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YEAR January 2013
COPYRIGHT
DISCLAIMER
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TERI-Business Council for Sustainable Development (BCSD)
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Tel : (+91 11) 2468 2100, 41504900Fax : (+91 11) 2468 2144, 2468 2145Email : [email protected] : www.teriin.org/bcsd
TITLE Electric Vehicles: Challenges & Opportunities in India
AUTHORS
Lead authors : Samir Karnik, Nitin Sukh (Responsible Banking Team, YES BANK)
Contributors : Agneev Mukherjee, Sarobjit Pal, Akshima Tejas Ghate,
Sangeetha Ann Wilson (TERI BCSD)
No part of this publication may be reproduced in any form by photo, photoprint,
microfilm or any other means without the written permission of YES BANK Ltd. and TERI
BCSD.
This report is the publication of YES BANK Limited (“YES BANK”) & TERI BCSD and so YES BANK & TERI BCSD have editorial control over the content, including opinions, advice, statements, services, offers etc. that is represented in this report. However, YES BANK & TERI BCSD will not be liable for any loss or damage caused by the reader's reliance on information obtained through this report. This report may contain third party contents and third-party resources. YES BANK & TERI BCSD takes no responsibility for third party content, advertisements or third party applications that are printed on or through this report, nor does it take any responsibility for the goods or services provided by its advertisers or for any error, omission, deletion, defect, theft or destruction or unauthorized access to, or alteration of, any user communication. Further, YES BANK & TERI BCSD does not assume any responsibility or liability for any loss or damage, including personal injury or death, resulting from use of this report or from any content for communications or materials available on this report. The contents are provided for your reference only.
The reader/ buyer understands that except for the information, products and services clearly identified as being supplied by YES BANK & TERI BCSD, it does not operate, control or endorse any information, products, or services appearing in the report in any way. All other information, products and services offered through the report are offered by third parties, which are not affiliated in any manner to YES BANK & TERI BCSD.
The reader/ buyer hereby disclaims and waives any right and/ or claim, they may have against YES BANK & TERI BCSD with respect to third party products and services.
All materials provided in the report is provided on “As is” basis and YES BANK & TERI BCSD makes no representation or warranty, express or implied, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title or non – infringement. As to documents, content, graphics published in the report, YES BANK & TERI BCSD makes no representation or warranty that the contents of such documents, articles are free from error or suitable for any purpose; nor that the implementation of such contents will not infringe any third party patents, copyrights, trademarks or other rights.
In no event shall YES BANK & TERI BCSD or its content providers be liable for any damages whatsoever, whether direct, indirect, special, consequential and/or incidental, including without limitation, damages arising from loss of data or information, loss of profits, business interruption, or arising from the access and/or use or inability to access and/or use content and/or any service available in this report, even if YES BANK & TERI BCSD is advised of the possibility of such loss.
The traditional approach of the banking sector to sustainability is often regarded as lacking in proactive
initiatives. However, several banks have recently adopted innovative and forward looking strategies to deal
with opportunities associated with sustainability. They have developed new products such as ethical funds
or loans specifically designed for environmental businesses to capture new market opportunities associated
with sustainability. This very joint endeavor between TERI BCSD and YES BANK to explore Electric Vehicles
as an option of sustainable mobility that has the capability to significantly lower emission levels including
carbon dioxide emissions which is an encouraging beginning.
Rapid urbanization, rising per capita incomes, growing aspirations of an expanding population and sprawling
cities have resulted in transport demand increasing at a rate much faster than the rate of growth of transport
infrastructure. Indian cities are witnessing an exponential increase in the use of personal transport and a
steady decline in the modal share of both public transport and non-motorized transport. There is a growing
realization, both internationally and nationally, that the current trends in urban transport are unsustainable
and should be arrested. Urban transport should move along a low carbon and sustainable pathway. Several
international initiatives like the SLOCAT (The Partnership on Sustainable, Low Carbon Transport), and major
events like the United Nations Conference on Sustainable Development, 2012 (Rio+20), etc. have
highlighted the challenges associated with meeting urban mobility demand in a sustainable manner. In India,
the National Urban Transport Policy, 2006 aims to move future transport development in Indian cities
towards a sustainable and low carbon trajectory. Current policy promotes investments in public transport
and non-motorized transport infrastructure so as to advance the agenda of sustainable mobility. While it
becomes important to plan for systems of public transport, and non-motorized transport for promoting
sustainable mobility, it is also critical to ensure that personal modes of transport i.e. cars and two wheelers
embody energy efficiency and low-carbon intensity. This is important because we are going to witness an
explosive increase in the number of personal vehicles in our country. It is therefore crucial that the new
vehicular fleet in the country produces low environmental impacts.
Electric vehicles, though not yet popular in India, are an important solution to addressing the issue of
vehicular pollution. The country has recently witnessed the unveiling of the National Electric Mobility
Mission Plan 2020 by the Hon'ble Prime Minister, Dr Manmohan Singh. This move is significant at this
juncture considering the country cannot continue its heavy dependence on personal modes, which run on
petroleum products (petrol and diesel) with implications for India's energy security and CO2 emissions. It is
important that we diversify our fuel mix in favour of clean fuels. Electrification of vehicles certainly offers
such potential provided the electricity is generated from clean sources of energy. Going forward, it is very
important that any plan for electric vehicles is implemented in an integrated manner in consonance with our
plans for electricity generation and distribution and urban infrastructure planning. Major R&D initiatives are
needed to ensure that the penetration of electric vehicles is accelerated. All key stakeholders including
industry, government, and financial institutions will have to work together in this endeavour.
I compliment YES BANK for undertaking this study and for publication of this Knowledge Paper.
MESSAGE
Dr R K Pachauri
Director-General, TERI
This well-researched knowledge paper advocates the incremental transition of private
transportation in India - from being driven by the internal combustion engine to electric drive
trains.
YES BANK and TERI BCSD are of the strong view that this revolution in Indian personal
transportation will open up significant business avenues, and corresponding financing
opportunities. It will also address the critical issues of India's long term energy security and
reduce the environmental impact of fossil fuel driven vehicles, though only at the tailpipe.
However, there are some ground realities in India and globally that will remain long term
challenges for the widespread uptake in electric vehicles (EV). The technology which makes
complete electric mobility possible and financially viable, from an Original Equipment
Manufacturers (OEMs) perspective, already exists in the Indian scenario. Technology
improvements in battery capacity, fast charging facilities and vehicle range are rapid and dynamic,
with many OEMS and other companies in the EV value chain already investing significant amounts
in research and development (R&D), and scaling manufacturing capacities. EVs have arrived
globally and most certainly in India with companies like Mahindra REVA championing the EV four
wheeler (4W) space and Hero Group dominating the EV two wheeler (2W) segment.
The rising price of crude in the international market has become an energy security concern for
the country. Are EVs the silver bullet to securing India's energy future and reducing carbon
emissions of its transportation sector? This is a difficult question to explicitly answer. While on one
hand, the mainstreaming of EVs will dramatically reduce India's reliance on imported crude oil, on
the other hand, EVs, if disruptively introduced, will be charged by India's crumbling and inefficient
electricity grid which is predominantly powered by imported coal. Therefore, whether EVs will
strengthen India's energy and climate security is a catch 22 question, in case the status quo
remains. The question then is - How do we change the status quo? For this, there is a need for a
comprehensive policy roadmap towards private vehicle electrification wherein the financial sector
and Government of India (GoI) play interdependent roles to develop critical and enabling EV
infrastructure and incentivize OEMs and organisations along the value chain, to innovate and
collectively work towards introducing EV 4W & 2W EV variants, thereby giving the consumer a
choice.
I firmly believe that the contents of this knowledge paper will provide important insights to policy
makers in achieving a smooth and incremental transition to EV's, thus ensuring India's long term
energy security.
FOREWORD
Thank You.
Sincerely,
Rana KapoorFounder, Managing Director & CEO
The findings of this paper will be of particular interest to 3 key stakeholders: The financial sector, policy
makers and the automobile industry.
The premise of this paper is that the financial sector will not fund companies that fall in a value chain
whose risks and business models are not fully understood. Therefore the key objective of the paper is
to clearly outline the EV value chain, the perceived risks along the value chain and highlight some
financial tools and business solutions that could be modified specifically for de-risking and therefore
facilitate the financing of EV growth in India.
Our key insight emanating from this report is that the Indian customer does not need to be directly
incentivized by the Government of India (GoI) and State Governments to buy EVs, as is currently the
case. The Indian consumer is price, fuel economy and style conscious and will therefore appreciate the
long term savings of EV versus Internal Combustion Engine (ICE). In which case, growth of the EV
value chain must be fuelled by organic consumer demand, and not pushed by unsustainable
Government subsidies for consumers, to drive EV purchases. This would defeat the purpose of
reducing strains on India's Balance of Payments. Organic consumer demand can only be fostered by
the Government, working in collaboration with the private sector to invest in an economically enabling
environment for rapid EV adoption, which entails the following:
Consumers will not buy EVs if
they are unable to charge them whilst in urban transit. Range anxiety inhibits the consumer's
decision making process and this is well documented by numerous reports. Therefore, the
Government must invest in 'clean & energy efficient fast charging infrastructure' that will
perceptually give urban consumers the comfort in buying EVs. Clean & Energy efficient fast
charging infrastructure will comprise of, in a phased manner, smart grids and metering, renewable
energy (RE) feeds and fast charging ports. Smart grids will not only accommodate EV charging
point applications, but will also reduce energy wastage by the grid in general. EVs will not
mainstream in India until and unless primary yet significant GoI led investments are made firstly in
smart grid adoption, followed by plug in applications like RE feeds & fast charging ports. Direct
GoI investments and public private partnership (PPP) models can be explored accordingly to hive
off the financial investment component to the private sector.
Launch a Government sponsored fund, inviting applications
from commercial banks, specifically for low interest forward lending, partial project risk
guarantees and co-equity investments.
PRUDENCE - Innovate and take incremental steps towards full automobile electrification. Competition
in the Indian EV and hybrid market will transform the Indian consumer's perception in the years to
come where foreign competitors and early bird Indian companies will grab dominant 4W EV & 2W EV
market shares.
For the Financial Sector:
For the Indian Government and Policy Makers:
• Develop 'Clean & Energy Efficient fast charging infrastructure' –
• Financially incentivise Indian Banks to fund India EV OEM manufacturers, Battery R&D, Fast
charging R&D & Smart grid projects –
For Indian Automobile companies:
Preface
C O N T E N T S1 Introduction: The Case for Sustainable Personal Transport in India 1
2 Sustainable Personal Transportation 13
3 The Electric Vehicle Value Chain 23
4 Policies Promoting Electric Vehicles in India 31
1.1 Energy Security 3
1.2 Climate Change 5
1.3 Road Transport Emissions in India 6
1.4 Trends in Personal Road Transport in India 71.5 Modal Shifts 9
2.1 Technological Innovations in Low-Carbon Transport 14
2.2 Pathway to Zero-Emission Vehicles 20
3.1 Raw Material Suppliers 24
3.2 Traditional Component Suppliers 25
3.3 Battery Manufactures & Suppliers 25
3.4 Original Equipment Manufacturers (OEMs) 26
3.5 Utilities 26
3.6 The Electric Vehicle Ecosystem 27
4.1 Initiatives by the Ministry of New and Renewable Energy 32
4.2 Initiatives in the 2011-2012 Budget 33
4.3 Initiatives by the Ministry of Heavy Industries 33and Public Enterprises
4.4 Government Agencies to take up EV Mobility in India 34
C O N T E N T S5 Development of EV Charging Infrastructure in India 37
6 Emerging Business Models 45
7 Analysis and Thought 51
5.1 EV Charging Infrastructure: Past Efforts 38
5.2 Comparison with Compressed Natural Gas (CNG) 39
Infrastructure
5.3 India's Power Sector 39
5.4 Smart Grids 41
5.5 Requirements for Smart Grid Deployment 43
6.1 Direct Vehicle Sales 46
6.2 EV Leasing 47
6.3 Battery Leasing and Swap Schemes 47
6.4 Infrastructure Service Models 48
7.1 Short Term Horizon 52
7.2 Long Term Horizon 52
7.3 Concluding Thoughts 54
“The mobility model we have today will not work tomorrow”
- Bill Ford, great-grandson of Henry Ford and Executive Chairman of the Ford Motor Company
India's population is expected to surpass that of China's in 2030, making it the most
populous county in the world. High economic growth rates and the impacts of
globalization have concentrated prosperity in urban centers resulting in sprawl and
auto-mobilization. Within 15 years the population residing in urban areas is expected
to double to over 700 million [1] due to distressed rural to urban migration and other
factors. This will place additional pressures on urban infrastructure, which is already
overburdened. Projections indicate that by 2021 India will have the largest
concentration of megacities in the world with a population exceeding 10 million. Out
of a total of 88 cities, with a population of more than half a million in 2011, only 28
have any formal public transportation system. In most cases, the existing public
transport systems are ageing and stretched beyond capacity, as the demand for public
transport services outstrips supply, both qualitatively and quantitatively.
