ELECTRIC MOBILITY PARADIGM SHIFT CAPTURING the OPPORTUNITIES 1 CBS Council for Business Sustainability
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ELECTRIC MOBILITY PARADIGM SHIFT CAPTURING THE OPPORTUNITIES 1 CBS Council for Business Sustainability 2 ELECTRIC MOBILITY PARADIGM SHIFT CAPTURING THE OPPORTUNITIES TITLE ELECTRIC MOBILITY PARADIGM SHIFT: CAPTURING THE OPPORTUNITIES YEAR February, 2018 TERI Team AUTHORS Chandan Bhavnani, Himanshu Shekhar, Arnesh Sharma (Responsible Banking, YES BANK) No part of this publication may be reproduced in any form by photo, photoprint, microfilm or COPYRIGHT any other means without the written permission of YES BANK Ltd. This report is the publication of YES BANK Limited (“YES BANK”) and so YES BANK & TERI have editorial control over the content, including opinions, advice, statements, services, offers etc. that is represented in this report. However, YES BANK & TERI will not be liable for any loss or damage caused by the reader’s reliance on information obtained through this report. This report may contain third party contents and third-party resources. YES BANK & TERI take no responsibility for third party content, advertisements or third party applications that are printed on or through this report, nor does it take any responsibility for the goods or services provided by its advertisers or for any error, omission, deletion, defect, theft or destruction or unauthorized access to, or alteration of, any user communication. Further, YES BANK & TERI do not assume any responsibility or liability for any loss or damage, including personal injury or death, resulting from use of this report or from any content for communications or materials available on this report. The contents are provided for your reference only. The reader/ buyer understands that except for the information, products and services clearly identified as being supplied by YES BANK & TERI, it does not operate, control or endorse any information, products, or services appearing in the report in any way. 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TERI Council for Business Registered and Head Office Sustainability (CBS) 9th Floor, Nehru Centre, The Energy and Resources Institute (TERI) Dr. Annie Besant Road, Core 6C, Darbari Seth Block, Habitat Place Worli, Mumbai - 400 018 Lodhi Road New Delhi - 110 003 Tel : +91 22 6669 9000 Tel : +91-11-24682100,41504900 CONTACTS Fax : +91 22 2497 4088 Fax : +91-11-24682144, 24682145 Email : [email protected] Northern Regional Office 48, Nyaya Marg, Chanakyapuri Website : http://cbs.teriin.org/ New Delhi – 110 021 Tel : +91 11 6656 9000/0124-4619008 Email : [email protected] Website : www.yesbank.in ELECTRIC MOBILITY PARADIGM SHIFT CAPTURING THE OPPORTUNITIES 3 CBS Council for Business Sustainability 4 ELECTRIC MOBILITY PARADIGM SHIFT CAPTURING THE OPPORTUNITIES FOREWORD Electric Mobility Paradigm Shift: Capturing the opportunities Electric Mobility, with a current market of USD 163 billion globally, is fast emerging as an unprecedented opportunity in low-carbon transition of the global economy, making transportation clean and efficient. Indian Government has also taken a target to shift to 100% Electric Vehicles (EV) by 2030. This, apart from feeding into nation’s carbon emission reduction target, would lead to reduction of pollution in cities by 80-90% and curtail 10% of India’s oil imports forecast for 2030, narrowing India’s current account deficit. This ambitious target is providing the much required thrust to make electric mobility, with investment potential of USD 667 billion in India, a pragmatic reality in the near future. Electric mobility landscape in India is currently at a nascent stage, with significant constraints to be overcome. India require nearly eight times the existing global stock of EVs, but with long timescales, auto industry would require enabling policy interventions to make sudden shifts in production. With 206 communities charging stations across the country against 56,000 fuel stations, there remains an urgent need to scale creation of an enabling infrastructure. Continuous upgradation and evolving technology also poses significant threat to financial structuring, requiring innovative financing mechanism to fuel this transition. Considering this context, the report, ‘Electric Mobility Paradigm Shift: Capturing the opportunities’, develops a six-point criteria to identify front runners (two-wheelers, three-wheelers and buses) which would propel the transition towards electric mobility. Further, the report highlights the potential of e-mobility in reducing carbon emission which is as high as 82% for complete electrification of two-wheelers by 2050. Critical policy mechanisms including setting up green zones, preferential tariffs and innovative financial instruments such as green bonds, fee-bates and demand aggregation mechanisms to support market creation for e-vehicles are also proposed in the report. I am confident that this report will provide important insights and specific actionables for policy makers, industry, financial community and all other stakeholders to together accomplish this transformation towards the electric mobility paradigm. Thank You. Sincerely, Rana Kapoor Managing Director & CEO Chairman ELECTRIC MOBILITY PARADIGM SHIFT CAPTURING THE OPPORTUNITIES 5 CBS Council for Business Sustainability 6 ELECTRIC MOBILITY PARADIGM SHIFT CAPTURING THE OPPORTUNITIES PREFACE A transition to electric mobility, especially in urban areas, is at the top of the Government of India’s policy agenda. This is driven by several factors, including the longer term implications of vehicular emissions on urban air quality, the macro-economic impact of the rising share of petroleum imports on the Indian economy, the challenge of enhancing the uptake of electricity from the power generation sector that is currently suffering from low capacity utilisation, and the ambition of moving towards a carbon free transport sector in conjunction with a power generation sector in which the share of renewable energy is steadily increasing. This transition is being enabled by several policy-driven initiatives, including the Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India (FAME India) Programme, placement of battery electric vehicles in a low rate category in the Goods and Services Tax (GST) regime, the EESL (Energy Efficiency Services Limited) tender for 10,000 electric cars for central government offices, and the identification of eleven cities by the Department of Heavy Industries for running Multi-Modal Electric Public Transport pilot projects. The central challenge in the transition to electric mobility today remains the higher cost of battery electric vehicles compared to internal combustion engines (largely because of high battery costs), and the lack of a ubiquitous charging infrastructure. There is a need, therefore, to identify measures which can provide an immediate push to key EV segments that enable us to achieve the scale and performance necessary to bring down costs and enhanced consumer awareness and acceptance. We, at TERI, are delighted to collaborate with YES Bank in the preparation of this paper which identifies low hanging opportunities for the EV transition, and presents recommendations to upscale EVs in each of the identified segments. We suggest that the two-wheeler, three wheeler, and bus segments are the priority segments for the transition to electric mobility. We look forward to this paper enhancing the data and analysis based discussion on policies and measures to accelerate the large-scale adoption of electric mobility in India. Dr Ajay Mathur Director General, TERI ELECTRIC MOBILITY PARADIGM SHIFT CAPTURING THE OPPORTUNITIES 7 CBS Council for Business Sustainability 8 ELECTRIC MOBILITY PARADIGM SHIFT CAPTURING THE OPPORTUNITIES EXECUTIVE SUMMARY Indian mobility sector is one of the fastest growing in the world with the number of motorized vehicles per 1,000 population seeing a threefold increase from 53 in 2001 to 167 in 2015. However, in comparison to developed markets like USA (795) and EU (573) it remains very low, indicating the growth potential of the mobility market in India. Currently, the transport sector in India depends almost unilaterally on imported oil to meet 98% of