annually, with the majority of new sales going to fleet expansion. Unlike developed markets where most new cars are replacing ageing vehicles, the average Indian car is roughly 5 years old. Most of the sales growth is accounted for by two-wheelers, reflecting the entry of new consumers into the passenger vehicle market. As the economy continues to expand and incomes rise, the number of cars is set to increase exponentially. In an ambitious new plan, the Indian government aims to save the country an estimated $60 billion in energy bills by 2030 and decrease carbon emissions by 37% by switching the country’s transportation system towards EVs. To achieve this goal, government Think Tank NITI Aayog has recommended offering fiscal incentives to EV manufacturers, while simultaneously discouraging privately-owned petrol and diesel-fueled vehicles. The target is underpinned by India’s low per capita ownership of vehicles, with the potential to ‘leap’ directly to a new mobility paradigm which involves shared, electric and connected cars. The current base for EVs is low, at 4,800 vehicles in 2016 representing 0.2% of the total fleet, having grown y/y by 450 cars. The government is targeting 6 million electric and hybrid vehicles on the roads by 2020 under the National Electric Mobility Mission Plan 2020 and Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) programme. The 2030 target implies a stock of over 50 million electric vehicles, and although India’s government seems committed to the target it will face many challenges in implementation. This paper looks at India’s ambitious policy plans and prospects for EVs and its likely implications for India’s energy sector.

By: Anupama Sen

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Oil

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