New Delhi

The world is riding on an Electric Vehicle bandwagon. However, India seems to be lagging in Electric Vehicle adoption, with a penetration rate of less than 1 per cent.

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A recent working paper by the Economic Advisory Council to the Prime Minister of India (EAC-PM) highlights the reasons for India's lacklustre performance.

The working paper, authored by EAC members Bibek Debroy and Devi Prasad Misra, reveals that high costs, 'range anxiety', limited model options, and unknown resale value are acting as barriers to large-scale EV adoption.

The rate of EV adoption is even slower in the LMV (Light Motor Vehicles) segment, which continues to impact the growth of this nascent EV sector. LMVs were about 19 per cent of the total vehicle sales in 2022-23, but only 0.95 per cent of them were EVs.

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The paper, while noting the cost of buying an EV may be higher to begin with, argues that the cost of running an EV will be lower compared to fuel-consuming vehicles in the long run, thanks to the cost difference between electricity and fuels.

"For small cars, the cost of ownership is in  favour of electric vehicles from the fifth year onwards whereas for mid-size vehicles the equation turns favourable for electric vehicles from the 9th year onwards," the authors write in the working paper titled 'Igniting the Bright Spark: Through the Looking Glass on Electric Mobility in India'.

The fear that a battery-run EV will run out of power before reaching its destination is real. While the term 'range anxiety' originated in the U.S, it has found resonance in India, where the EV charging spots are still under development.

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The report notes that there were 6586 publically accessible EV Charging Stations in India, as of March 2023. But a recent CII report shows that India would need over 1.3 million charging stations in order to facilitate EV adoption.

While the lack of diversity in models remain a challenge, the paper highlights China's decade-long experience in EVs and encourages greater government role in the sector to boost adoption.

Once the adoption figures rise, Debroy and Misra argue, market forces can enter the nascent market and diversify the product offerings.

"It is estimated that between 2009 and 2022, the Chinese government poured over US$29 billion into subsidies and tax breaks for Chinese EV manufacturers," they say, adding that early adoption of EVs has come from state mandates or state subsidies.

But a thorough reading of the paper suggests that the biggest benefit of adopting EVs would be economic.

India is an oil-importing country, the third-largest in the world. As per reports, India spent nearly $113.4 billion in oil and gas imports in 2022-23, becoming a major strain on the Current Account Deficit.

But India's growing economic prowess is reflected in the size of its automobile market -- the world's fifth-largest. The paper argues that moving towards battery-run EVs will not only bring down the import bill but also help India fulfil its net-zero committments.

While market forces, epspecially private players, will play a key role in expanding the sector, the government will have to create a robust policy framework to sustain EV adoption.  

The paper suggests introduction of mandates that seek a certain percentage of vehicles manufactured to be EVs. It also suggests leasing instead of purchasing EVs as a way to encourage greater adoption. 

Finally, the paper argues that a greater share of EVs in the government's fleet will have a demonstration effect on the public, which will lead to a mass adoption.

While significant challenges remain, a Bain & Co report states that EVs could account for more than 40 per cent of India’s automotive market and generate over $100 billion of revenue by 2030.

All that India needs, according to the working paper, is greater policy interventions.