As disposable income increases, a result of economic growth, those entering the
middle-class are able to afford and prefer personal vehicles, as it is a symbol of
upward social mobility, and also provides greater comfort, flexibility and convenience.
In the absence of proper planning measures, the dynamics between increasing
numbers of vehicles as well as a growing population wanting to use private vehicles
for transport are likely to pressurize transport infrastructure, leading to inefficiencies as
a result of infrastructural bottlenecks such as traffic congestion, gridlocks and slower
train speeds. This would result in higher traffic management costs and greater energy
consumption, therefore significantly increasing carbon emissions from transportation.
The growth in motor vehicles is much faster than the population and faster than the
GDP with 5% annual growth in motorcycles/scooter and 14% annual growth in cars
[2].
Introduction: The Case for Sustainable Personal Transport in India
Electric Vehicles in India: Challenges and Opportunities2
If current ICE uptake trends continue, developing countries like India are faced with unsustainable
futures that are likely to have negative triple bottom line impacts. Considering the stage of
economic development in India, the country has a unique opportunity to develop sustainably by
managing emissions growth, enhancing energy security and by supporting the creation of a world
class clean-technology industry. The time is ripe to explore a range of potentially promising
solutions to redirect the economy towards a path which is sustainable and secure.
Beginning with economic liberalization in 1991, the consistent growth and globalization of the
Indian economy thereafter, energy consumption in India has grown exponentially. Increasing
urbanization, infrastructural development and concentration of economic activities in certain load
centers have resulted in higher mobility fuelled by a rapid increase in number of vehicles and
distances travelled. The growing demand for energy is being addressed largely though oil imports, thwhere India is currently the 5 largest oil importer in the world. India simply does not possess
adequate oil reserves to meet current and future demand. 72% of the oil consumed in India in
2007 was imported and this is projected to rise sharply to over 90% by 2030 [3]. High oil prices
result in negative feedback loops that weaken stock prices and tighten fiscal conditions, thereby
depressing economic growth in the long term.
The growth of the Indian economy is impacted by the price of oil imports, which tends to be
extremely volatile and sensitive to economic and political shifts. As a result of the global
recession, oil prices rose to a record peak of INR 7,830 per barrel (USD 145) in July 2008 (Exhibit
1) and the Brent Crude oil price hit INR 5,400 (USD 100) on 31st January, 2011 due to
the political upheaval in Egypt [4]. The growth in demand for oil from BRICS (Brazil, Russia, India,
China & South Africa) nations and other emerging economies coupled with a decrease in the
discovery of new exploitable oil fields will push up oil prices up over the next few decades. This
would further exacerbate the budget deficit, dampening economic growth.
1.1 Energy Security
per barrel
Electric Vehicles in India: Challenges and Opportunities 3
Exhibit 1: Oil price fluctuations (USD), 1987 – 2011 [19]
Source: IEA (International Energy Agency), (2009), Key World Statistics
May
1987
Jan
198
8
Jan
198
9
Jan
199
0
Jan
199
1
Jan
199
2
Jan
199
3
Jan
199
4
Jan
199
5
Jan
199
6
Jan
199
7
Jan
199
8
Jan
199
9
Jan
20
00
Jan 2
001
Jan
20
02
Jan
20
03
Jan 2
004
Jan 2
005
Jan 2
006
Jan 2
007
Jan 2
008
Jan 2
009
Jan
201
0
Jan 2
011
0
20
40
60
80
100
120
140Nominal Real (April 2011 US dollars)
May 1987-April 2011 monthly average Brent spot prices
Conversion to April 2011 dollars uses US CPI for AII Urban Consumers (CPI-U)
Electric Vehicles in India: Challenges and Opportunities4
The transport sector is a key consumer of oil and oil products. More than 50% of the oil
consumption in India occurs on account of transport-related activities [85]. The World Energy
Outlook has estimated that most of the increase in oil consumption by 2030 in India will be driven
by light-duty vehicles, mainly passenger cars – growing at an annual rate of approximately 10%
(Exhibit 2) [5].
Exhibit 2: Energy usage worldwide, industry break up and light duty vehicle depictions [19]
Source: IEA (International Energy Agency), (2009), Key World Statistics
A significant question to ask at this juncture is whether the world can continue generating a
sufficient supply of oil in the coming decades to accommodate the rise in demand from emerging
economies like India and China, without hampering environmental quality?
Until recently Governments and businesses have ignored the phenomenon of 'peak oil'. Peak oil
refers to the 'point at which the maximum rate of global oil extraction is reached'. However, there
has been growing acceptance of peak oil in the public domain, where both Governments and
businesses have been exploring alternative sources of energy supply, primarily renewable sources
like solar, wind, hydro, geo-thermal and nuclear energy. The oil industry is beginning to realize that
we have crossed “the era of easy oil, (and) in the future oil will be dirtier, deeper and far more
challenging (to extract)”[5]. Technologies that have the potential to phase-out oil dependent forms
of transportation should be actively pursued to gauge their feasibility.
PROJECTED INCREMENTAL OIL
DEMAND BY SECTOR, 2006-30 (MTI)
TOTAL STOCK OF LIGHT-DUTY
VEHICLES BY REGION (bn)
-200
0
200
400
600 Africa
Latin AmericaMiddle EastIndia
2.0
2.5
x3
Rest of world Other Asia India
China OECD
OtherNon-energy USE
IndustryTransport
Other Asia1.5 x2
ChinaEastern EuropeEECCAOECD Pacific
OECD Europe
OECD N. America
205020402030202020102000
0.5
0
1.0
1880 1900 1920 1940 1960 20001980-0.6
-0.4
-0.2
0.2
0
0.4
0.6
Global Temperature Anomalies
Year
Electric Vehicles in India: Challenges and Opportunities 5
1.2 Climate Change
Climate Change has emerged as one of the most pressing issues for Governments and
policymakers. This issue has drawn unprecedented global collaboration between scientists and
policy makers through the United Nations Framework Convention on Climate Change (UNFCCC)
treaty that has been signed by 194 nations (as of May, 2011). According to the Fourth Assessment
Report of the United Nations Intergovernmental Panel on Climate Change, 'warming of the planet
is unequivocal' and it is very likely that the rise in global average temperatures is 'due to the
observed increase in anthropogenic greenhouse gas (GhG) concentrations' [6].
The World Meteorological Organization (WMO) reported that 2010 was the hottest year on
records since 1880, tied with 2005, and the difference was less than a margin of uncertainty [7].
This is evidence of a warming trend that continues to be strengthened (Exhibit 3). Consensus
among the scientific community tells us that we must reduce greenhouse gases by 50% by 2050
to prevent the worst impacts of climate change [8].
Since the transportation sector is one of the largest and fastest growing sources of GhG
emissions, decoupling growth in transport from increasing GhG emissions presents a clear
challenge for policy makers in India. EVs, in particular, can have a significant impact towards
cutting down demand for oil imports and reducing carbon emissions arising from road
transportation, only if electricity is derived from hydro and renewable [9].
Exhibit 3: Global temperature anomalies [6](°C)
Source: IPCC (Intergovernmental Panel on Climate Change), (2007), Summary for Policy Makers
Electric Vehicles in India: Challenges and Opportunities6
1.3 Road Transport Emissions in India
India is the fourth largest GhG emitter in the world. The transport sector is the fourth largest
contributor of greenhouse gases in India with a share of 7.5% of the emissions in the country
preceded by electricity generation (37.8%), agriculture (17.6%) and industry (8.7%) [11].
India has witnessed a 200-fold increase in vehicle numbers between 1951 and 2011. Road
transport is the largest contributor of GhG emissions and was responsible for 87% (123.5 Mt
CO e) of the total emissions arising from the transport sector in 2007. Currently passenger 2
vehicles that include two wheelers and four wheelers are responsible for about 30% to 35% of
the total road transport emissions (Exhibit 4).
Over the next decade, the number of passenger vehicles on the road is expected to rise sharply,
approximately 14% y-o-y. According to the IEA/SMP transportation model reference case (using
2003-04 as the base year), emissions from passenger cars are likely to grow at 5% per annum in
India [13]. Even if engine efficiencies improve, the sheer growth in the number of vehicles on the
road would lead to an absolute increase in GhG emissions from road transport.
Exhibit 4: Road Transport: CO e emissions by Fuel type – 2007 [12]2
Source: Transport Sector: Greenhouse Gas Emissions 2007, Central Road Research Institute, New Delhi, INCCA
2% 15%
28%
55%
Buses/Cars/Taxi/3W (CNG+LPG)
2W/3W (Petrol)
Cars/Taxi/Jeep (Petrol+Diesel)
Commercial Vehicles: Trucks/Buses/LCV (Diesel)
Electric Vehicles in India: Challenges and Opportunities 7
1.4 Trends in Personal Road Transport in India
The Indian road network is the second largest in the world, covering 3.34 million kilometers where
as much as 80% of passenger traffic is carried by the roads [14].
The high growth rates of the Indian economy have resulted in an unprecedented rise in disposable
incomes and this has contributed towards a burgeoning automotive industry. With the Indian
economy projected to grow at an average of 8-9% per annum over the middle term, the
percentage of Indian consumers that are able to afford vehicles is likely to increase. Yet, India's car
per capita ratio (i.e. number of cars per 1000 persons) is the lowest among the world's five largest
automobile markets (Exhibit 6), pegged at 18 cars per 1000 people. The share of public transport
has been declining slowly as a result of the growth in private vehicle ownership, fuelled by
expanding urbanization and affluence.
Exhibit 5: Expected growth in CO emissions in India from different transport 2
modes [13]
Source: Mobility at What Cost?,InfoChange Agenda
2005 0
201
2015
2020 5
202
2030
2035
2040
2045
2050
2000
0
100
200
300
400
500
600
700
800
Water
Frieght rail
Freight trucks
Air
Pass rail
Buses
3-wheelers
2-wheelers
Pass cars
Meg
ato
nn
es
C O
2
Electric Vehicles in India: Challenges and Opportunities8
Existing transport infrastructure has however, proven to be grossly inadequate to meet these
demands. The reason for the same is reflected in a study conducted by the Ministry of Urban
Development, Government of India and Wilbur Smith Associates [16]. The study estimated that
total intra-city passenger transport activities (passenger kilometers) across 87 cities, including
state capitals and cities with populations greater than 0.5 million (2008), was growing at a rate of
about 5.5% per annum between 2007-11 as compared to a population growth rate of about 2.6%
per annum in the same period of time. It is estimated that the increase in passenger activities
would continue to grow at an even higher rate of about 7.6% per annum between 2011 and 2031.
The dynamic interactions between personal vehicle penetration, rising incomes, increasing
affordability of cars and expanding export opportunities is expected to position the Indian
automobile industry for growth. The Indian automobile industry has recovered from the recession
registering record sales in 2009-10 and it contributed almost 4% of India's Gross Domestic
Product [15] and recent estimates suggest that the output of the industry is expected to reach 4
million units by 2013 [17] supported by infra structural developments and favorable Government
policies.
