Live news , top stories, corporate news, company news, sector news, economy news, results analysis news, ceo interviews, fund manager interview, advisor interview, market news, bazaar talk, hot stocks news, ipo news, commodities news, mutual fund news, insurance news, news wire
22 April, 2024 10:04 IST
Government plans to set-up 400,000 charging stations in India by FY26
Source: IRIS | 13 Dec, 2021, 08.04PM
Rating: NAN / 5 stars.
Comments  |  Post Comment
 Over the last decade, issues such as a deteriorating air quality due to high pollution, extreme weather events due to global warming and a high dependency on crude oil imports have been a cause of concern for the transport sector in India, according to Brickwork Ratings. These concerns can be mitigated in environment-friendly ways and through the adoption of Electric Vehicles (EV), which could go a long way in reducing pollution, as well as the dependency on crude oil imports.

Among all the sectors, automobiles are the major producer of greenhouse gases and have been trying to build a footing for EVs in the market. To fuel the efforts of these automobile Original Equipment Manufacturers (OEMs), the government has been coming up with initiatives such as the National Electric Mobility Mission Plan, Faster Adoption and Manufacturing of Electric Vehicles in India (FAME I & II), National Mission for Transformative Mobility and Battery Manufacturing, Phased Manufacturing Program and Advanced Chemistry Cell Production-Linked Incentive Scheme. With these schemes, the Government of India plans to create an ambitious market share of 30% for EVs by FY30, the credit agency said.

The Indian EV market, which is currently less than 1% of the overall automobile market, as against the global EV penetration of around 5%, will need to grow at over a 45% Compounded Annual Growth Rate (CAGR) to achieve the target of 30% EV adoption by 2030 under the national e-mobility programme. This may be ambitious and challenging, and yet the government and automotive sector are all set to holistically push for EV adoption in line with global environmental goals and their commitment towards reducing emissions. These plans are supported by significant policy initiatives by both the Central and State governments, it said.

All the aforesaid schemes are expected to provide a push to and encourage EV sales in India in the medium term. Of these, FAME- II (with an outlay of Rs 10,000 crore) and the Production-Linked Incentive (PLI) scheme for the auto sector are expected to be the most significant ones in terms of incentivising EV usage, the credit agency added.

Around 13 Indian states, including Delhi, Gujarat, Maharashtra, Karnataka and Tamil Nadu have provided subsidies and incentives to promote the manufacturing of EVs. These incentives are in the form of SGST reimbursements, exemptions from registration fees and road taxes, and so on. The Auto PLI scheme has two components, viz. the Champion OEM Incentive Scheme and Component Champion Incentive Scheme, which are sales-value-linked incentive schemes. This scheme is applicable on advanced automotive technology components of two-wheelers, three-wheelers, passenger vehicles, commercial vehicles and tractors, and incentives ranging from 8%-13%, with an additional 5% incentive for electric and hydrogen fuel cell vehicles. Under FAME-II (revised in 2021), the subsidies for two-wheelers have been increased by 50%, which ensures bringing down the cost of ownership to viable levels. The subsidy amount has been revised to Rs 15,000/kwh from Rs 10,000/kwh for battery-powered two-wheelers that meet the previously defined eligibility criteria.

EV Two-Wheelers to Lead the Growth Trajectory

Although in FY21, EVs witnessed growth in sales backed by two- and four-wheelers, the same accounted for less than 1% of the overall automobile industry sales. BWR expects the sales to witness a strong revival in FY22, backed by continued momentum in two-wheelers and demand revival in three-wheelers due to the expectation of better economic prospects. The sales have already increased by around 50% during YTD FY22 (April-November). For creating an ecosystem for EVs, various factors such as EV prices, charging infrastructure, mass acceptability and evolving technology, setting-up of manufacturing units for EVs needs to be considered. The share of two-wheeler EVs may grow faster than that of three-wheeler EVs and help achieve the target of 30% by 2030 on account of the requirement of smaller batteries, huge untapped potential in India and economic viability. The success of three-wheeler EVs hinges upon the launch of a wide range of EV models of petrol and diesel versions at affordable prices.

Affordability will be a crucial factor in the price-sensitive Indian market. Currently, an EV costs more than normal vehicles do, although in the long run, the maintenance costs of EVs is lesser than petrol-operated vehicles. As per our estimates, purchasing an EV would be more economical in the long run; savings derived by using an EV is 40-50% of the cost of Internal Combustion Engine (ICE) vehicles over a five-year usage period. Declining battery prices would further result in prices of EVs coming down in the near future. Additionally, the availability of charging infrastructure is a major factor that needs to be worked on. The government plans to set-up 400,000 charging stations in the country by FY26 from the current 1,800 plus charging stations, of which only 370 are functional in major cities. Moreover, the fact that only 13 states in India have an EV policy to nurture EV sales often acts as a deterrent for potential EV buyers.

Substantial Capex Needed to Achieve the Target

The target of achieving 30% EV penetration by 2030 would need more concerted efforts by OEMs and the government and significant investments in the EV value chain. Furthermore, as per our study, OEMs will have to incur capex to the tune of ~Rs 3.5 lakh crore, exclusively for EVs, in the next five to seven years to meet the government’s vision of EVs constituting 30% vehicles on road in India by 2030. This amount is significant as OEMs currently have a capex of around Rs 25,000 crore to Rs 30,000 crore per year in terms of enhancing their capacity for model launches and the upgradation of existing models. Hence, apart from their regular capex, OEMs will have to incur additional capex to the tune of Rs 30,000 crore per year on EVs’ capacity expansion, which seems unlikely, looking at the current challenging business environment.

Concerted Efforts of All Stakeholders Required

Although the situation looks challenging at present as results of the previous schemes have not been as expected, given that H1FY22 EV sales grew by 78% (albeit on a low base), BWR expects to see a similar trend in H2FY22 and EVs to have triple-digit growth in FY22. With increased concerns of global warming and a rampant increase in fuel prices, constant initiative needs to be taken to create demand and improve the supply chain and infrastructure for EVs to operate. To achieve the ambitious target of having EVs account for 30% of the overall automobile sales by FY30, constant efforts are required to be taken by all the stakeholders.
 Post Comment
Name Email
Security Code type    into this box
Related Articles
Home  |   Shares  |   F&O  |   Mutual Funds  |   Loans  |   Insurance  |   News Centre
Wealth Tracker  |   Newsletters  |   Tax Corner  |   NRI Centre  |   Advertise
© All rights reserved. IRIS Business Services Limited
A Disclaimer