Economic Undertakings

Government must catalyze electric mobility

Henry Ford’s Model T introduced a new dynamic to human mobility. Equally important is Tesla’s Model S. The two will remain in the pages of automotive history, albeit for different reasons. The first ushered in mass automobile production; the latter embodies sustainability.

Climate change and soaring fuel prices have recently pushed the boundaries of innovation. Vehicles must not only run faster, but also be less polluting. Gas guzzlers must make way for smoke-free and noise-free machines. Indian companies have read the tea leaves. The future is electric. Every two weeks, the newspapers announce the rise of a new electric vehicle start-up. From two-wheelers to buses, everything runs on batteries.

The electric vehicle revolution is as big a disruption as that seen by the electronics industry in the last century. Moore’s Law saw the exponential increase in the computing power of electronic chips. Battery technology is now the holy grail. The inevitability of the transition to electric mobility has a convincing economic rationale. Its acceleration, however, requires active support from the government.

Conventionally fueled vehicles have acquired a level of maturity over the past hundred years. A range of options are available for a demanding customer. This is not the case for electric vehicles. Battery technologies are still evolving. It adds uncertainty and risk. A purchase today could become obsolete in a few months. Public charging infrastructure is inadequate, adding to an inherent “autonomy anxiety”. Electric vehicle prices continue to be higher than comparable fossil fuel vehicles, even though operating costs are much lower.

Support needed

This is where the government’s catalytic role is crucial. The manufacture and purchase of electric vehicles will need a sustained subsidy for some time. Public charging infrastructure also requires government funding, before the private sector steps in. A state-funded branding strategy would encourage fencing users to switch to electricity.

The FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) program has given OEMs a boost. State governments, such as Delhi, have supplemented it with additional purchase subsidies, reduced compliance requirements, and tax exemptions. An ambitious ‘Switch Delhi’ brand campaign was launched earlier this year to build awareness.

The results are most visible in the two-wheeler segment. Sales across the country have increased sevenfold over the past five years. In Delhi, growth has been exponential: from just 18 two-wheelers sold in 2016 to over 1,100 last year. The numbers have already crossed 2,500 in 2021, five months from the end. Even so, it barely affects one percent of total two-wheeler sales.

The electrification of the bus fleet is a more difficult proposition. The distance a bus can travel on a single charge varies greatly from manufacturer to manufacturer. This makes procurement difficult. Upgrading the infrastructure at bus depots to allow overnight charging takes time and depends on the local electricity grid. Perhaps the hybrid depots, which house both CNG buses and electric buses, could offer a solution for efficient use of space.

The good news is that manufacturers are investing in upgrade technologies, which so far are mostly imported. Cities like Pune, Ahmedabad, Hyderabad and Navi Mumbai have taken the lead in the electrification of buses. Delhi has also pledged to make at least half of its bus fleet electric over the next three years.

Delhi municipal bodies have partnered with public sector companies to create charging infrastructure in busier locations. The Delhi government is also setting up charging infrastructure at 100 locations across the city. The geographical coordinates of all the charging infrastructures have been mapped on a common mobility application – ONE Delhi. In the long term, like the mobile towers, the infrastructure for recharging and exchanging batteries will come from private investments. The problem is reaching critical mass.

Fleet aggregators and last mile delivery companies can spearhead the electric mobility revolution. They also stand to gain the most in terms of reducing operating costs. However, most of the vehicle owners on the aggregation platform represent the odd job economy. They tend to change jobs easily and generally own cheaper and more polluting vehicles. A surge in demand by large aggregators and fleet owners, supported by a regulatory boost, could help accelerate the transition. The purchasing incentives offered by these companies, in addition to government subsidies, would contribute to rapid electrification of the fleet. The Delhi government has demanded that the new vehicle fleet acquisition, whether by replacement or addition, will be purely electric.

The initial push for electrification will come from cities. Neighborhood transport needs are easily manageable in this mode. Last mile connectivity options, including electric three-wheelers and electric rickshaws, offer viable solutions. Micro-mobility vehicles like YULU are gaining ground among young people. Delhi Metro has installed 25 driverless power buses at its stations.

Sustainable funding is needed to strengthen the subsidy framework and charging infrastructure. The financing of EV infrastructure by companies should be considered an eligible activity under corporate social responsibility.

The next two years are crucial. Incentives on the supply side need to be backed by regulatory pressure on the demand side to keep the electric vehicle movement going. The increased volumes will stimulate private investment in technological innovation and manufacturing.

The author is the Principal Secretary of Transport, GNCT Delhi. Views are personal

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