The automotive market remains cost-conscious in India. The primary decision point for car buyers
in India continues to be the upfront purchase price of vehicles, whereas fuel efficiency has
historically been a secondary concern, though the implied effect is evident due to a preference for
small and cheap cars. Having stated that, the luxury car market in India has shown compounded
annual growth rate of 30-40% over the last 4 years [18]. This statistic challenges the notion that
the Indian consumer will remain predominantly price conscious in the long term. However, as fuel
costs rise, we can expect increasing consumer importance and emphasis on fuel efficiency in
purchase decisions.
Exhibit 6: Cars per 1,000 population (country breakup) & socio economic strata growth in India [15]
Source: The Indian Automotive Industry: Evolving Dynamics, KPMG India
ItalyGermany
USAFranceSpain
UKJapan
RussiaBrazil
IndiaChina
0 20 40 60 140
200
400
600
800
Mn. Cars (2007)
Cars
per, 0
00 p
opula
tion (20
07)
Num
ber
of
household
s ('0
00)
65.2
13.8
109.2
-6%
3%
16%
41
140.7
46.7
2009-102001-02
High Income
(>Rs, 180K per month)
Low Income
(<INR 45K per month)
Middle Income
(INR 45K per month)
Electric Vehicles in India: Challenges and Opportunities 9
1.5 Modal Shifts
The rapid growth of demand for passenger mobility in Indian cities has not been matched by an
equal increase in supply of transport infrastructure and services. This has resulted in the increased
use of private vehicles across most urban centres accompanied by declining share of public
transport systems. In addition, with expanding cities, the share of pedestrians, cyclists and non-
motorized transport users has also fallen, as seen in Exhibit 7, 8 and 9.
Exhibit 7: Growth in passenger vehicles in India (mn) from 1981 to 2009
Exhibit 8: Change in public transport shares between 1994 to 2007 [16]
Exhibit 9: Changing shares of walk trips between 1994 and 2007 [16]
In India, the transportation sector is responsible for nearly 20% of the total energy consumption
and is the second largest consumer of energy in the country after industry [19]. A significant
amount of road based passenger transport activities in the country are concentrated in cities. The
on-road passenger transport activities in urban India are responsible for nearly 40% of the total
energy consumption in road passenger transport sector [20].
Source: MoRTH Yearbooks
0
10
20
30
40
50
60
70
80
90
Growth of registered motor vehicles in India
Two-wheelersCars, jeeps, taxisBuses
1981 1991 2001 2009
0
10
20
30
40
50
60
70
80
<0.5 0.5 to 1 1 to 2 2 to 4 4 to 8 > 8
City population size (in million)
Share of public transport in India
1994 2007
PT
sh
are
(%
)
0
20
40
60
<.5 .5-1 1-2 2-4 4-8 Above 8
1994 2007
City population size (in mn)
% S
ha
re o
f w
alk
trip
s
Source: WSA (Wilbur Smith Associates) & MoUD (Ministry of Urban Development), (2008), Study on Traffic & Transportation Policies and Strategies in Urban Areas in India, as cited in TERI, (2012)
Source: WSA (Wilbur Smith Associates) & MoUD (Ministry of Urban Development), (2008), Study on Traffic & Transportation Policies and Strategies in Urban Areas in India, as cited in TERI, (2012)
Electric Vehicles in India: Challenges and Opportunities10
The current trends in urban transport, which are primarily a result of the inability of Indian cities to
meet the increasing transport demand in a planned manner, have resulted in local problems
related to congestion, deterioration of air quality, increase in number of road fatalities and
accidents and loss in economic productivity. The congestion levels in many Indian cities have
reached unmanageable proportions, the average vehicle speeds dropping down to as low as 10
km/hour in many cities. This leads to higher fuel consumption due to low speeds and vehicle
idling [21].
Considering an oil constrained future and the high emission levels associated with the
transport sector, it is therefore important to reduce the use of petroleum dependent private
vehicles in the country.
In the 1950's and early 1960's, private vehicles were less in number and road transport served as
a mode complimentary to public transportation. By the late 1990's the share of road transport in
cities was as much as 80% in passenger traffic [21]. The modal split has shifted in favor of road
transport, away from energy efficient modes like railways and buses that have a lower carbon
footprint. For example, in Delhi the modal share of public transport has dropped from 60% in 2000
to 43% in 2008 [22]. This is a likely trend not only in most megacities but also Tier II and Tier III
cities that are characterized by poor transport services and infrastructure. Only 20 cities in the
country have an organized public bus service [23], which in most cases are inadequate leading to
an increased dependence on personal modes of transport.
Exhibit 10: Comparison of Vehicular Growth with Population Growth
Source: Indiastats.com
140000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Population** 102874 102761 104353 106002 108900 110600 112200 113800 115400
Public Buses* 114.9 114.6 115.2 115.7 113.2 112.1 107.8 113.6 117.6
Cars/Taxis/Jeeps* 7058 7613 8599 9451 10320 11526 12649 13950 15313
2W* 38556 41581 47525 51922 58799 64743 69129 75336 82402
PCI 40678 42375 45337 49004 54505 60951 70238 78790 88420
0
20000
40000
60000
80000
100000
120000
Electric Vehicles in India: Challenges and Opportunities 11
The growth in personal vehicle ownership will continue to accelerate with increasing incomes,
greater availability, as well as access to credit and decreasing vehicle cost, case in point being the
Tata Nano which has enjoyed an increase in sales, 5.8%, over 2011-2012 [24].
Exhibit 10 indicates a growing reliance on personal modes of transport (cars and two-wheelers)
and intermediate modes of transport (taxis and auto-rickshaws) driven by the doubling of per-
capita incomes from 2001 to 2009. Over the same period the number of public buses has
remained relatively constant considering a rise in population of approximately 125 million. This
data suggests a growing trend towards a reliance on personal modes of transport due to the
burgeoning middle class, a lack of urban planning and minimal investments by the Government
towards improving public transportation.
Bus services in particular have deteriorated because public transport service providers are unable
to expand services, both in terms of number of buses and number of routes plying. The share of
buses is negligible when compared to private/personalized vehicles in most Indian cities.
Overcrowding of the public transportation system is particularly evident in large cities, where
buses and trains carry more than twice their optimal capacity. As a result we have seen a massive
shift towards personalized transport, particularly two-wheelers, and the growing use of
intermediate modes such as taxis and three-wheeler auto-rickshaws [25].
At this juncture, it should be noted that the Government has drawn plans to improve local rail
networks in urban cities by improving access and expanding existing capacity. Other urban
transport planning initiatives include bus-rapid-transport-systems (BRTS), pedestrian zones,
skywalks and cycling paths. Delhi, Mumbai, Kolkata, Chennai and Hyderabad are in different
phases of planning or implementing light-duty metro rail services to complement existing modes
of public transport. It is envisaged that these plans will have some impact on increasing the share
of public transport. However given India's low motorization index and the lack of adequate
investments in public transport, the country is further expected to exhibit growth in light duty
personal vehicles.
India will be faced with the complex problem of convincing people not to use their vehicles
because this would increase the demand for oil imports - adding to the budget deficit while
contributing to the country's growing carbon footprint. Therefore, the only way to really shift
population mindsets is by making public transportation networks extensive, accessible and safer.
In the interim, alternative modes of sustainable personal transportation must be explored to
tackle the immediate socio-environmental impacts of the Internal Combustion Engine.
Sustainable transport systems aim to reduce emissions, fossil fuel
consumption and minimize the land area requirements, while providing easy
access to people to enable efficient mobility [25]. Vehicles that run on
alternative sources of energy such as solar, bio-fuels, fuel cells and batteries
have been developed, demonstrated and in some cases they have entered
markets and are already on the roads.
2.1 Technological Innovations in Low-Carbon Transport
A brief overview of key innovations in low-carbon vehicles that are being
actively pursued in India:
1. Electric Vehicles (EV)
EV's utilize electric motors to induce propulsion. The key differentiator between
EV's and conventional ICE vehicles is that the electricity that they consume can
be derived from different sources or a combination of energy sources,
particularly renewables such as solar and wind energy. Electric vehicles are only
as 'green' as the energy sources used to charge them. Charging EV's in India
remains a challenge, where 60% of electricity is generated from fossil fuels
fired coal power plants [26].
Electricity can be transmitted to EV's wirelessly through induction or directly
using an electrical cable. EV's utilize on-board batteries to store electricity.
Unlike ICE's, EV's are capable of regenerative braking whereby they are able to
recover the energy that is lost during braking as electricity that is then stored
back into the on-board battery. They do not have any tail-pipe or evaporative
emissions and are virtually maintenance free. There has been a renewed
Sustainable Personal Transportation
Electric Vehicles in India: Challenges and Opportunities14
interest in EVs as a solution to address the emerging concerns around energy security and
climate change. There are almost 40 new production ready electric vehicles and hybrid vehicles
launching by 2013.
Bio-fuels are broadly defined as “fuels that are produced directly or indirectly from organic
material – biomass – including plant materials and animal waste” [27]. Efficiency improvements in
conversion technology now permit the extraction of bio-fuels from a wide variety of sources,
particularly, wood, crops and waste materials. Bioethanol and biodiesel are the two most
commonly available types of biofuels. Biofuels have been around since the invention of the
automobile but were largely displaced by the discovery of huge deposits of oil that kept petrol
and diesel prices cheap for decades.
Bio-fuels are a renewable resource as more plants can be grown for conversion into fuel, with the
added advantage that the plants sequester carbon as they grow. Over the last decade there has
been much debate about the relative pros and cons of focusing on biofuels as a viable solution
based on a range of economic, social, environmental and technical issues. The large scale
production of bio-fuel for transportation would require large land areas; as a result its potential to
replace fossil fuels is limited. However, innovative approaches like using seaweed to produce
biofuels might address the 'food vs. fuel' debate and lead to breakthroughs.
The current world production of biofuels is less than 1% of world transport fuel demand and India
contributed about 0.6% of global biofuels production in 2009 [28]. In India, bio-fuels have an
assured market as the Government, through the 'National Biofuel Policy', aims to meet 20% of
diesel with fuel derived from plants. In 2009, the Government of India mandated 5% blending of
ethanol with petrol across India, which is projected to annually save 80 million liters of petrol [29].
Vehicles are increasingly using compressed natural gas (CNG), or less commonly liquefied natural
gas (LNG), as an alternative to conventional fuels as it is cheaper and cleaner. In 2010, there were th~12.6 million CNG/LNG vehicles plying the roads worldwide with India ranked 5 , with a total
fleet of approximately 1.08 million vehicles [30]. Existing petrol or diesel vehicles can be easily
modified to run on CNG at an average cost of INR 20,000 [31] for petrol vehicles and about INR
50,000 for diesel vehicles. CNG is one of the more promising alternative fuels due to its
abundance and zero emissions. The strongest driver of CNG development has been its favorable
economics i.e. the price advantage of CNG over conventional fuels.
CNG as a transport fuel has been actively promoted by the Government of India through
mandates and targets. The CNG programs in Delhi and Mumbai are the oldest and well matured,
driven by public policy mandates and a strong commercial interest of large taxi fleets in fuel/cost
savings. The Ministry of Environment and Forests recently stated that approximately 70% of intra-
2. Bio-fuels
3. Compressed Natural Gas (CNG)
Electric Vehicles in India: Challenges and Opportunities 15
Electric Vehicles in India: Challenges and Opportunities16
city public buses use CNG as fuel [32]. Rising petrol and diesel prices have stimulated demand for
CNG vehicles and many auto majors like Maruti-Suzuki, Tata Motors, Chevrolet, Toyota, Hyundai,
among others, have introduced factory fitted CNG vehicles of their popular models in the Indian
market.
Hydrogen vehicles internally convert the chemical energy from hydrogen to mechanical energy for
propulsion either through burning hydrogen in an internal combustion engine or through reactions
between hydrogen and oxygen in fuel cells that run electric motors.
Hydrogen vehicles are divided by two different technological approaches, namely -
i. Hydrogen-ICE: Existing cars that run on petrol and diesel can be modified to use hydrogen as
a fuel in their internal engines.
ii. Hydrogen Fuel Cell: Hydrogen fuel cell cars are essentially electric vehicles that use hydrogen
fuel cells instead of battery packs for power.
Hydrogen has proved to be an attractive fuel as it has excellent electro-chemical reactivity,
adequate power density to enable automobile propulsion and zero tail-pipe emissions [33].
