Future of Electric Vehicles in India

Electric Vehicles are growing in popularity and certainly in mind space. They are cleaner and more efficient and even fun. Their growth, however, is still considered just a market problem. The end user should choose on the basis of what it costs to buy and run, or how it performs, etc. Markets matter but there is also a need for government and policy inputs. EVs, after all, operate within broader energy and transportation ecosystems with their own distortions. Unless we understand Indian-use cases, driver limitations and opportunities, we risk ambitious targets that remain aspirational.

Indians are famously value conscious. This is why consumers love diesel cars, despite their higher MRP and pollution relative to petrol counterparts. Even at today’s low oil prices, running a diesel sedan can cost about Rs3.8 per kilometre versus petrol’s Rs5.5. In contrast, CNG costs roughly Rs1.9/km, but it’s not widely available. The cost of EVs depends on electricity price, which varies significantly. At Rs7/kWh (kilowatt hour) of power, they cost only about Rs1.1/km. This saves consumers driving 5,000km per year over Rs 20,000 annually, and taxis much more as they drive 10-15 times as much.

The catch is the upfront cost. EVs are expensive, primarily because of the battery. A single kWh of electricity is enough to go about 6km, so a 200km “full tank” range requires about 35 kWh of battery. Today’s prices for lithium ion batteries are about $250/kWh globally, which comes to Rs 5.7 lakh in battery costs, excluding import duties. Even with an eight-year lifespan and a 12% interest rate, justifying the battery costs on per kilometre savings alone means one would have to drive over 25,000km per year. However, when battery prices fall to $100/kWh, as projected a few years out, EVs can become a game changer.

Range turns out to be key: 5,000km per year is only about 15km per day on average, while an urban taxi may do 300km daily. Higher range means not only more battery cost but weight as well. In an ideal world, we would have a smaller battery pack and simply recharge periodically. In practice, taxi and fleet vehicles can only charge overnight, and even private users may have limits on charging options. Without fast-charging infrastructure—fast-charging an EV requires much more power than household 15 amp sockets, which can only offer about 3 kW of power, so 35 kWh takes almost 12 hours to charge—one inevitably has “range anxiety”. Unlike the US, most Indians don’t have a personal garage. Hence, widespread and company-agnostic public charging infrastructure becomes a key policy choice.

Not only are EVs efficient – with regenerative braking capturing energy otherwise wasted and also due to the inherent efficiency of motors, especially at low speeds they pollute less. We should value such environmental co-benefits, not just carbon reductions. We could compensate cleaner vehicles through reduced registration charges, or even aim for mandating EVs for taxis and selected public transport vehicles. These are often diesel and thus far worse polluters.

There are other distortions to consider. Over half of petrol’s pump prices are for taxes. Petrol taxes are 1% of GDP and diesel 2% and fully switching to EVs means affecting 2% of GDP. Of course, oil is predominantly imported, so moving to EVs should be a worthwhile trade-off. Plus, over-time more and more electricity will come from renewable sources.