Electric vehicle (EV) use has been on the rise in recent years, but in India that market has started to stagnate. Previous attempts from the government have proven to be unfruitful at stimulating the EV industry in India. In this blog, we look at a study done by the International Energy Agency about how to implement effective policy. There are four pillars that the International Energy Agency accredits to successful policy: research and development support, achievable goals, financial incentives, and increasing overall value of EVs.
1.RESEARCH AND DEVELOPMENT SUPPORT FROM THE GOVERNMENT
There are currently only two companies manufacturing electric vehicles in India, TATA and Mahindra. For the EV industry to grow, there must be sufficient competition between manufacturers. Such competition would increase the quality of products and decrease the prices for buyers. However, considering the relatively new technology that EVs rely on, companies must first invest significant time and money into research and development to produce efficient cars that can compete in a market dominated by petrol and diesel-powered vehicles. If the Indian government were to fund manufacturers’ research on the subject, it would drastically increase the quality of the products and the number of competitors in the market. In early 2017, the government announced plans to fund up to 60% of R&D for electric two-wheelers, three-wheelers, and commercial vehicles. If such plans are carried out, companies would, with support from the government, be able to manufacture EVs that can compete with petrol and diesel powered vehicles.
2.ACHIEVABLE GOALS
Originally, the Indian government had set an ambitious goal of having only electric vehicles on the road by the year 2030. This perfectly exemplifies the overzealous and unattainable targets that are detrimental to the industry. Seeing as only two car manufacturers in India currently produce electric vehicles, claiming that the entire population will use EVs by 2030 exposes the Indian government is naiveté on the subject. Such goals fail to serve as motivation for manufacturers because they know the targets cannot be reached anyway, and therefore do not even attempt to achieve them. The CEO of Mercedes Benz India, Roland Folger, believes that the Indian government should not “rush with the all-EV push,” demonstrating the lack of belief in such goals from a company that is a significant part of the industry. Recently, the government announced that it is revising its goal to 30% electric cars by 2030 – a far more achievable target. This revised goal is likely to engender motivation in manufacturers, potentially helping the industry. However, smaller-scale goals – such as individual sales targets for companies – would also help drive manufacturers towards more precise targets.
3.FINANCIAL INCENTIVES
India could use the example set by the United States and implement policies that would incentivize the purchase of EVs by consumers. Tax credits and tax exemptions could be granted, potentially stimulating demand. Standard tax exemptions could be implemented for the purchase of new cars, and additional exemptions could be applied for vehicles with larger batteries or houses that install charging stations. If demand increases as a result of these incentives, domestic manufacturers will be forced to increase production. Furthermore, automobile companies that were otherwise not manufacturing EVs will recognize the vast potential for profits and will, therefore, enter the industry, increasing competition and reducing prices.
4.INCREASE THE OVERALL VALUE OF OWNING AN ELECTRIC VEHICLE
Considering the high property rates in most Indian cities, rates for parking spots in housing societies could be reduced for owners of electric vehicles. EV owners could be exempt from toll fees and the proposed road tax (the road tax is not yet in place). Companies and businesses could also be offered tax exemptions for installing charging stations in office parking spaces. In all, several policies could be implemented to increase the value, both monetary and non-monetary, of electric vehicle ownership.
Indian’s government could learn from other countries in the field of electric vehicle policy. The stuttering Indian EV industry could undoubtedly benefit from policy changes that have proven successful in countries such as the United States and Germany. However, arguably the most important lesson to be learned from other countries is not from their success, but from their failures. Even the United States, which has one of the largest EV industries in the world, was unable to reach its goal of selling 1 million electric vehicles by 2015. The goal, set by President Obama, proved to be far too ambitious as the United States had only achieved about 400,000 electric vehicle sales by the end of 2015. Thus, India must recognize that the transition to electric vehicles will be a slow one, as both consumers and producers collectively and steadily commit to the cause. Indeed, the success of the EV industry does not solely depend on the production and purchase of vehicles, but on a large scale structural change to the Indian economy. Small steps must be taken in order to change the transportation infrastructure in the country entirely, that will eventually result in a transition towards electric vehicles. Recognizing the magnitude of this task is the first step to shaping a successful EV industry.