Hydrogen can be produced using a wide variety of sources such as natural gas, coal, biomass,
geothermal, solar and wind, which makes it an important energy carrier from an energy-security
stand point. Most automobile majors have invested in developing prototypes and are at various
stages of testing commercial feasibility of HFV.
Though HFVs are considered to be zero emission vehicles, they do have 'well to wheel' (total
lifecycle) emissions, as most of the hydrogen used is produced from natural gas. Though HFCV's
tend to outperform battery electric vehicles in terms of range and refueling time, they yet face
significant technical and economic hurdles that critics, like Nobel laureates Steven Chu and Burt
Richter, say would not be overcome in the near future [34]. Most research tends to support a
hydrogen economy as a long term option as the hydrogen option suffers from several
uncertainties around system and infrastructure costs and is not likely to be available en-mass in
the foreseeable future, i.e. before 2020.
In India, the Planning Commission has constituted working groups to look at hydrogen as a viable
fuel. The Ministry of Petroleum and Natural Gas created a INR 100 cr. (USD 18.5mn) fund for
research and development of hydrogen technologies. Other efforts include - The Green Initiative
for Future Transport (GIFT), which aims to research, develop and demonstrate hydrogen fuel cell
vehicles, with goals and targets up to 2020. India is also one for the 16 founding members of the
International Partnership on Hydrogen Economy set up in Washington D.C., on November 2003
and has also prepared a National Hydrogen Energy Road Map and Programme (2006) focusing on
two and three-wheelers [35]. Few Indian vehicles manufactures like Mahindra and Tata Motors, in
4. Hydrogen Fuel Vehicles (HFV)
Electric Vehicles in India: Challenges and Opportunities 17
partnership with research institutes have developed prototypes of hydrogen vehicles to test their
feasibility in the Indian market.
Hybrid/Dual Fuel Vehicles are defined as vehicles that use two or more distinct fuel sources, or a
mixture of fuels, for power and propulsion. HFVs are viewed as a transition technology to bridge
the gap towards zero-emission vehicles because they provide consumers with flexibility in terms
of fuel costs, refueling time, driving distances and emission reductions [37]. They tend to be
cleaner and are more fuel-efficient than conventional vehicles that use an ICE, the extent of which
depends on the combination of fuel sources used. Many different combinations of fuel sources
have been developed and tested for vehicles.
Hybrid vehicles typically ensure savings in terms of fuel economy and emissions due to the
following:
i. Relying on both engines and electric motors for their power needs, as this reduces the size
and weight of engines resulting in less internal losses.
ii. The tank-to-wheel efficiency of electric motors is also significantly higher than ICEs.
iii. Batteries have the capacity to efficiently store, reuse and recapture energy, through
technologies like regenerative breaking that save energy normally wasted as heat during
braking.
iv. Vehicles use blended fuels, like ethanol added to petrol or hydrogen mixed with CNG, as the
addition of low emission fuels to conventional fuels reduces the total fuel emission factor.
5. Hybrid/Dual Fuel Vehicles (HFV)
Exhibit 11: Various fuel combinations being pursued through Government initiatives
and by automobile manufactures
Source: YES BANK Analysis
Blended Fuels
Biofuel +GasolineHydrogen +CNG
(Hy-thane)
Dual Fuels
CNG +
Gasoline
Electric +
Gasoline
GaseousLiquid
Hybrid and Dual Fuel Vehicles
Electric Vehicles in India: Challenges and Opportunities18
The Government of India, in partnership with automobile manufacturers and research institutes,
has been exploring the feasibility of blended fuels and dual fuel vehicles. The future will most likely
see a combination of solutions being used for different purposes based on their relative suitability.
For example, while dual fuel vehicles might be promoted in densely populated urban environment
that have the required recharging/refueling infrastructure, vehicles running on a mix of gasoline
and ethanol might be suited to inter-city mobility or long distance journeys where recharging
infrastructure for electric vehicles or CNG refueling facilities are absent. The Ministry of New and
Renewable Energy, along with SIAM, IOCL, Tata Motors, Ashok Leyland, Eicher Motors, Mahindra
and Mahindra and Bajaj Auto, have supported a unique project for demonstrating a hybrid Hythane
(H-CNG) model, using up to 30% of hydrogen and CNG, in cars, buses and three-wheelers[35].
Vehicles that utilize new technologies to improve the overall engine efficiency and reduce
emissions of internal combustion engine vehicles are collectively called Advanced Internal
Combustion Engine (AICE) vehicles. Automobile manufacturers constantly strive to improve the
efficiency of ICE vehicles to reduce energy loss, improve mileage, reduce tail-pipe emissions and
ultimately lower the cost of operation. The Government of India has also driven engine efficiency
improvements by imposing the Bharat Stage (BS) emissions standards, which are progressively
updated. They stipulate emissions limits for different vehicles categories. Automobile
manufacturers must meet the stipulated criteria as they are mandatory.
In cost-conscious markets like India, a key decision point for consumers is the total cost of
ownership of vehicles – which includes the price of the vehicles, the cost of fuel, and
maintenance costs. Cars that have a higher efficiency require comparatively less fuel to travel a
particular distance. As a result their fuel consumption and running costs are less. However, it is
important to consider the 'rebound effect', formally referred to as the Khazzoom-Brookes
postulate [37], that has been confirmed by a wide range of studies and indicates that when energy
prices are constant, cost effective efficiency improvements will increase economy-wide energy
consumption above what it would have been without those improvements or in simpler terms -
“greater the efficiency of a process, the greater the energy use” [5]. The Kazzoom-Brookes
postulate clearly suggests that energy efficiency improvements in the automobile sector would
not suffice to meet future transportation goals (i.e. de-carbonization of the transport sector), as
they would invariably lead to an absolute increase in energy/fuel consumption and thus carbon
emissions [37].
Advanced ICE's are not an end solution but they will play an important role as an intermediate
wedge until other low-carbon alternatives like EVs and HFV's achieve scale and market
penetration.
6. Advanced Internal Combustion Engine (AICE)
Electric Vehicles in India: Challenges and Opportunities 19
Exhibit 12: Fuel type impact analysis
Petrol Diesel Bio-Diesel Ethanol CNG Electric Hydrogen/
Hythane
Main fuel
source
Physical state
Types of
Vehicles
Available
Fuel
Availability
Refueling
Infrastructure
Crude oil
Liquid
All types of
vehicles
categories
Available at all
fueling
stations
Refueling
stations are
widely spread
across the
country.
Mature
infrastructure
for the deliver
of petrol.
Crude oil
Liquid
Most types of
vehicle
categories.
Available at all
fueling
stations
Refueling
stations are
widely spread
across the
country.
Mature
infrastructure
for delivery of
diesel.
Soy bean oil,
rapeseed oil,
waste cooking
oil, animal fats
Liquid
Any vehicle
that runs on
diesel -no
modifications
for up to 5%
blends and
many engines
are compatible
with 20%
blends.
Not available at
fuelling
stations. Plans
to introduce
biodiesel
through the
'National
Biofuels
Policy'. It is
now being
produced
locally for use
in three-
wheeler
rickshaws.
Existing
fuelling
stations can be
fitted with bio-
diesel pumps
Corn, grains or
agricultural
waste
(sugarcane
molasses)
Liquid
Light duty
vehicles,
medium and
heavy duty
trucks and
buses. Other
vehicles that
can use mixed
fuels.
Currently
blended with
diesel or
petrol. 5%
ethanol
blended petrol
has been
introduced in
20 states and
8 union
territories, and
will be
extended to
10%blend pan-
India in
phase2.
Ethanol fuel
dispensers can
be easily
installed at
conventional
fueling
stations
Underground
reserves
Compressed
gas
Many types of
vehicle
categories -
but most
require
modifications
to engines and
space for
storage tanks.
Available in
most large
cities and
widely across
Maharashtra,
Gujarat and
Delhi.
Expansion of
gas pipelines
will lead to
greater
availability of
CNG
Coal; however
there are a
range of
sources that
include
nuclear, natural
gas,
hydroelectric
and
renewables.
Electricity
Neighborhood
electric
vehicles,
bicycles,
motorbikes,
light-duty
vehicles,
medium and
heavy duty
trucks and
buses.
Charging
facilities not
available at any
fueling
stations. Most
homes,
Government
facilities,
garages and
businesses
have adequate
electricity
capacity for
charging (may
require slight
upgrades)
Need for public
charging
stations at
parking lots,
malls, fuelling
stations and
also in
buildings
Natural gas,
methanol,
other energy
sources
including
renewables
Compressed
gas
No vehicles
available for
commercial
sale; several
pilot projects
are currently
being
demonstrated.
Not available at
fueling
stations. A
demo station
has been set
up at Dwarka
in Delhi to test
the technology
Delivery of
hydrogen will
require
significant
investment
towards
production and
infrastructure.
Hythane can
make use of
existing CNG
infrastructure.
Comparison of Alternative Transport Technologies in India
Electric Vehicles in India: Challenges and Opportunities20
Petrol Diesel Bio-Diesel Ethanol CNG Electric Hydrogen/
Hythane
Maintenance
Fuel Costs
(as on Sept
2012)
Environment
Impacts
Energy
Security
Impacts
Require regular
pollution
checks,
servicing,
tune-ups, oil
changes,
lubrication
INR 71/liter
Produces
harmful
emissions.
Gasoline
vehicles are
improving and
as a result
emissions are
being
progressively
reduced.
Manufactured
using mostly
imported oil
which is not a
secure option
Require regular
pollution
checks,
servicing,
tune-ups, oil
changes,
lubrication
INR 42/liter
Produces
harmful
emissions and
particulate
matter.
Emissions are
being reduced
with after-
treatment
devices.
Manufactured
using mostly
imported oil
which is not a
secure option
Hoses and
seal may be
affected with
higher-percent
blends.
Lubricity is
improved over
that of
conventional
diesel
NA
Reduces
emissions and
particulate
matter when
compared to
conventional
diesel.
However NOx
emissions may
increase.
Bio-diesel is
domestically
produced and
has a fossil
energy ratio of
3.3 to 1 which
means that its
impacts are
slightly less
but similar to
petrol
Special
lubricants may
be required.
Practices are
similar to
conventional
vehicles
INR 27/liter
Can
demonstrate
up to 25%
reduction in
ozone-forming
emissions
when
compared to
petrol.
Ethanol is
domestically
produced and
is renewable.
High pressure
tanks require
periodic
inspection and
certification
INR 32/kg
Significant
reduction in
tail pipe and
ozone forming
emissions
though HC
emissions may
increase.
CNG is
domestically
produced but
is limited. India
is currently
exploring
options of
importing
natural gas
from Iran and
Myanmar.
Minimal
servicing
needed. No
tune-ups, oil
changes,
timing belts,
water pumps,
radiators or
fuel injectors.
Batteries need
to be replaced
after 3-6 years
INR 4/kWh
Zero tail-pipe
emissions.
Some
emissions can
be attributed
to power
source/
generation.
Electricity is
generated
through coal
fired power
plants as it is
available in
plenty. It is the
most
economical
and price
stable fuel.
In fuel cell
applications
maintenance
in minimal.
Hydrogen-
ICE's would
require regular
servicing.
NA
Zero regulated
emission for
fuel cell
vehicles and
only NOx
emissions
possible with
Hydrogen ICE
vehicles.
Hydrogen can
help reduce
India's
dependence
on foreign oil
by being
produced from
renewable
resources
2.2 Pathway to Zero-Emission Vehicles
The path towards Zero-Emission Vehicles (ZEVs) begins with technological modifications and
enhancements to existing engines and drive-trains that improve the tank-to-wheel efficiency of
vehicles. Vehicles that run on low-carbon alternative fuels such as biodiesel, ethanol, synthfuels
and natural gas are categorized collectively with high efficiency ICEs as A-ICE vehicles, and they
can reduce emissions by up to 10-15% [39].
