Potential for sustainable mobility in India is immense
India’s unique strengths in the EV sector, such as a vast market, government commitment, and dominance in two-wheelers will help India on its journey to becoming the EV hub. Few challenges in charging infrastructure, upfront costs, reliance on imports, and range anxiety, no doubt have been the deterrents to this growth but India’s EV adoption has been promising.
To address import dependency, Randheer Singh, Co-founder & CEO, Fore See Advisors focuses on domestic battery manufacturing, supply chain localization, and skill development. Looking ahead, Singh emphasized the need to diversify EV incentives beyond the current focus and prioritize areas like electric bicycles, commercial vehicles, critical minerals processing, and recycling and refurbishing for a comprehensive and sustainable EV ecosystem.
IBT: How was your journey towards e-mobility, your experiences and what has been your journey like as Founder- CEO of Fore See?
Randheer Singh: In terms of my personal journey and the electric vehicle (EV) journey in India, they have run in parallel. I joined NITI Aayog in 2020, coinciding with India’s burgeoning interest in EVs. However, it was also a time when the COVID-19 pandemic was sweeping the nation. Nevertheless, as a country, it presented a remarkable opportunity for us to leapfrog into the burgeoning EV sector, which is why I transitioned from my previous role as a CFO in the corporate sector to join NITI Aayog.
During my tenure at NITI Aayog, I was involved in various significant initiatives. Initially, I played a pivotal role in revising FAME II, which we released in June 2021, just one year after I joined. Subsequently, I contributed to the Advanced Chemistry Cell program, the Automotive Production Linked Incentive (PLI) scheme, and various other projects. When I started in 2020, the monthly sales of EVs were in the range of 2000 to 4000 vehicles. Currently, they stand at almost 100,000 vehicles per month, with a recent decrease in the last few months due to the tapering down of FAME II incentives, but still within the range of 50,000 to 80,000 vehicles per month. Achieving a million vehicle sales last year was a significant milestone, especially considering that for four-wheelers, we have already surpassed countries like the Netherlands, where EV penetration is at 80%.
I must emphasize that my entry into the government was at the director level in NITI Aayog, and these positions were part of the Prime Minister’s vision. The journey so far has been immensely fulfilling, and my passion for this sector led me to establish my consulting firm, ForeSee Advisors. It’s a private limited firm with teams in Delhi, Mumbai, and Bangalore, all dedicated to addressing challenges within the entire EV value chain. Our focus areas encompass critical minerals, localization, cell manufacturing, battery production, and commercial vehicles. However, our primary emphasis is on three key areas: charging infrastructure, reuse and recycling, and cell manufacturing. These are the core aspects on which we concentrate our efforts.
IBT: How do you see India’s EV growth graph in comparison with other leading makers? What strengths and challenges are particularly unique to India?
Randheer Singh: India’s growth in the electric vehicle (EV) sector is undeniably promising, but it’s important to put it into context when compared to other leading nations. When we look at countries like China, the United States, and certain European nations, India’s EV growth may appear slower. This is primarily because these countries have a higher dominance of four-wheelers in their vehicle market, whereas India is predominantly a two-wheeler market, accounting for 76% to 80% of total vehicles.
However, India possesses several unique strengths that contribute to its potential in the EV sector. Firstly, India’s enormous size and population represent a massive market for EVs, particularly in densely populated urban areas grappling with pollution and congestion. In fact, 14 of the 20 most polluted cities in the world are located in India, highlighting the urgent need for cleaner transportation solutions.
Secondly, the Indian government has demonstrated a strong commitment to promoting EVs through various incentives, subsidies, and policy support, including initiatives like FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles). Importantly, these efforts extend not only at the federal level but also at the state level, with more than 26 states and Union Territories introducing their own EV-specific policies, ensuring policy clarity and consistency.
Thirdly, India’s dominance in two-wheelers aligns with the transportation needs of its vast population, especially in urban areas. Two-wheelers are well-suited for navigating congested city streets.
