POLICY BRIEF THE CASE FOR ELECTRIC Building scale and speed for zero emissions mobility Authors: Anumita Roychowdhury, Moushumi Mohanty and Shubham Srivastava Research contribution: Sayan Roy and Anannya Das Editor: Akshat Jain Design: Ajit Bajaj Layout: Kirpal Singh Production: Rakesh Shrivastava and Gundhar Das The views/analysis expressed in this report/document do not necessarily reflect the views of Shakti Sustainable Energy Foundation. The Foundation also does not guarantee the accuracy of any data included in this publication nor does it accept any responsibility for the consequences of its use. © 2021 Centre for Science and Environment Material from this publication can be used, but with acknowledgement. Maps are not to scale. Citation: Anumita Roychowdhury, Moushumi Mohanty and Shubham Srivastava 2021. Policy Brief: The case for electric—Building scale and speed for zero emissions mobility. Centre for Science and Environment, New Delhi Published by Centre for Science and Environment 41, Tughlakabad Institutional Area New Delhi 110 062 Phones: 91-11-40616000 Fax: 91-11-29955879 E-mail: [email protected] Website: www.cseindia.org POLICY BRIEF THE CASE FOR ELECTRIC Building scale and speed for zero emissions mobility Contents 1. Why this study? 7 1.1 EV adoption programmes not desgined for scale 9 1.2 Summary of policy accelerators and way forward 10 1.2.1 FAME incentive schemes: What must change? 11 1.2.2 Need zero emissions mandate in India 19 1.2.3 Leverage fuel efficiency regulations to accelerate EV market 21 1.2.4 Accelerating localization 22 1.2.5 Accelerating charging infrastructure 24 1.2.6 State level EV policy to drive electrification 26 1.2.7 Address challenges of financing the EV market 27 PART 1: STATE OF ELECTRIC VEHICLES IN INDIA 31 2. Is India prepared for acceleration? 32 3. Vehicle segment-wise trend and concerns 39 3.1 Electric two-wheelers 39 3.2 Electric cars 45 3.3 Electric buses 50 3.4 Electric three-wheelers 58 3.5 Electric three- and four-wheeler cargo vehicles 63 3.6 Fleet aggregators and electrification 64 4. Policy drivers of EV programme 73 4.1 Fuel efficiency benchmark to drive EV market 78 4.2 Localization and scale 82 4.3 Battery ecosystem to drive electrification 84 4.4 Scrappage policy as an EV stimulus 91 5. State level policy driving electrification 93 5.1 Charging infrastructure target: Chicken and egg syndrome 96 5.2 Challenges of financing the EV market 109 5.3 Building industry support 113 5.4 Towards zero emissions mandate in India 115 PART 2: STATE OF ELECTRIC VEHICLES GLOBALLY 119 6. Global learning curve 120 6.1 Changing global market 120 6.1.1 Industry shake-up 126 5 POLICY BRIEF: THE CASE FOR ELECTRIC 7. Towards building scale: Policy levers to drive EV transition 132 7.1 Incentives for electrification 133 7.1.1 Europe 136 7.1.2 Incentives in the US and California 145 7.1.3 China: More holistic strategy 147 7.2 Anatomy of a ZEV mandate 153 7.2.1 The California ZEV experience 153 7.2.2 The European ZEV programme 160 7.2.3 China’s NEV mandate with dual credits 164 7.2.4 Designing a ZEV mandate in India 167 7.3 Post-pandemic economic recovery to promote EVs 170 8. Conclusion and way forward 173 References and endnotes 182 6 1. Why this study? A global shift is underway from petro-economy to electro-economy. This is expected to gather momentum as countries move towards net zero climate goals to stabilize global temperature rise below 1.5 °C. This is also expected to contribute towards clean air and public health goals. Close to 126 countries have already pledged to achieve carbon neutrality by 2050, and the total net-zero commitments globally cover half of the world’s gross domestic product. Towards this decarbonization goal, about 20 countries have already announced targets of 100 per cent zero-emission vehicles (ZEVs) and phasing out of internal combustion engine (ICE) vehicles in the time horizon of 2040–50. More countries are to follow. This scale of change can be hugely disruptive and will also impact India’s automotive market. But what is happening in India? International Energy Agency (IEA) estimates that if the global market has to stay on course towards decarbonization, the electric vehicle (EV) stock has to jump from around five per cent of global car sales in 2020 to more than 60 per cent by 2030. And to match this, annual battery production for EVs needs to leap from 160 gigawatt-hours (GWh) today to 6,600 GWh in 2030, which is like adding almost 20 gigafactories each year for the next ten years, and increasing the public charging points from around 1 million today to 40 million in 2030. This rapid scale of change is expected to unfold this decade. Global automotive companies have started to respond to the regulatory pressures in major markets to announce commitments