(Source: YES BANK research, SIAM, Ministry of Petrolium,
US Department of Energy –Alternate Fuels and Advanced Vehicle Data Center)
Electric Vehicles in India: Challenges and Opportunities 21
The next step towards ZEVs involves the electrification of vehicles. There are a wide range of EV
technologies being explored at the moment, that include:
üMild-Hybrid – It is the first real step towards electrification and ZEVs, and contains a small
electric motor that enables a start-stop system, facilitates regenerative braking energy to
charge the battery and offers acceleration assistance. Mild-hybrid vehicles achieve small
reductions in emissions, between 10 to 15% at relatively high costs [39]. It is viewed as an
intermediate development step towards a fully-hybrid system.
üFully-Hybrid – Features a larger motor and battery pack that provides the vehicle with electric
launching, acceleration assistance and electric driving at low speeds. It can achieve a
maximum of 25-30% in GhG emission reductions. Though fully-hybrids currently cost
between INR 2.5 to 3.5 lacs (USD 4629 – USD 6481) more than conventional ICE cars, the
cost of hybrid components is expected to fall by 5% per year [39].
üPlug-in Hybrid (PHEV) – It is a hybrid vehicle with a larger battery that can be recharged by
connecting a plug to an electric power source or grid. The ability to connect to the grid gives
the PHEV an range of 30-60 kilometers of all electric driving. PHEVs feature smaller ICE that
takes over from the all electric drive to provide a longer range. The carbon reduction potential
of a PHEV is between 30-40%.
Exhibit 13: The path to electrification
Source: YES BANK Analysis
Advanced Internal
Combustion
Natural Gas and Biofuels
Hybrid Fuel + Electric
Fully Electric
Hydrogen
Electrification
10- 30%Up to 15% 50 -100 %30-40% 50 -100 %
Tech
nolo
gic
al A
dva
nce
men
t
Carbon Reduction Potential
Electric Vehicles in India: Challenges and Opportunities22
üRange Extenders – They are all EVs that feature a small ICE that is used to recharge the
battery to extend the driving range. This feature is useful in the absence of charging
infrastructure as they combine the advantages of electric driving with the ability to undertake
longer journeys. They have a carbon reduction potential of between 60-80% depending on the
electricity source used to charge the battery [39].
üFully Electric – All of the needed propulsion energy is stored in a large battery that can be
recharged by connecting it to the electricity grid. Electric vehicles are two to three times
more efficient than conventional ICEs [40]. Though there are a range of different battery
technologies being used, it is predicted that litium-ion batteries will dominate the landscape
[40]. A fully electric vehicle is only as clean as the source of electricity that is used to
recharge the battery, and when charged using renewable sources it can reduce emissions by
up to 80-100%.
Exhibit 14: GhG emissions from various fuel sources [42]
Source: Zhang & Cooke, 2010
0.5
2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
GhG Goal: 80% below 1990 Pollution
GhG Goal: 60% below 1990 Pollution
1990 LDV GHC1.0
1.5
2.0
2.5
Fuel CellVehicle Scenario
H2 ICE HEV Scenario
BEV Scenario
Ethanol Plug-In Hybrid Scenario
Gasoline Plug-In Hybrid Scenario
Base Case: Gasoline Hybrid
Scenario
100% Gasoline ICVs
-
Greenhouse Gas Pollution (Light duty vehicles only)(Billion/tonnes CO -equivalent/year)2
The stimulus for a technological shift towards electric vehicles in India, as is the
case among most comparable markets, depends on improved battery
technologies, longer ranges, better charging infrastructure, lower prices,
Government incentives and progressive regulation. While electric vehicles offer
a great opportunity to diversify across the value chain, they also pose significant
risks as the technology could change the dynamics of the industry and cede
large parts of the value chain that has evolved over several decades obsolete
[43].
In order to grasp the changing landscape of the EV sector it is important to
understand the different actors across its value chain and the relationships they
share –
3.1 Raw Material Suppliers
Raw materials have a high impact on cost structures of the automobile sector.
Raw material suppliers face a host of challenges that include rising prices,
fluctuating prices, discriminatory pricing by foreign vendors of Indian
component manufacturers/exporters and custom free import of finished goods
from ASEAN countries under various free trade agreements [44]. Steel is one
The Electric Vehicle Value Chain
Electric Vehicles in India: Challenges and Opportunities24
Exhibit 15: The EV value chain
Source:YES BANK Analysis
Raw Material Suppliers
Traditional Component Suppliers
Battery Suppliers OEMS
Utilities /Infrastructure
of the primary raw materials used in the manufacture of automobiles and its price has risen
between 25% to 40% for specific products like flat, long and pig iron which are commonly used
by vehicle manufacturers. Ironically, even though India is one of the cheapest sources of iron ore,
steel prices are high when compared to international standards. The Government of India must
consider enforcing competitive policies that contain the price of steel against global steel prices
by regulating the export of steel, monitoring steel price and lowering import duty to widen access
to cheap steel sources outside India (IDC, 2008) [45]. Other raw materials like plastics and lithium
(for batteries), a rare earth metal, are also plagued by global price fluctuations. Given the growth
in demand for lithium batteries, that are used in common electronics and appliances like mobile
phones and laptops, the price of lithium is expected to rise as lithium reserves are scare and
geographically sparse. This is of particular concern to Indian battery manufacturers, considering
China is the closest source of lithium, having the largest proven lithium reserves in the world.
Also, the battery component has the highest weightage in the overall cost structure of an EV.
The auto component industry in India is expected to grow at a rate of 13-15%, having the
potential to become one of the top five auto component economies by 2025 [45]. Over the last
decade there has been a marked improvement in the quality of auto components manufactured in
India. Most of the standard components required by the Indian automotive sector are
domestically manufactured with an import dependance estimate of about 13.5% of domestic
demand. Due to growing economies of scale of the Indian auto component industry,
manufacturers of EV are likely to depend on traditional component manufacturers for all
standardized parts that go into an EV and that are common to ICE vehicles such as tyres, seats,
doors, windows etc. India exports a wide range of auto components and chassis. The auto
component industry's exports are expected to grow by about 24% during 2010-2015 [46], and can
be further bolstered by investing in technology collaborations and joint R&D. Traditional
component manufacturers can diversify their product offerings by tying up with makers of EVs,
leveraging their technological expertise, to develop specialized parts for hybrid and EV, both for
domestic and export markets. India has a relatively strong auto component base for electrical and
electronic components that can be leveraged to tap into the emerging EV sector.
A key concern in the EV sector has been the advancement of battery technology, which has
benefitted from recent breakthroughs in lithium-Ion batteries due to their application in computers
and mobile devices. There has been substantial growth in the number of lithium-ion patents in
China, USA, Japan and Western Europe [40] and batteries available today can store energy to
enable driving ranges that exceed 100 kms. Battery manufacturers have been working with
OEM's to develop batteries for EVs and many of them have been increasing production capacity
to achieve the required volume to drive down prices. The growth in the battery market for EVs will
spur investments in R&D making batteries more reliable and affordable while providing longer
driving ranges. It is likely that existing battery suppliers for mobile devices will dominate the
3.2 Traditional Component Suppliers
3.3 Battery Manufacturers & Suppliers
Electric Vehicles in India: Challenges and Opportunities 25
Electric Vehicles in India: Challenges and Opportunities26
market, though new players are quickly emerging. Battery manufacturers and suppliers will also
have to consider pro-environmental means to dispose depleted batteries as they comprise
hazardous chemicals. While some battery suppliers are forging new partnerships with automobile
manufacturers to reduce risks (e.g. Toyota and Panasonic), others continue to traditionally buy
batteries from Tier 1 suppliers (e.g. Johnson Control and Saft)
Looking ahead, OEM's face daunting challenges towards the allocation of investments in new
technologies as a result of the current financial slowdown, and yet they must adapt their
businesses to capitalize on emerging opportunities in new markets, specifically the EV sector. The
automobile industry seems to be preparing for a major shift towards powertrain technology. There
are a range of different types of EVs (see 'Pathway to ZEVs) and OEM's will have to assess
options based on their ability to leverage different actors across the value chain. Since established
OEM's have plants that are built around mass production, they offer very few cost advantages for
new powertrain configurations. OEM's could develop a competitive advantage through
partnerships with technology companies (that have know-how on electric drive-trains), battery
manufactures and traditional component suppliers to reduce risks and leapfrog the development
of EVs. In turn, they could also partner with other OEM's to share and spread associated risk, by
standardizing EV components. Manufacturers in emerging economies, India and China in
particular, are exposed to much wider business opportunities from the shift towards EVs.
“Indian cities and towns are plagued by frequent outages and the basic requirement for electric
cars is electricity…” [47]. A growth in demand for EVs will have a sizable impact on electricity
generators and suppliers. This additional demand for electricity will have to be addressed through
increased generating capacity and essentially through better grid management. Driven by reforms
beginning with 'The Electricity Act, 2003', followed by de-licensing, the power generation sector
has transformed from being a slow moving industry to a space where there lie vast growth
opportunities. By repairing or upgrading distribution equipment, efforts are being made to reduce
transmission and distribution losses, which currently stands at 28%. Covered in a later section,
we will explore the possibility of introducing smart grids in major metropolitan cities, from a
technical perspective. India's power sector has increased generation capacity by record numbers
this year, and it is expected to double from the current 177 gigawatts (2011) to 300 gigawatts by
2015 [48]. India also has plans to generate 15% of the electricity mix through renewable sources
such as solar, wind, biomass, geothermal and hydro energy [49]. Solar energy is expected to grow
to the tune of 2 GW by 2013, gradually scaling up to 20 GW by 2020 [50], and wind energy
generation capacity which has experienced phenomenal growth, stands at 13 GW (Dec, 2010) and
is expected to grow to about 50 GW by 2020 [49]. According to a number of studies, electricity
demand from EVs can 'increase the penetration of wind as a baseload resource' [51], since the
generating profile of wind energy matches the load profile of a night-time charging regime.
Increasing the renewable energy mix would reduce the emission factor of the total electricity
3.4 Original Equipment Manufacturers (OEMs)
3.5 Utilities
Electric Vehicles in India: Challenges and Opportunities 27
generation mix, rendering EV's cleaner and greener. Since EVs are only as clean as the electricity
used to charge them, adding renewable energy to the mix would only boost their green
credentials. EV manufacturers must liaise with utility providers in order to develop innovative
solutions for charging of public and private, including option of using renewable energy sources.
3.6 The Electric Vehicle Ecosystem
Exhibit 16: The EV Ecosystem
Source: Mahindra - Reva
Insurance
e DT ch R&
Climate Change
Policy
Smart Charging
V2G
Building/VehicleInteraction (V2B)
Grid Storage
Smart Grid
Firming Renewables
Renewable Power
Li-ion Battery
Vehicle Electrification
Consumers
Data Flow
Finance
Information
Money
Electricity
Major trendsKey system players
Electric Vehicles in India: Challenges and Opportunities28
Exhibit 17: EV risks, challenges & solutions
Electric Vehicles in India: Challenges and Opportunities30
EV
Safety chassissafety
Source: YES BANK Analysis
Policies Promoting Electric Vehicles in India
Electric Vehicles in India: Challenges and Opportunities32
The Government of India, along with several State Governments, have
supported many initiatives promoting environmentally friendly technologies.
Over the last few years several steps have been taken in this direction by using
regulation as the primary driver. The following section highlights some of the
major initiatives that have been taken by the Government to support the cause
of electric mobility in India.
4.1 Initiatives by the Ministry of New and Renewable Energy (MNRE)
The Ministry of New and Renewable Energy (MNRE) in November 2010
decided to offer incentives to EV manufacturers during the remaining period of
Exhibit 18: Green Transport in India
Source: KPMG, YES BANK Analysis
CNG conversion of buses, taxis and auto-rickshaws introduced in
Mumbai
India’s first CNG bus launched
Supreme Court orders to convert
all city bus fleets, taxis and
auto-rickshaws in Delhi to CNG
First electric car commercialized in India (Reva)
India’s first MUV-‘Omni
Cargo’ launched by Maruti-Suzuki
Reva exported to European markets and branded as
G-wiz
All buses in Delhi
converted to CNG
India’s first dual fuel (petrol + LNG)
passenger car ’Wagon R Duo’
launched by Maruti-Suzuki
–
India’s first electric two wheeler
launched –‘Yo Byke’ by Indus Elec-trans
Hero Electric launches
electric two wheeler
First hybrid car launched in India-Honda Civic Hybrid
1,10,000 electric vehicles sold -
97-98% of which were
two wheelers
Full exemption from central excise duty
provided to EVs
Delhi is the first city in India to introduce
a hybrid electric-CNG public bus manufactured by
Tata Motors
GOI sets up the National Mission
for Hybrid and Electric Vehicles
Karnataka is the first state to utilize bio-fuels
and ethanol-blended fuels in public buses
in Bangalore
First section of the Delhi Metro Rail–the
red line-opened
1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2010-2011 and for the entire period of 2011-2012 to boost the sales of environment-friendly
vehicles. The scheme, which came under the 11th five year plan, set aside a fund of INR 95 cr.
