In the recent budget speech, Finance minister announced tax incentive on loans taken to purchase EVs apart from reducing the GST rate for them from 12% to 5% to encourage the sales of EVs thereby speeding up the transition from IC engine-driven vehicles to electric mobility. The goal is to be completely electric by 2030 and NITI Ayog has pointed that it is imperative to fix realistic time frame by which scooters, motorcycles, three-wheel carriages and, later, all new vehicles will be battery powered if we wish to meet 2030 deadline. Well even though the recent measures announced by the government are welcome and for sure will boost the sales of EVs and encourage firms to invest in new technologies it is important to take a holistic approach and not rush through.
The major technical challenge for EVs are charging time. We rarely spend more than 15 mins in Gas stations to refuel (even if we are to fill the full tank) and it is not strange to expect similar usage pattern from EVs. We rarely take time to refuel as a factor for automobiles be it in our daily urban rides or long drives. Probably we can charge it overnight and can slowly change our usage pattern, but it becomes a bigger concern for Commercial vehicles. We cannot expect truck drivers to layover for hours just to "refuel". It would drastically hit the entire logistics and supply chain.
Then there are multiple infrastructural challenges, the first and foremost is the obvious one the number of charging stations. Probably it will not be of a big problem to set as many charging stations as petrol bunks in Metro cities, but to build them in remote places will be quite daunting. To put this into perspective only 54% of our railway broad-gauge lines are electrified as on date. Also, 100% electrification of Indian cities and villages might just be misleading as a village is considered to be electrified if only 10% of households have electricity connection. Also, less than 50% of households have electricity connection for more than 12 hours a day. Hence, the supply and distribution of electricity remain a major concern. Next aspect is meeting increased demand in electricity consumption and just to ensure 24x7 reliable power India needs to double the installed power capacity. Of course, this does not take into account the increased power requirement needed to recharge the electric vehicles. How this energy is generated becomes very important. Of course taking into account regenerative breaking, higher efficiency of electric motors compared to IC engines and thermal power plants are almost often operated at peak efficiency the absolute energy requirements are bound to come down compared to using IC engines but still if it is through non renewable resources it will partly defeat the purpose of going Electric which is to reduce pollution and carbon footprint.
Lastly, and probably the biggest challenge of all, all the industries which depend on IC engines to automobiles will take a major hit. Now not just the tier 1 supplier (Engine manufacturer) but also Gearbox manufacturer and several small and medium tier 2 and tier 3 manufacturing units which supply components to IC engines and gearbox manufactures will also be hit drastically. Remember that IC engine and Transmission together account for 70% of total automobile cost and this should directly correlate to the number of people engaged in the manufacturing of these components (blue- and white-collar jobs). Also, the major revenues for Indian oil, BPCL, etc. come from supplying oil to Automobiles. To think that the majority of them employed in these firms, probably in tens of lakhs will run out of jobs by 2030 looks quite alarming especially considering the current high unemployment in our country. Yes, Batteries manufacturing units will be set, more electric motor manufacturing plants will be set but can it generate enough employment to accommodate all those who will lose their jobs? Probably no.
So it is very important for the government to come up with a holistic plan by taking into account all the aforementioned challenges and come off with a more balanced plan such that it becomes a positive-sum game rather than a negative or zero-sum game.