to produce 100 per cent electric vehicles by 2040. This global scale of change in major vehicle markets of the world signals the inevitability of this change. There does not seem to be an option of not doing it. Can India therefore afford to remain insular and conservative in the face of such a tectonic shift? While the environmental and public health reasons for this change towards ZEVs are non- negotiable, the economic reasons for attracting and retaining the new investments in the sector with other spinoffs are equally compelling. This cannot be ignored anymore. India has always remained a laggard in the internal combustion engine trajectory and has struggled to keep pace with and to catch up in the vehicle technology race. India has leapfrogged to Bharat Stage (BS) VI emissions standards for ICE vehicles only recently, with substantial gains in emission reduction. But this has now brought in newer concerns around lifetime emissions performance of vehicles in the real world requiring more expensive and complex engineering solutions. The next round of revision of emissions standards and test procedures will be even tougher. 7 POLICY BRIEF: THE CASE FOR ELECTRIC Electrification opens up new opportunities for India to not only lead the market, but also to meet its decarbonization and clean air goals. India has to meet the national ambient air quality standards under the National Clean Air Programme as well as step up its obligations under Nationally Determined Commitments (NDCs) to go beyond the target of reducing energy intensity by 30–35 per cent by 2030. At the same time, a growing crude oil import bill and resultant rise in current account deficit is yet another push factor. Bending the rising emissions curve in the transport sector continues to remain a critical challenge. The inevitability of the zero emissions pathway will have no room for incremental change. Therefore, this will require a convergence of environmental policy as well as industrial policy to prepare for the big change. Yet, despite the different policies and incentive programmes related to electric vehicles taking shape, there is no long-term policy visibility of the zero emissions target for the country to drive the change. From time to time, ministerial level announcements have been made to express the policy intent of achieving 30 per cent electrification of new vehicle fleet by 2030 for zero emissions transformation. NITI Aayog in 2019 had set the ambition of 70 per cent electrification of all commercial cars, 30 per cent of private cars, 40 per cent of buses, and 80 per cent of two-wheelers and three-wheelers by 2030. But this intent is not backed by any regulatory mandate and long-term policy milestones to bring certainty into the market. Without the regulatory target, automotive industry’s voluntary targets have also lost steam. Society of Indian Automobile Manufacturers (SIAM) in 2019 had put out its own roadmap that aimed for all new vehicle sales for intra-city public transport fleets to be pure electric vehicles by 2030; and 40 percent of new vehicle sales to be pure electric vehicles by 2030. Finally, all new vehicle sales were to be pure electric vehicles by 2047. Even though the electric vehicle policy development goes back to the early part of the last decade, there is no evidence of ground level transformation yet. India’s original target was stated in its National Electric Mobility Mission Plan (NEMMP) of 2013 that targeted to have least 60–70 lakh electric vehicles by 2020. But that has remained a non-starter with a little over 6 lakh electric vehicles on ground by 31 March 2021, according to data released by the Ministry of Road Transport and Highways (MoRTH) on their VAHAN Dashboard. Several policies are taking shape in India today at both central and state levels to incentivize electric vehicles under Faster Adoption of (Hybrid &) Electric Vehicles (FAME) schemes to make them affordable, to improve price parity with ICE vehicles and 8 thus stimulate demand, to target large scale fleet conversion (public transport, delivery fleet, ride hailing, etc.), to provide production linked incentives to encourage local manufacturing to build local supply and value chains around electric vehicles, to build a battery ecosystem and support charging infrastructure, to source raw material for battery cells, and to design financing strategy. In addition, 15 state governments have drawn up electric vehicle policies. But these are not adding up to build the market yet. The VAHAN database reveals that a substantial portion of the 6 lakh units comprises e-rickshaws that have expanded significantly without regulatory and pricing support in the unorganized sector. Their low acquisition costs and low life cycle costs are largely responsible for this expansion.