BackOur unique EV transition is a leadership opportunity
India should double down on its thrust by focusing on cost sensitive users of two and three wheelers
PremiumIf in the West the environmentally conscious and affluent are going the electric vehicle (EV) way with four-wheelers like Tesla’s, a unique transition is happening in India. Here, it is being spearheaded by two- and three-wheelers. Electric two-wheelers and three-wheelers (including e-rickshaws) accounted for 92% of EVs registered in the country in 2022. And the 2023-24 budget gave the EV industry a boost by announcing the removal of customs duties on capital goods used for manufacturing lithium cells used in these vehicles.
India’s transport decarbonization is a good example of inclusive development and green growth, where lower income groups and vulnerable businesses stand to gain the most from the transition. In the Global South, then, India stands to gain from positioning itself as a global hub for EV two- and three-wheelers. Our scooters and auto-rickshaws can be at the forefront of this.
Analysis by the Council on Energy, Environment and Water (CEEW) shows the total cost of owning an electric three-wheeler (e-3W) is 13-46% lower than that of owning similar vehicles using petrol, diesel and compressed natural gas. When drivers switch to electric, a 30% increase in daily savings is enough to pay back an e-3W loan. Commercial two-wheeler delivery riders can also significantly improve their earnings by adopting EVs.
So what’s delaying the transition? Despite clear economic gains and availability of EV models, e-2Ws and e-3Ws are still not being adopted at the desired pace. Only 4.5% of three-wheelers registered last year were electric, up from 1.7% in 2021. Even though about 5.8 lakh e-2Ws were registered in 2022, they made up just 3.9% of total two-wheelers. This slow uptake can be attributed to low awareness, lack of trust in EV performance, high finance cost, poor visibility and poor access to charging infrastructure.
A greater focus on passenger three-wheelers and commercial two-wheelers can accelerate India’s green push by improving livelihoods while reducing environmental and transport costs. We suggest four steps:
First, set up EV credit guarantee trust funds to de-risk financiers: Financiers are apprehensive about extending loans to users without a CIBIL score. Most 2W delivery riders and 3W drivers rely on high-interest loans from informal markets. MSMEs, which face a similar challenge, have benefited from credit guarantee funds (enhanced in this budget). The Centre could create a similar EV-focused fund that city/state governments may leverage to back loans for e-3Ws and commercial e-2Ws.
Second, make chargers easily accessible: Spatially uniform charging infrastructure development guidelines, as suggested by the ministry of power, do not consider the needs of 2Ws and 3Ws whose idle-time locations are not uniformly distributed across the city. Auto-rickshaws spend their operational and non-operational idle times at specific parking locations with high footfall. Similarly, 2W delivery riders spend their idle time near pick-up hubs and restaurants. The charging infrastructure being developed on national highways also does not cater to 2Ws and 3Ws, which mainly operate within cities. We recommend charging locations that are strategically chosen based on city-level high- resolution assessments of how e-3W and e-2W users would be best served.
Third, incentivize battery swapping ecosystems: Time lost on charging is very costly for passenger 3W and 2W delivery users. This is why complementary battery swapping ecosystems are evolving in these segments. These provide charging solutions by swapping empty batteries with charged ones, which helps users avoid long waits. However, most local swapping ecosystems in India are focused on large homogeneous fleets of the same manufacturer‘s make and model. We recommend incentives for batteries, EVs with swappable batteries, or for battery-swapping infrastructure. This will promote battery interoperability among heterogeneous fleets within the same battery-swapping ecosystems.
Fourth, allocate higher funds to improve awareness: What was done for the Swachh Bharat Mission can serve as a model. There are still considerable awareness gaps among users about the ability of EVs to cater to their needs and reduce their costs. Undoubtedly, there are also behavioural biases that impede EV adoption. A larger allotment of funds for information, education and communication (IEC) by the government under its Faster Adoption and Manufacturing of EVs (FAME-II) scheme, specifically to address e2W and e3W segments biases, would help. Including administration costs, FAME-II’s IEC allocation remains just 0.004% of the overall scheme outlay. This is minuscule in comparison with other schemes like the Jawaharlal Nehru National Urban Renewal or Swachh Bharat missions, which have 5-8% allocation for IEC. Delhi is an example of how state-level awareness campaigns with EV fairs and demonstrations can catalyse an upshoot in e-2W and e-3W sales.
We propose that India double down on its electric 2W and 3W transition to maximize its benefits for the environment, people’s livelihoods and the Indian economy. The Union government must take strategic steps focused on the e-2W and e-3W segments to ease financing, improve awareness and reduce charging costs, accessibility and time. With these two EV segments, India has an opportunity to lead the efforts of other Asian emerging economies to chart their own inclusive energy-transition strategies.
Aravind Harikumar & Himani Jain are, respectively, a research analyst and a senior programme lead at the Council on Energy Environment and Water.
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