Electric vehicles (EVs) are hailed as the future of mobility for good reason, given the ecological imperative to contain carbon emissions and hold off global warming. That the state must play a role in their success goes without saying, so it’s good that India has an EV conversion policy in place. Last month, the Indian government announced the second phase of its Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME-2) scheme, aimed at weaning various modes of public transport off fossil fuels. Some days ago, it released details of its indigenization thrust. However, the jury is still out on whether its plan will work out as envisioned.
Doubts persist for good reason, too. Under FAME-2, incentives are offered to manufacturers of three-wheelers, four-wheelers and buses that run on electric power. The latest guidelines issued by the department of heavy industries insist that to avail of the benefits under the scheme, half of all EV components, such as control units, chargers and AC units, must be manufactured within the country. This has been done to boost domestic production. However, for local companies, it remains risky to invest a lot of money in plants to make such products without clarity on the specifications that are likely to become industry standards across the world. This is a nascent industry even in the West and China is reported to have taken a global lead on key elements such as lithium batteries and charging units.
The Chinese government, of course, gave generous tax incentives and subsidies to car makers and consumers alike to make it happen. It also restricted the sale of fossil-fuel cars. Its EV industry is set to boom. India, however, has no major firm making controllers, batteries or magnet motors. As India has insufficient lithium reserves, the battery game—reducing the cost of which is the fulcrum for EV success in general—is especially hard to get into. Local EV makers would be better off waiting for component standardization and then forging tie-ups with successful foreign players (as some have tried) to achieve volumes and the viability granted by economies of scale.
While EVs have shown that they can offer top-notch performance, as users of Tesla cars testify, they are still too costly to replace fossil fuel vehicles in the broad consumer market. Batteries are getting cheaper, but it’ll be several years before EVs prompt people at large to trade their old wheels in for these. Interchangeable batteries would ease the process, as would a reliable network of charging stations where drained batteries could be swapped with fully-charged ones in a jiffy, as a plug-in-and-wait model would demand too much patience. All this lands the market in a chicken-and-egg situation. What must come first—EVs or their support infrastructure? This is the problem that public investment in EV market development must focus on.
Instead of an incentive scheme that tries to electrify public transport systems and prod the local manufacturing of parts, Indian policy would achieve more by assessing the global state of play, working out which battery and motor designs will come to dominate, and then setting up a grid to support a market switchover bit by bit as EV costs fall. It would call for a finely calibrated interplay of regulatory and market forces. Premature electrification is best avoided. As of now, India’s goal of clearing its city streets of fumes looks like a pie in the sky.