India’s EV ambitions run on three wheels

India’s push for electric vehicles (EVs) was renewed when Phase-II of Faster Adoption and Manufacturing of (Hybrid and) Electric (FAME) vehicles in India was approved in 2019, with an outlay of ₹10,000 crore. It was important. Since Phase-I, which was launched in 2015, was approved with an outlay of ₹895 crore. India was doubling down on its EV ambitions, focusing on the EV demand at home while developing its own indigenous EV manufacturing industry that could meet this demand.

Initially conceived for three years, FAME-II got an extension of two years in June 2021 due to several factors including the pandemic. It aims to support 1 million e-two-wheelers, 5 lakh e-three-wheelers, 55,000 e-four-wheeler passenger cars and 7,000 e-buses. Three years into FAME-II, the numbers are far behind the original three-year target. As a part of FAME-II, the government has focused on indigenous manufacturing, answering the calls of several automakers. Older auto makers like Tata Motors, Mahindra & Mahindra, Hero Electric, and TVS unveiled their EV offerings. With Ola and Bounce entering the e-two-wheeler segment, new EV players also emerged. While e-two-wheelers and e-four-wheelers receive significant coverage, a three-wheeled underdog has quietly dominated the Indian EV space.

E-three-wheelers dominate

Three-wheeler EVs like e-autos and e-rickshaws account for about 65% of all EVs registered in India. In contrast, two wheeler EVs come in second place with over 30% registration and passenger four wheeler EVs come in at only 2.5%. Under the targets of FAME-II, from 2019 onwards e-three-wheelers have crossed the target of 5 lakh to over 4 lakh vehicles. Given the prevalence of unregistered vehicles in India, the number is expected to be higher. At the current rate, e-three-wheelers are expected to cross the target of 5 lakh by 2023. Given the success of e-three-wheelers, it is worth taking a closer look at their flagship position, how they got here, and what India’s EV policy can do to sustain their success and expand it to other categories. Is.

EV registration data shows that Assam, Bihar, Delhi, Uttar Pradesh and West Bengal account for about 80% of all e-three-wheeler registrations, with UP accounting for nearly 40% of all registrations. Out of these five states, Assam, Delhi, UP and West Bengal have formalized EV policies, while Bihar has a draft policy with the final one to be introduced later in 2022. Incidentally, these five states are characterized by high population density and scarcity. Affordable public transport. Indigenously designed and manufactured, e-three-wheelers like e-rickshaws have become a common sight in these states. Costing between ₹1 lakh and ₹1.5 lakh, these vehicles are manufactured by local workshops and small enterprises and have dominated the e-three-wheeler market. With financial support from FAME-II, local manufacturers have created a truly Indian electric vehicle with their unique design to meet the needs of Indian commuters. Older automakers with their own e-three-wheeler offerings are struggling to compete with these local producers. EV policies implemented by these states as part of FAME-II have been instrumental in driving this growth.

The EV policies of these five states are focused on accelerating EV adoption among consumers and promoting local manufacturing. All five states offer road tax exemption and registration fee of 100%. Assam, Delhi and West Bengal have linked the incentive to battery size (in kW) with additional benefits on interest rate on loans and scrappage incentives in some cases. UP has taken a different route with its subsidies, offering 100% interest-free loans to state government employees to buy EVs in the state and 30% subsidy on the street price of EVs to single girl child families. To promote the sale of electric vehicles manufactured within the state, UP exempts all such vehicles from SGST. It has outlined incentives to boost EV manufacturing in the state. Bihar’s draft EV policy has also been modeled along the same lines: it focuses on adoption and manufacturing. These states have performed exceptionally well in the FAME-II scheme and are on track to achieve the target of 5 lakh e-three wheelers.

The success that India has achieved in the e-three-wheeler space has come from developments on both the demand and supply side. Subsidies, tax exemptions and interest free loans have successfully fueled the demand for these vehicles. These vehicles provide a cheap means of transportation for millions of people, are easy to maintain, and have relatively low operating costs, making them extremely popular among operators. The indigenous design allows easy local manufacturing in workshops and small enterprises and makes them relatively easy to charge and maintain as compared to their two wheelers and four wheelers. This success in the e-three-wheeler space has been difficult to replicate in the e-two-wheeler and e-four-wheeler space, which have both demand and supply issues. Since two wheelers and four wheelers are essentially associated with personal use, consumers are justifiably apprehensive in adopting such vehicles, which come with a host of issues. The recent incidents of fire in e-scooters have added to the apprehension. It is hard to come by reliable manufacturers with a proven track record in the two-wheeler and four-wheeler EV space in India. This further adds to the supply side constraints and there are very few affordable offerings for the consumer.

issues to be addressed

Existing policies at the state level, which are focused on accelerating EV adoption among consumers, have fueled the e-three-wheeler dominance. However, it has come at some cost. A major one is adequate passenger safety. Hence subsequent EV policies should pay special attention to this issue. Local manufacturing enterprises often lack the necessary resources or the motivation to invest in design development that focuses on safety. Lack of proper monitoring by regulatory bodies on these manufacturers adds to the crisis. Therefore, future policies should incorporate appropriate design and passenger safety standards. While current state-level policies have been instrumental in increasing local e-three-wheeler manufacturing, they have led to an increasingly fragmented manufacturing industry in the early 20th century with non-uniform standards similar to those of the early years of motor vehicles. . This fragmentation has left legacy automakers struggling to compete with a large number of manufacturers in each state. EV policies should address this issue so that older automakers are not discouraged from competing in the e-three-wheeler space. Their resources are essential to the design and manufacture of more advanced and safer e-three-wheelers. Therefore, future EV policies should take into account the existing and emerging stakeholders on the demand and supply sides for effective implementation. With the prevailing trajectory of EVs, India must draw lessons from its e-three-wheeler success story to sustain its EV ambitions.

Soumyadeep Kundu is a doctoral student and Soumya Roy is Associate Professor, Quantitative Methods and Operations Management Area, Indian Institute of Management-Kozhikode.