Hybrid and Electric Vehicles in India Current Scenario and Market Incentives
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WORKING PAPER 2016-26 Hybrid and Electric Vehicles in India Current Scenario and Market Incentives Authors: Shikha Rokadiya, Anup Bandivadekar Date: December 2016 Keywords: Hybrid electric vehicles (HEVs), mild hybrids, battery electric vehicles (BEVs), life cycle emissions, total cost of ownership (TCO) Introduction Table 1. Components and Outlay Under FAME Scheme3 Component under FY 2015-16 FY 2016-17 BACKGROUND FAME Scheme Million INR (Million USD) Million INR (Million USD) Cost concerns have deterred manufac- Technology Platform 700 (10.5) 1,200 (18) turers from introducing hybrid electric Demand Incentives 1,550 (23.25) 3,400 (51) vehicle (HEVs) and battery electric Charging Infrastructure 100 (1.5) 200 (3) vehicle (BEV) technologies in India Pilot Projects 200 (3) 500 (7.5) until recently, but this seems poised IEC/Operations 50 (0.75) 50 (0.75) to change following the introduction Total 2,600 (39) 5,350 (80.25) of incentives to boost the penetra- tion of these vehicles. In FY 2015-16, hybrid and electric passenger vehicles two-year period across FY 2015-16 and STUDY OBJECTIVES constituted approximately 1.3% of all FY 2016-17. Demand incentives, which Considering that the FAME scheme has passenger vehicle sales in India, up are available as a direct subsidy on 1 been in effect for one year, and that from essentially zero in FY 2012-13 . the retail price of eligible vehicles to various other incentive mechanisms consumers, are the most significant The flagship program to boost hybrid are also available, the objectives of this component of the scheme.3 and electric technologies in India is the study are: Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME)2 1. To examine the utilization of the scheme from the Central Government, demand incentive allocations launched in April 2015. As outlined in 3 Distribution of national level incentives in under the FAME scheme for FY early stage markets of Electrical Vehicle 2015-16, based on vehicle segment Table 1, the scheme earmarks funds Initiative (EVI) countries across 2008-2012 and technology. under several components for a was: consumer incentives ~ 27%; charging infrastructure ~ 7%; and RD&D activities ~ 2. To examine the fuel-efficiency 66%. In comparison, the outlay under India’s FAME scheme is weighted toward consumer benefits of models currently 1 Sales data obtained for FY 2015-16 from incentives instead of RD&D components. registered under the FAME scheme. Segment Y Automotive Intelligence Pvt. Ltd. This makes sense as India stands to gain 2 Notification S.O. 830(E). of The Gazette of from technological advances already made in 3. To examine additional central- and India, Ministry of Heavy Industry and Public RD&D globally. However, the relative outlay state-level incentives available Enterprises, March 13, 2015, http://www. for charging infrastructure deployment is fame-india.gov.in/ViewNotificationDetails. lower under the FAME scheme compared with for the vehicle segments and aspx?RowId=5 early stage global programs. technologies that received Acknowledgments: The authors wish to thank Saurabh Rohilla, Preeti Jain, and Chris Cherry for their insights during the research phase, and Anand Gopal and Ravi Gadepalli for their critical review. © INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION, 2016 WWW.THEICCT.ORG HYBRID AND ELECTRIC VEHICLES IN INDIA demand incentives from FAME in Table 2. Range of Demand Incentives Available Across Vehicle Segments and FY 2015-16. For the purpose of Technologies Under FAME Scheme this study, the NCT of Delhi is Battery-Operated considered a benchmark state. Vehicle Mild Hybrid Strong Hybrid Plug-In Hybrid Electric 4. To examine the relative contribu- Segment INR (USD) INR (USD) INR (USD) INR (USD) Two- 1,800 – 6,200 13,000 – 18,000 7,500 – 29,000 tion of all incentives considered, — including demand incentives Wheelers (27 – 93) (195 – 270) (112.5 – 435) Three- 3,300 – 7,800 25,000 – 46,000 11,000 – 61,000 from FAME, in making hybrid and — Wheelers (49.5 - 117) (375 – 690) (165 – 915) electric technologies cost-com- petitive in the Indian market. Passenger 11,000 – 24,000 59,000 – 71,000 98,000 – 1,18,000 76,000 – 1,38,000 Cars (165 – 360) (885 – 1,065) (1,470 – 1,770) (1,140 – 2,070) 5. To understand policy implications Light- 17,000 – 23,000 52,000 – 62,000 73,000 – 1,25,000 1,02,000 – 1,87,000 going forward, based on the current Commercial (255 – 345) (780 – 930) (1,095 – 1,875) (1,530 – 2,805) scenario of available incentives. Vehicles 30,00,000 51,00,000 – It is important to note that because Buses –41,00,000 66,00,000 — — consumers do not always make (45,000 – 61,500) (76,500 – 99,000) purchasing decisions using structured * Demand incentives are also available for retrofitment kits across all vehicle segments and technolo- cost-comparison methods, the objective gies for up to 15% to 30% of kit price depending on the amount of fuel consumption reduced, as well of this analysis is not to comment on as price