(USD 17.6 mn) to provide incentives of up to 20% on ex-factory prices of vehicles, subject to a
maximum limit. The manufacturer gave this subsidy to the customers and later claim it as a
refund from the Government. Targets were set up for sales in 2010-2011 with MNRE giving
subsidies to 140 EVs, 10,000 electric high-speed 2Ws, 20,000 electric low-speed 2Ws and 100
electric three-wheelers [53].
In order to avail this scheme, the Government set out qualification criterions for manufactures.
Firstly, they had to have significant presence in the retail side of the industry. Secondly, the
vehicle manufacturer was required to have a minimum of 30% indigenous content. And finally,
the manufacturers would have to be able to provide after sales service through its own outlets
[53].
The MNRE scheme however ended in March 2012 (when programmes under the 11th Plan period
drew to a close) and the discontinuation of the scheme witnessed a 65% decline in the sales of
EVs. This led the Government to extend the MNRE subsidy scheme in August 2012 till proposals
under the National Mission for Electric Mobility (NMEM) were formulated.
The 2011-12 Budget, encouraged CNG, LPG and other hybrid and alternative fuel cars uptake in
the country. A variety of incentives for EVs and hybrids were also declared.
The then Finance Minister, Mr Pranab Mukherjee, also announced the formation of a new inter-
ministerial mission – “National Mission for Hybrid and Electric Vehicles” (NMHEV) to promote EV
mobility. This initiative was designed to act as a focal point for all the industry's needs on
infrastructure, R&D and new incentives. The mission is headed by the Ministry of Heavy Industry
& Public Enterprises and stakeholders including Ministries like Urban Development, New and
Renewable Energy, and Power along with private stakeholders (industry).
The Budget proposed extending the basic customs duty exemption and concessional rate of
Central Excise duty (4%) on specific parts such as imported batteries for EVs and concessional
rate of 5% on excise duty on hybrid vehicles to incentivize their domestic production. The excise
duty on hybrid kits that convert traditional vehicles into more fuel-efficient machines, has been
reduced to 5% from 10%. A concessional excise duty of 10% has also been proposed for
vehicles with fuel cell or hydrogen cell technology and a concessional excise duty of 10%
extended on hybrid vehicles [54].
The Ministry of Heavy Industries is planning to approve a INR 20,000 - 23,000 cr. (USD 3.7bn –
USD 4.25bn) plan under the National Electric Vehicle Mission policy to promote EV mobility over
the next 8 years. The Government plans to invest around INR 12,250 - 13,850 cr. (USD 2.26bn –
4.2 Initiatives in the 2011-2012
4.3 Initiatives by Ministry of Heavy Industries and Public Enterprises
Budget
Electric Vehicles in India: Challenges and Opportunities 33
Electric Vehicles in India: Challenges and Opportunities34
USD 2.56bn) [55] and the rest will be invested out by the industry. The funds for this initiative are
to be made by pooling allocations given to all the other Ministries, like the JNNURM related funds
of Ministry of Urban Development and the Climate Change Fund of the Ministry of Environment
[54]. The funds are to be allocated for incentivising private players, giving tax benefits and setting
up R&D centres apart from various other activities. The NMHEV will provide incentives and
subsidies to customers through manufacturers, based on many parameters such as fuel efficiency
and carbon emission standards.
The various initiatives proposed by the Ministry of Heavy Industries in the draft National Mission
for Hybrid and Electric Vehicles (NMHEV) are [56 & 57] :
1. Proposing/ suggesting that Public Sector Undertaking banks to offer loans to customers for
purchasing EVs so that financing facilities are available for purchasing EVs.
2. Making mandatory the provision of charging points for electric vehicles in all upcoming
housing complexes across the country.
3. Advising the Automotive Component Manufacturers Association of India to reduce shortages
of spare parts by developing and producing components for EV.
4. Creating EV zones in certain "highly polluted" cities as pilot projects
5. Funding research & development
6. Providing charging infrastructure for EVs.
7. Promoting indigenization
8. Supporting the development of a cost-effective EV technology for a mass platform and
starting operations
9. Setting a target of 6-7 million units of new vehicle sales of full range of EVs
A National Electric Mobility Mission Plan 2020 (NEMMP 2020) was formally launched by the
National Council for Electric Mobility (NCEM) and the Prime Minister of India on January
14th, 2013 [55].
The Department of Heavy Industry, Government of India has constituted a National Council on
Electric Mobility (NCEM) and a National Board on Electric Mobility (NBEM) to take forward electric
mobility and manufacturing of EVs, including hybrids, in India. They would also look at ensuring
that their components are also manufactured in India. NCEM and NBEM are headed by Minister of
Heavy Industry and Public Enterprises and Secretary, Department of Heavy Industry, respectively
[59]. The National Automotive Board would serve as the technical advisor to both the NCEM and
NBEM. Their roles and composition are described in further details below.
4.4 Government Agencies to take up EV Mobility in India
Electric Vehicles in India: Challenges and Opportunities 35
i. National Council for Electric Mobility (NCEM)
ii. National Board for Electric Mobility
iii. National Automotive Board (NAB)
NCEM is a Government body made up of 18 members including 8 Cabinet Ministers. This has
been approved to be the apex body in deciding matters relating to EV mobility. The Council
comprises of Ministers from key Central Ministries and Departments along with eminent
representatives from the industry and academia. It would be chaired by the Minister of Heavy
Industries & Public Enterprises [60]. The NCEM has adopted the National Electric Mobility
Mission Plan 2020 (NEMMP 2020) which lays the vision and sets the targets for National
Mission for Electric Mobility (NMEM) [61].
The National Board for Electric Mobility (NBEM) has been approved to be set up under the
Department of Heavy Industry to aid the NCEM. It will consist of 25 members, comprising of
secretaries of stakeholder Central Ministries/Departments with representation from industry
and academia. The board will be headed by joint secretary, Department of Heavy Industries.
Both the Government agencies will be supported by NATRiP Implementation Society (NATIS)
currently, until National Automotive Board (NAB) is created [62].
The National Automotive Board (NAB), after its formation is envisioned to be the technical
advisor and secretariat for both the NCEM and NBEM. This board will be responsible for
acting as facilitator between the Government and the industry and will promote R&D
activities in the sector. NAB will be responsible for sustainable development of the Indian
auto sector. The members would be from the Department of Heavy Industry, Planning
Commission and from various ministries, including Road Transport and Highways, Science
and Technology, and Environment and Forests besides representatives from the academia
and the industry. The NAB would be made self sufficient with funds made available from the
Automotive Cess administered by the Development Council for Auto and Allied Industries,
under the Department of Heavy Industry [63].
Development of EV Charging Infrastructure in India
Electric Vehicles in India: Challenges and Opportunities38
While there are a number of bottlenecks in EV adoption, and R&D is being conducted by
automobile manufacturers and research organisations to address them, one major issue that must
be addressed urgently is the integration of appropriate charging infrastructure for EVs, before a
rapid expansion in EV numbers can happen. YES BANK & TERI are of the view that a wide network
of public charging stations must be made available.
5.1 EV Charging Infrastructure: Past Efforts
There have been plans in the past to develop a network of charging stations in various areas of the
country. In 2010, the Delhi Government announced that it would provide a network of charging
stations in the city, but only after several EVs were ready for launch in the country [63]. This
reflects one of the problems with EVs in general: infrastructure developers are reluctant to invest
in this area until there is a sizable population of EVs on the roads, while vehicle manufacturers are
unwilling to launch their models in India due to the lack of charging stations [64]. A catch 22
situations.
Some manufacturers have tried to address this issue by taking up the challenge of developing
charging infrastructure themselves. Electrotherm India Ltd., for instance, stated in 2010 that they
would collaborate with local garage owners within a radius of 3 kilometres of major cities like
Delhi, Mumbai, Chennai, Bangalore and Ahmedabad for installing charging stations [65]. A similar
plan was also articulated by Hero Electric, with the aim of setting up 10,000 charging stations by
the end of 2009-10 [66]. However, involvement of the Government appears to be necessary, at
least in the early stages, given the investment of approximately INR 2 lack (USD 3700) required
for setting up a single charging station [67]. A welcome initiative in this regard is the plan of New
Delhi Municipal Corporation (NDMC) to set up 100 charging stations in Delhi in the near future
[68].
Total installed capacity
Energy deficit
Peak deficit
2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
50
100
150
200
250
6
8
10
12
14
16
18
Year
Insta
lle
d c
ap
acit
y (
GM
)
5.2 Comparison with Compressed Natural Gas (CNG) Infrastructure
5.3 India's Power Sector
The experience of CNG distribution in India may be a pointer to the future of EV infrastructure. In
1998, the Indian Supreme Court directed that the Gas Authority of India Limited (GAIL) should
expand their CNG distribution network in Delhi from 9 to 80 outlets by 2000, so that a re-fuelling
infrastructure for autos, taxis and public buses becomes available [69]. Despite initial teething
problems, today this infrastructure is fairly well developed in Delhi. However, expansion to other
cities is still an expensive affair. GAIL has estimated that expanding the network to 298 cities by
2014 will require an investment of INR 37,170 cr. (USD 6.8bn) [69]. This compares with an
estimate of INR 8000-9000 cr. (USD 1.48bn – USD 1.67bn) being required to be spent on R&D
and country-wide infrastructure for EVs [70]. The essence here is that given the large initial
investment that is required for setting up any infrastructure, be it for CNG vehicles or EVs,
Government support becomes essential.
Any discussion on the establishment of an EV charging infrastructure in India is incomplete
without a discussion about India's power sector. In recent years, this sector has assumed
increased importance owing to India's rapid economic growth, which has led to an increase in
electricity demand both from domestic consumers enjoying a higher standard of living and from
the industrial sector whose growth in output is heavily linked to electricity consumption. This
sector, therefore, has seen massive investments over the past decade, which has been reflected
in a steady increase in the installed electricity capacity. India's installed power generation capacity
reached 209.3 GW as of October 2012. The increase in the installed electricity capacity over the
past seven years is shown in Exhibit 19.
Electric Vehicles in India: Challenges and Opportunities 39
Exhibit 19: Trend of India's installed electricity capacity and percentage deficit in
energy and peak electricity consumption
Source: Mahindra - Reva
Electric Vehicles in India: Challenges and Opportunities40
Despite this remarkable increase in the installed capacity, the power sector continues to exhibit a
deficit of supply from demand, both in terms of the total energy and peak demand. This deficit has
remained largely constant over the years, as can be seen in Exhibit 19. This can be attributed to
the fact that the increase in installed capacity, despite being sizable, has still been inadequate to
meet the increase in demand. The result is frequent power cuts in most areas of the country, and
power grid failures are also not uncommon.
This leads to one of the principal concerns regarding widespread deployment of EVs, India
struggles to meet its existing electricity demands, and therefore, it would be unwise to impose an
additional burden on the power sector. It has been estimated that India's annual power
consumption in 2020 is expected to be double the 2009 value of 600 TWh [71], and supplies are
expected to struggle to keep up with this surge in demand. It is clear that the gap between
electricity supply and demand is unlikely to be bridged in the near future, with problems with coal
supply threatening the capacity addition targets [72].
