India’s electric vehicle transition
Along the avenues for economic recovery and sustained growth after the COVID-19 pandemic dies down, paving the path with a transition to electric vehicles (EV) has immense potential for investment and rapid market growth. The 30 per cent EV transition in 2030 is likely to have a wide-ranging impact on the economy and we focus specifically on changes in oil import, value-addition, employment, impact on public finances, market size for EV components, and environmental gains from reduced local air pollutants and greenhouse gas (GHG) emissions.
We attempt at unpacking these issues by projecting the vehicle stock in 2030 in business-as- usual (BAU) and a scenario with 30 per cent EV penetration. In addition, we explore three different mobility paradigms – (i) high public transport, (ii) high private vehicle and (iii) high shared mobility to gauge the range of impact of mode-share coupled with 30 per cent EV sales in 2030 on the industry, economy and environment. Our key findings and recommendations are summarised as follows.
Electric mobility would support economic recovery
By our estimates, we project the vehicle stock (passenger + freight) to increase by nearly 2.7 times between the base year 2016 and the projected year 2030. We explored the consequences of 30 per cent EV sales (35 per cent in e-two-wheelers [e-2Ws] and e-three-wheelers [e-3Ws]; 30 per cent in electric buses [e-buses]; 25 per cent in electric taxis [e-taxis]; and 13 per cent in electric cars [e-cars]) in in contrast to a business-as-usual (BAU) scenario.
In contrast to a BAU, the gains from 30 per cent electric vehicle (EV) sales in 2030 are hard to miss. With the reduction in oil demand from the passenger road transport sector, India will save on crude oil imports worth INR 1,07,566 crore (USD 14.1 billion). Further, a 17 per cent decrease in particulate matter and NOx emissions, 18 per cent reduction in CO emissions, and 4 per cent reduction in GHG emissions relative to BAU can be expected. In addition to aligning with India’s goals to reduce its oil imports and strengthening its forex reserves, the EV ecosystem presents a market size of INR 2,12,456 crore (USD 27.8 billion) for batteries, powertrains, and charging infrastructure in 2030. Under the right policy environment, supply-chain for EV manufacturing presents an attractive opportunity for future investments providing a much-needed stimulus to the economy. However, any major technological transition is fraught with losses and trade-offs.
When comparing direct jobs created in manufacturing and energy production activities in the EV sector, we find there are fewer jobs in a scenario with EVs – a reduction of 19 per cent jobs in the oil sector and ICE vehicle manufacturing combined. An EV transition plan must lay equal emphasis on new economic activities such as battery recycling (urban mining) and other services associated with electric mobility, for job creation. The central and state governments must wean away from their dependence on revenues linked to petroleum consumption, in order to limit perverse incentives that sustain policy support for ICE vehicles, and help accelerating EV adoption in India. As is evident form Figure ES1 and ES2, the gains from the transition to electric mobility overshadow potential losses.
Promoting public transport is essential while promoting electric mobility
Policy interventions and behavioural changes can drive changes in passenger transport mode-share and this in turn can impact energy consumption, air quality, congestion, and road safety. Therefore, we further explored EV penetration under various mobility paradigms. Our projections show that a 30 per cent EV sales in future combined with a higher share of public transport would lead to a 31 per cent reduction in oil imports (worth INR 2,16,043 crore (USD 28.3 billion) relative to a BAU scenario. This would result in a concomitant reduction of 36 per cent in carbon monoxide (CO) emissions, 28 per cent in nitrogen oxide (NOx) emissions, 29 per cent in particulate matter (PM) emissions, and 20 per cent in GHG emissions, in the same scenario. On the flip side, the purported benefits of electrifying passenger transport are overturned in case of high private vehicle ownership, which would lead to an overall increase of 5 per cent in energy consumption compared to the BAU scenario. Therefore, to realise the benefits of an EV transition, policymakers must focus on shaping the evolution of passenger transport mode-share. A majority of trips and passenger travel demand must be met by public transport and non-motorised transport options such as walking and cycling.
(The article has been authored by Abhinav Soman, Harsimran Kaur, Himani Jain, Karthik Ganesan)