of the kit what the “correct” level of incentives should be, but rather to help readers as well as in achieving climate and air- to impact deployment of hybrid and understand the relative contribution of quality benefits resulting from reduced electric technologies in India. various incentives in making hybrid and fuel consumption. electric technologies cost-competitive MARKET INCENTIVES IN PLACE with conventional options on the market. Further, the scope of incentives The FAME scheme offers a subsidy Further, because the overall goal of such considered in this analysis is limited to on the retail price of passenger cars. incentives is to influence the market the direct fiscal benefits available at a These subsidies range as follows: for in favor of socioeconomic outcomes national and state level. Other incentive mild hybrids, from INR 11,000 (USD such as domestic energy security and mechanisms and promotional initia- 165) to INR 24,000 (USD 360); for climate change mitigation, this analysis tives, both fiscal and non-fiscal in nature, strong hybrids, from INR 59,000 (USD also aims to inform readers on such including at a city and utility level, are 885) to INR 71,000 (USD 1,065); and contextual benefits available through also known to play an important role for electric vehicles, from INR 60,000 hybrid and electric technologies. For in the promotion of hybrid and electric (USD 900) to INR 1,34,000 (USD 6 perspective, crude oil imports constitute vehicle deployment . Examples of such 2,010). Subsidies are also available more than 30% of India’s primary energy incentive mechanisms and initiatives for two-wheelers, three-wheelers, supply,4 and the majority of this oil include state- and city-level technology light-commercial vehicles, buses, and consumption is from refined petroleum deployment goals and schemes; for retrofit kits. A summary of the products used in the transport sector5. state- and city-level incentives for available demand incentives across Since hybrid and electric technologies creation of publicly accessible charging vehicle segments is outlined in Table are inherently more fuel efficient than infrastructure; city-level workplace 2. The scheme has built-in perfor- conventional technologies, they play charging programs; state-, city-, and mance criteria in terms of fuel-effi- an important role in reducing India’s utility-level outreach and consumer ciency improvements for each vehicle dependence on foreign energy imports awareness programs; and preferen- segment and technology category tial and off-peak tariffs at utility level. to qualify for these incentives. The 4 The Energy and Resources Institute, “Global Such incentive mechanisms warrant scheme also indicates minimum Oil Markets and India’s Vulnerability to Oil further investigation for their potential fuel-efficiency improvements over Shocks,” TERI-NFA Working Paper Series No. a non-hybrid or non-electric base 18 (2014). http://www.teriin.org/projects/nfa/ model, if a base model exists. pdf/working-paper-No18-Oil-volatility.pdf 6 Nic Lutsey, Stephanie Searle, Sarah Chambliss, 5 Print Release on All India Study Report to Anup Bandivadekar, Assessment of Leading Petroleum Planning and Analysis Cell on Electric Vehicle Promotion Activities in The subsidy from the FAME scheme Sale of Diesel and Petrol, Press Information United States Cities (ICCT: Washington DC, is not the only incentive mechanism Bureau, Government of India (January 28, 2015). http://www.theicct.org/sites/default/ that impacts the market for hybrid and 2014). http://pib.nic.in/newsite/PrintRelease. files/publications/ICCT_EV-promotion-US- aspx?relid=102799 cities_20150729.pdf electric vehicles in India. In addition 2 INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION WORKING PAPER 2016-26 HYBRID AND ELECTRIC VEHICLES IN INDIA to FAME, the Central Government of in terms of fuel-consumption • Distribution emissions for India and some state governments, reductions of registered hybrid gasoline or diesel from Indian such as the Government of National and non-electric models under refineries17 Capital Territory of Delhi (NCT of the FAME scheme, in comparison • Emissions due to fuel consump- Delhi), provide tax incentives that treat with their non-hybrid or non- tion from vehicle operation18,19 hybrid and electric vehicles preferen- electric base models or appro- tially over conventional technologies. priate reference benchmarks • Incentive analysis: One way to For example, the Central Government from the segment. Further, for understand the effectiveness of of India levies an excise duty of up to passenger cars, fuel-consumption the various incentives is in terms 30% on conventional car technologies7 levels of the registered models of a total cost of ownership (TCO) (determined by vehicle dimensions are also evaluated in perspective analysis of hybrid and electric and engine capacity) while hybrid and of India’s recently implemented technologies when compared with electric vehicles are subjected to flat fuel-consumption standards for conventional base models both duties of 12.5% and 6%, respectively8.