The reliance on coal is another aspect of India's power sector that is unfavourable for widespread
EV adoption. A principal advantage of EVs over conventional vehicles is the lack of tail pipe
emissions. However, if the electricity is generated by coal or other fossil fuels, this advantage is
reduced drastically. As seen in Exhibit 20, in India, presently 57 % of India's electricity generation
capacity is based on coal, with nearly 10 % coming from other fossil fuels. This reliance on coal is
unlikely to reduce in the near future, since of the capacity addition of 76,000 MW being planned in ththe 12 Five Year Plan period (2012-17), as much as 63,000 MW is based on coal power plants
[73]. Projections suggest that even in 2031, between 67 and 78% of the total electricity generated
would be fossil fuel based [74].
Source: Power Sector Planning in India (Kanitkar T. and Banerjee R.,)
Exhibit 20: Break-up of India's power generation capacity in November 2012 [75]
Nuclear2.3%
Hydro18.6%
Non-hydro renewable
12.3%
Coal57.3%
Gas9.0%
Diesel0.6%
Thermal66%
Electric Vehicles in India: Challenges and Opportunities 41
5.4 Smart Grids
The scenario outlined above highlights that EVs may not necessarily be less polluting than
conventional vehicles, especially given the high Transmission and Distribution (T&D) losses of the
electricity sector in India, although the centralised nature of the emissions may ease the
application of pollution control measures. For EVs to be truly environment friendly, the use of
renewable energy becomes a necessity, but as stated above, the penetration of renewables in
India's power sector is likely to remain small in the short and medium terms.
For EVs to not threaten India's power situation, it is imperative that any charging infrastructure is
not overly dependent on grid supply. Decentralised electricity generation at the charging outlets is
therefore the need of the hour. Using diesel electricity generation for this purpose, however, will
again negate the point of using EVs. Any decentralised generation will, therefore, have to be
based on renewable energy. Renewable energy sources, of course, have their own set of
problems. Primary among these is the intermittent and unreliable nature of the generation. To
ensure that a steady supply of electricity is available, a storage system will be necessary, perhaps
along with a diversification in the sources, with more than one renewable energy source being
utilised. Synchronisation of all the different sources with each other, and also with the varying load
imposed by the charging outlets, in real time, is a challenge that requires the use of smart grids.
A smart grid is generally defined as an intelligent electricity distribution network that is supplied
by a diverse range of energy resources. A smart grid may either be connected to a conventional
grid or be isolated and supply to a localised load only. A smart grid is an application of digital
information and communication technology (ICT) and uses advanced sensing, communication and
control technologies to optimise electrical power generation and delivery within the domain of the
grid. A smart grid allows dynamic communication and balancing of the electrical network, thus
minimising losses and increasing the stability of the grid. Unlike conventional power grids, which
handle only a one-way flow of electricity from the generator to the outlet, smart grids require a
two-way flow of information, and as will be explained later, may even handle a two-way flow of
electricity.
An example of a smart grid is the system set up by TERI in Gual Pahari, Haryana, India. This smart
mini grid is driven by state-of-art power electronics devices and controlled through ultra-fast digital
technology based on National Instruments CompactRIO and LabVIEW which offers a higher
degree of flexibility, reliability, efficiency and safety of complete power system. This smart mini
grid system involves the integration of the following distributed energy resources:
• A 10.5kWP Solar Photovoltaic (Crystalline silicon based solar module) system
• A 2kWP Solar Photovoltaic (Crystalline silicon based solar module) system
• A 1kWP Thin-film based Solar Photovoltaic system
• A 3.3kW Wind Turbine Generator (WTG)
• A 100kW Biomass Gasifier (woody) system
Electric Vehicles in India: Challenges and Opportunities42
• A Battery Bank of 48V, 600Ah for energy storage
• Diesel Generator sets/Utility Grid.
The load of the TERI Retreat complex, which varies quite widely depending upon the season,
occupancy level of the residential premises, the number of conferences being held and several
other factors, is managed by this smart mini grid.
Smart-grid technology can enable the EV-charging load to be shifted to off-peak periods, thereby
flattening the daily load curve and significantly reducing both generation and network investment
needs [75]. However, the complexity of the grid operation means that the development of
standards that ensure interoperability of the diverse components both on the supply and demand
sides becomes essential [76]. This is more so because EVs can represent not just a load for smart
grids, but also a source. In the long run, it has been postulated that EVs can function as
distributed energy storage devices, feeding back electricity stored in their batteries to the grid.
This mode of operation, known as vehicle-to-grid (V2G) supply, will see EVs absorb extra energy
when power demand is low, and release it back to the grid when the demand is high.
Source: TERI (The Energy and Resources Institute)
Exhibit 21: Complete Single Line Diagram (SLD) of Smart Mini Grid System
developed by TERI
Electric Vehicles in India: Challenges and Opportunities 43
V2G operation is not yet commonplace, but its groundwork has already been laid. In 2009, the US
state of Delaware passed a bill, which would compensate owners of EVs for electricity sent back
to the grid at the same rate at which they were charged for drawing power. Consumers will be
'net metered', meaning that they will only be charged for the net amount of electricity that they
draw from the grid [77].
The above points should make it clear that a smart grid dedicated to EV charging, and one that
relies primarily on renewable energy for supply, and is capable of absorbing electricity back from
the vehicles, is the way forward. The development and large scale implementation of such smart
grids requires extensive planning, and resources beyond what a single private player may be able
to provide. This is because in addition to the charging outlets, arrangements have to be made for
installation of the electricity generating equipment based on different resources, such as solar,
wind and biomass energy. Automation of the system is also a specialised task that will depend on
one hand, the energy resources available and their characteristics, and on the other, the charging
load profile. Land requirement for installation of these grids is also likely to be more extensive
than for simple charging outlets, with the charging stations possibly being placed at locations far
away from the points of generation. The desirability of off peak EV charging, coupled with the
relatively long charging times, means that it will be most convenient for consumers to charge their
vehicles at home, therefore, the smart grids must be integrated into residential areas, which
means that property developers are stakeholders for smart grid deployment. However, the
problem of 'range anxiety' among EV owners means that an extensive network of charging
outlets near highways is also necessary, bringing highway development authorities into the
picture. Connectivity to the main grid, and metering, especially for V2G, requires careful planning
on the part of the national electricity authorities, with test projects perhaps being required before
wider implementation. In any case, development of common standards for the charging
infrastructure will mean Government intervention, in the way that the National Institute of
Standards and Technology (NIST) is working on developing common standards in the USA [76].
It is clear therefore, that a large-scale effort is necessary for solving the principal barrier that
remains for EV deployment, viz., implementation of an independent, renewable energy- supplied,
smart grid-based charging infrastructure. The need of the hour is for Government initiative in this
regard, so as to mobilise, the diverse set of stakeholders ranging from research institutions,
renewable energy suppliers, financial institutions, EV manufacturers, power companies, policy
makers and consumers. Only after all these parties are on board can EVs hope to move beyond a
niche technology. Here, the Government may explore several partnership structures with the
private sector, and public sector companies for that matter, which have the technical and business
expertise to develop and maintain urban smart grid projects through Build Operate Own (BOO)
and Build Operate Transfer (BOT) mechanisms. However, it is imperative that traditional OEMs
work towards developing EV variants, ranging from hybrids to full electric variants.
5.5 Requirements for Smart Grid Deployment
Emerging Business Models
Electric Vehicles in India: Challenges and Opportunities46
There are a range of different business models and financing structures that
have emerged globally around the intersection of three critical segments of the
EV value chain – automotive, battery and charging infrastructure – that are
resulting in innovative strategic partnerships that aim to spread risk and make
EVs an economical offering for the end consumer [78]. Some of the prime
emerging business models include:
6.1 Direct Vehicle Sales
Akin to the sale of conventional vehicles, the relationship between consumer
and automotive manufacturer remains relatively unchanged, where the EV
manufacturer relies on retail outlets to sell their vehicles to the consumer. The
upfront cost of an EV in such an arrangement is likely to be high and therefore
it would only appeal to a niche group of committed green consumers who are
able to afford it. The price of the EV includes the battery, which makes up a
significant proportion of the total cost structure. EV manufacturers in
partnership with battery suppliers would have to provide a warranty on the
battery since the expected lifetime of the battery is about six to eight years,
much less than a conventional ICE [78].
Given the short life span and high cost of the battery, the second hand value
on an EV would be below par. However this concern can be addressed by
OEMs or battery suppliers by creating buy-back mechanisms that guarantee an
acceptable price for used/depleated batteries or through battery swap
schemes that offer customers a discounted price for a new battery. This would
help improve the overall value proposition of an EV. This model requires a high
level of consumer education and awareness to effectively communicate the
low operating cost of an EV when compared to conventional vehicles. Given a
fair level of awareness coupled with the rising cost of fossil fuels, consumers, would potentially
find appeal in the significant cost savings accrued from using electricity, as it would partially pay
for the higher upfront price of the EV. Direct vehicle purchases give consumers the autonomy and
flexibility to sell or trade the car whenever they desire.
This model proposes a significant change in the way a consumer purchases a vehicle, as the
ownership of the vehicle primarily remains with OEM or authorized service providers that lease
out the vehicle for a predetermined period of time. The key advantage of this model is that it
reduces the upfront purchase price (which is prohibitive for a large proportion of consumers in
India) by spreading it over the lease period.
Manufacturers could also offer consumers an option to transfer ownership of the vehicle at the
end of the lease period at a discounted price, along with an extended warranty/insurance scheme
on the battery pack, which would help improve the residual value of the EV. This model is feasible
for consumers that may not have a permanent residence or do not have access to a dedicated
charging point. Most new residential constructions in urban India have dedicated parking, either in
the form of multi-level or underground parking, that could potentially accommodate installation of
charging for points for EVs. EV leasing might also be a favourable option for those early adopters
or techno-conscious consumers that would prefer to upgrade their vehicle every few years as
battery technology and other vehicle innovations are gradually developed and introduced in new
EV models.
To reduce the initial upfront purchase price of an EV, the cost of the battery is dissaggregated
from the selling price thus rendering the vehicle affordable to a wider segment of consumers.
Consumer does not purchase the battery along with the vehicle eliminating battery risks and
rendering issue of warranty a negligible concern.
For most consumers, it would take several years to realize fuel savings that are able to offset the
high upfornt cost. Battery leasing/swap schemes would help negate consumer concerns about
battery durability and performance, while simultaneously reducing the initial/upfront EV purchase
price. Service providers (battery leasing agents/ franchised dealers) retain the ownership of
batteries. This model puts the operational costs of an EV on par with conventional ICEs, where
the cost of 'fuel' (i.e. subscription fee for battery leasing), includes the combined cost of
electricity and the amortized cost of the battery pack. An advantage of this model is that it allows
manufacturers to retain ownership of the battery for various 'second-life' applications (potentially
in renewable energy storage and power grid management), that would provide additional value
[79].
6.2 EV Leasing
6.3 Battery Leasing and Swap Schemes
Electric Vehicles in India: Challenges and Opportunities 47
Electric Vehicles in India: Challenges and Opportunities48
As an added measure to encourage early adopters, manufacturers could also consider leasing the
vehicle and the battery together as this would help further spread the entire price over the leasing
period, similar to a subscription/car rental service. At the end of the contracted subscription/rental
period, the EVs would then return back to the franchised dealer network, giving them greater
control over its assets. Manufacturers, battery suppliers and service operators can partner to
collectively develop 'battery swap/switiching stations', similar to existing petrol/diesel stations,
around a subscription service model, where EV owners can drive in and swap depleted batteries
for fully charged ones.
Charging infrastructure is one of the key components of developing an effective EV ecosystem, as
potential consumers face 'range anxiety' and are concerned about where they might charge their
EVs. However, initial studies conducted by Mahindra-Reva in urban areas indicate that individuals
travel less than 80 kms in a day [43], while most available EVs have a range of over 80 kms on a
single charge, and are not likely to require wide spread public charging points. If consumers have
access to a fixed charging point at their residence, they would be able to meet their daily charging
needs by connecting to their own dedicated charging point in the night, when the car is idle and
remains unused. Yet, in many rented properties and apartment blocks in urban India, installing
charging sockets could be complicated due to the lack of dedicated parking spots. The availability
of public charging is largely a perception problem, as the existance of public charging points, are
likely to make potential consumers feel comfortable driving EVs, as they are psychologically
assured that they would have access to charging facilities in the event that their battery gets
depleted en-route to their destination. Nonetheless, establishing a visible EV charging
infrastructure is likely to help overcome 'range anxiety' among consumers, as it is one of the key
drivers of EV adoption [43].
In order to develop a commercial public charging infrastructure, cost and scale are two critical
factors, as setting up charging infrastructure is expensive and consumer demand is unknown [78].
In the initial stages it would be important to identify the right zones to set up charging points and
also the relative proximity of charging points. It is therefore important to conduct feasibility studies
to identify how, when and where consumers are likely to charge their vehicles. This is a 'chicken
and egg' situation as there is no financial imperative to install charging points until there is a large
enough fleet of EVs on the road and consumers will not buy EVs until there are adequately
available charging points.
Three prevalent business models that have emerged around managing charging infrastructure
include –
a. Public Infrastructure Model – providing charging points in public parking spaces. This
involves reserving spots at which a charging point is provided for electric vehicles at public
parking spaces. Since only EVs are allowed to park at these spots, they are likely to act as an
incentive to consumers in urban cities where public parking is scarce, only if adequate
6.4 Infrastructure Service Models
Electric Vehicles in India: Challenges and Opportunities 49
spaces are reserved for EVs. This model would have to be supported by local municipalities
in partnership with infrastructure providers. It seeks to provide access to charging for those
consumers that lack home charging.
b. Private Infrastructure Model – This is a preferable model in the early stages of EV adoption
as it responds to direct consumer demand. It involves installing charging points for EV
adopters at their residence or at private sites such as malls, office parking lots, privately
managed parking lots, petrol pumps etc. This ensures higher usage of charging points based
on actual demand, as reflected by EV purchases, thus providing a greater return on
investment [78]. Government mandated building codes can also recommend installing a
minimum of two to three electric vehicle charging points at parking lots in new buildings.
c. End-to-End Solution – This model involves close partnerships between OEMs,
infrastructure facility providers, maintenance services providers and local Governments – to
provide consumers with an integrated package of end-to-end value added services, thereby
minimizing the number of interfaces that the consumer has to manage [78]. This could evolve
as a subscription service where EV adopters pay a monthly/annual fee for an integrated
services package that involves access to charging facilities, vehicle maintenance services and
free parking at public pay-and-park lots, that are managed by local municipalities.
Apart from mere technical aspects around the blueprint of EVs, players in the EV space should
shift towards developing comprehensive models that integrate vehicles, infrastructure and allied
services. The most significant step towards reducing the barriers to EV adoption revolves around
coming up with an integrated effective business model, one that links together the interests of
carmakers, owners, infrastructure developers and policy makers [80].
Final Chapter: Analysis and Thought
Electric Vehicles in India: Challenges and Opportunities52
7.1 Short Term Horizons
The 2W ICE market is growing at a phenomenal pace, approximately
14%/annum [81] in terms of volume sales in urban and rural India. We expect
2W ICE sales to continue expanding along the same trajectory on the premise
that as income levels rise and the Bottom of Pyramid (B-o-P) segment
becomes more upwardly mobile, there will be a shift from using bicycles to
2W. This trend, backed by the encouraging growth in the 2W sales in urban
India as compared to EV 4W sales indicates that the uptake of 2W in the
shorter term (5-10 years) will be more robust as compared to the uptake of 4W
. 2W EVs do not require as much electrical input as 4W EVs mainly due to
smaller battery sizes. Considering the sporadic supply of electricity in semi
rural and rural India, 2W may not experience robust sales in these markets.
However, cost conscious urban dwellers may purchase an 2W as a second
vehicle rather than a primary vehicle which can be used by family members to
travel short distances. A low price tag aided by state subsidies makes electric
2W affordable where there are a range of financing options available from
financial institutions. Due to higher sales volumes as compared to 4W ,
insurance companies are able to charge lower premiums. With a favourable
policy/regulation climate and consumer appetite for 2W vehicles backed by
readily available consumer finance and lower risk perceptions to facilitate
corporate finance decision making, the growth story of the 2W EV market in
India is sound.
7.2 Long Term Horizons
EV 4W manufacturers are addressing risk concerns across the value chain with
innovative business models and cautious capacity expansion. Although OEMS
EV
EV
EV
EV
EV
EV
EV
have taken some giant leaps forward in terms of technology, leap frogging the hybrid and
alternative fuelled engines phases and jumping straight to EVs, still faces major infrastructural
hurdles, in India, that impedes the dynamic growth of the 4W EV market.
India suffers from severe energy deficiency, power generation and supply capacity to meet rising
demand to power from industrial and commercial activity as well as homes with a rising number
of electrical appliances. Power outages still occur in major cities like Delhi NCR and Kolkata and
they are an everyday reality in semi urban and rural India where 24 hour power outages are not
uncommon. Furthermore, despite having one of the largest coal reserves in the world, India
imports premium coal for efficient thermal power generation.
With over 59% of grid electricity being powered by coal, major transmission leakages due to
outdated infrastructure, rising demand and insufficient supply, the pollution free, energy efficiency
and energy security perspectives of owning an EV simply do not hold weight in India. Considering
existing ICE technology has successfully reduced toxic fume emissions and improved fuel
consumption, whereas coal combustion for electricity generation continues to be amongst the
most environmentally offensive industrial activities, introducing EVs as a mainstream personal
mobility solution into this ecosystem could have a more detrimental impact on the environment
as compared to existing and future ICE technologies.
Some OEMs have developed innovative solutions to offset the consumption of coal powered grid
electricity by incorporating solar panels into the roof design of EV cars as well as supplementing
electricity feeds into charging ports with renewable energy. However, renewable energy
retrofitting for EV is still a relatively expensive proposition and a technical challenge for
developers, hence we can only expect to see such solutions becoming mainstream in the long
term. RE retrofitting for EVs and EV charging stations have the potential to earn OEMs and
charging service providers CER) under Clean Development
Mechanism ( and Bureau of Energy Efficiency (BEE), Energy Saving Certificates (
under the Perform, Achieve and Trade ( which will facilitate faster RoIs and validate
the claim of EVs being a clean mobility solution.
Considering a lack of 4W EV options and variants in the Indian market and that they are currently
being showcased as alternatives to low range personal urban mobility where customers have
purchased 4W EVs as a secondary and tertiary vehicle, it is not surprising that the Government is
not considering immediate development and deployment of smart grids and public charging
infrastructure. As EV uptake increases, it will become critical for OEMs and/or utility companies to
work with Municipal authorities to install charging points that receive supplementary power from
renewable sources. The public charging points will serve a dual purpose as they will increase the
visibility of EVs to the public thus giving comfort to potential buyers. Studies are currently being
undertaken to understand how highly visible public EV charging facilities shape consumer
perceptions and decision making.
Certified Emission Reduction (
CDM) EsCerts)
PAT) scheme
Electric Vehicles in India: Challenges and Opportunities 53
Electric Vehicles in India: Challenges and Opportunities54
7.3 Concluding Thoughts
2W ICE vehicles will continue to dominate sales in the Indian personal mobility market where
rising petrol prices may steer consumers towards exploring 2W . Since 2W are essentially
used and ideal for short range travel and existing EV battery technology only allows limited range
travel on one charge, the consumer transition from ICE to EV in the 2W segment will be relatively
smooth. In fact many 2W consumers are already migrating to 2W due to the tremendous
long term operating cost savings and attractive chassis design, where the industry enjoyed growth
rates of up to 200% in sales year on year. However, the recent withdrawal of consumer focused
subsidies by MNRE for 2W has significantly dented sales, which have dropped by over 70%
(from 7000 per month to 2000-3000 per month) and leading to the widespread closure of
dealerships [82].
The 4W ICE market is growing at a rate of 5% per annum [81], however this growth has not been
mimicked or enjoyed by the 4W market considering the various challenges highlighted in this
paper. Despite supportive Government subsidies, high petrol & diesel prices and informative
advertising on the economic and environmental virtues of going electric, there has been minimal
impact on sales. Value chain risks for the EV sector resemble that of the regular ICE market, with
the addition of battery manufacturers, adverse consumer perceptions & utilities. Ultimately, the
future efficiency and cost effectiveness of the EV value chain is hugely dependent on product
innovation and growth of EV battery manufacturers' production capacities.
Further, the key roadblock to EV market growth do not seem to be related to the value chain, lack
of charging infrastructure, policy, economics or environment related, but rather Indian consumer
perception. More specifically chassis design, range anxiety, concerns about battery longevity,
cabin capacity and high purchase costs are the key factors considered when a vehicle purchase
decisions are made. Further, it is 'competition' which triggers product innovation and the presents
'choice' to the consumer. In the Indian 4W EV market there is simply no competition. Currently,
Mahindra REVA is the only OEM that is manufacturing and selling 4W at scale in India,
however, their offering cannot be compared by customers to any other 4W ICE vehicle in the
same price range/category. It is therefore unimaginable at this stage, and for the short term, that a
buyer will purchase a 4W EV as a primary mode of mobility, but rather a secondary vehicle for
short range travel, as the current consumer trends suggest.
YES BANK and TERI BCSD believe that a real turning point for 4W sales in India will come
when it is considered as a primary vehicle. Increased OEM competition in this space is critical as
it will lead to further value chain efficiencies and product innovations with particular emphasis on
attractive chassis design, improving battery technology leading to increased range and economies
of scale, ultimately leading to lower purchase prices. These developments will shape consumer
perception of 4W as being a credible primary mode of personal transport where environmental
and operating costs will not be the only factors considered.
EVs EV
EVs
EV
EV
EV
EV
EV
Electric Vehicles in India: Challenges and Opportunities 55
Finally, major multinational OEMs are launching hybrid and hydrogen fuelled vehicles in the
International markets to much fanfare. Oil and Gas majors are advocating bio-diesel and hydrogen
as future fuels as they will be able to leverage their refinery, logistical and refuelling infrastructure,
therefore sustaining their business models. Their influence on ICE design, shaping OEM strategic
directions and Government policies are also well known. With these realities and trends in mind,
OEMs will be wise to develop and implement alternative business models to leverage an existing
ecosystem and be a part of the incremental transition from ICE to EV, rather than going against
the grain and pushing a disruptive technology, in a market, consumer landscape, and
manufacturing ecosystem that is simply not ready for it, yet.
Electric Vehicles in India: Challenges and Opportunities56
Acknowledgement
YES BANK would like to thank Mahindra-Reva for contributing thoughts and research articles
that have enabled YES BANK and TERI BCSD to produce this knowledge paper.
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Electric Vehicles in India: Challenges and Opportunities 61
With a vision to create a synergy for the corporate sector as a whole to move towards
sustainability, TERI-BCSD (Business Council for Sustainable Development) India was set up by
The Energy and Resources Institute (TERI) in 2001. It has now evolved into a strong industry
body, with membership from diverse sectors, including public sector undertakings,
multinationals, and private companies from across India. They work towards evangelizing
business sustainability through industry specific initiatives that provide a platform for
knowledge, learning and encourage sharing of best practices. It is also the Indian partner of the
WBCSD (World Business Council for Sustainable Development), Geneva. TERI-BCSD India
member company representatives identify, conceptualize and implement projects in
partnership with researchers at TERI and the structure of the business council reflects this
partnership. TERI provides research and implementation support to the business council and
acts as the permanent technical resource for various theme specific action oriented projects,
knowledge papers, seminars and capacity building workshops. Membership is by invitation
only. For more information please visit www.teriin.org/bcsd
YES BANK, India's fourth largest private sector Bank, is the outcome of the professional &
entrepreneurial commitment of its Founder, Rana Kapoor and his top management team, to
establish a high quality, customer centric, service driven, private Indian Bank catering to the
Future Businesses of India. YES BANK has adopted international best practices, the highest
standards of service quality and operational excellence, and offers comprehensive banking and
financial solutions to all its valued customers.
YES BANK has a knowledge driven approach to banking, and a superior customer experience
for its retail, corporate and emerging corporate banking clients. YES BANK is steadily evolving
as the Professionals' Bank of India with the vision of building the "Best Quality Bank of the
World in India" by 2015.