Despite these strengths, India faces specific challenges in its EV journey. Firstly, the development of a robust charging and battery-swapping infrastructure remains a significant hurdle, particularly in rural and remote areas. Adoption of EVs and the associated infrastructure, such as Battery as a Service (BaaS) models, is currently concentrated in a few clusters across the country and needs to expand rapidly.
Secondly, the upfront cost of EVs tends to be higher than their internal combustion engine counterparts, making them less affordable for many consumers. However, when considering the total cost of ownership, which non-commercial users often overlook, EVs can be on par or even more cost-effective than traditional vehicles.
Thirdly, the country’s reliance on imported battery technology and components is a notable challenge that requires substantial improvement. Recent issues, such as import-related complications during FAME II implementation, underscore this dependency.
Lastly, the issue of range anxiety, stemming from limited range and concerns about charging availability and time, remains a significant challenge for potential EV buyers.
In conclusion, India’s trajectory in the EV sector is marked by unique strengths and challenges that set it apart from other leading nations. While there is room for improvement, the country has made significant strides. The potential for sustainable mobility in India is immense, and addressing these challenges will be crucial to realizing that potential.
IBT: Considering other producers like China which registers 60% of electric car sales, India on the other hand witnessed slower penetration of electric cars. What have been the reasons for such a marked difference in the adoption rates?
Randheer Singh: China embarked on its journey in the electric vehicle (EV) sector over a decade ago, and its dominance is evident across the entire EV value chain. They control approximately 60% to 65% of lithium mines globally, which is the initial step in the chain. Around 65% of mineral refining, a crucial process for cell production, takes place in China. Moreover, China leads in anode and cathode active material production, with 90% and 67% to 70%, respectively, occurring within the country. China is also responsible for over 60% of cell manufacturing, further solidifying its position in the EV market. When it comes to battery manufacturing, the availability of EV models, range, and service quality, China surpasses not only India but the entire world. Remarkably, China accounted for 54% of global EV sales last year, underscoring its dominant position in the market.
In contrast, India may have entered the EV arena later, but its pace of adoption is remarkable, following a pattern seen in the telecommunications and solar industries. In the past two years, India has seen a rapid increase in EV adoption, with over 1 million vehicles now on the road. This demonstrates that while India might have joined the EV movement later, it is not too late to make substantial progress and excel in this field.
One significant achievement in India’s EV journey is the successful launch of the Advanced Chemistry Cell program, a technically demanding initiative in lithium-ion cell manufacturing. Prior to this program, there were no domestic cell manufacturers. The program attracted 16 companies, with 10 participating in the actual bidding process. Out of these, 9 were successful, indicating a strong commitment to localization and “Make in India.” This underscores the determination of both the government and companies to establish a thriving EV market in the country.
When considering four-wheelers specifically, affordability and risk-aversion among traditional manufacturers have been challenges. Tata Motors took the lead by launching the Nexon and Tigor electric vehicles, a move that paid off well. However, there is currently a lack of affordable four-wheeler models in the market. Few options exist below 5 lakhs, and only two to three models are available for less than 10 lakhs. Less than 20 lakhs, the selection expands to only four to five models, limiting consumer choices.
Conversely, the two-wheeler market is witnessing significant adoption, with penetration already exceeding 10%. In the three-wheeler segment, where adoption rates are exceptionally high, penetration exceeds 50%. Even within the L5 segment (another EV category), penetration surpasses 15%. Overall, the rate of adoption in India’s larger vehicle segments is quite promising.
IBT: The sector is highly dependent on imports of Li-ion batteries. Moreover, non-adherence to localization norms has been red-flagged by the government recently for EV players. Which are the critical parts in the EV value chain for which we are highly import dependent and what steps can be taken to address this?
Randheer Singh: So, in terms of India’s heavy dependence on lithium-ion battery imports, it’s a critical concern for the sustainability of our EV industry. To address this issue, we must first identify the critical parts in the EV value chain contributing to this import dependency. One is of course the lithium ion batteries. This is the core and this constitutes a significant portion of the imports. The second is the battery cell. Even if the assembly manufacturing of battery packs happens in India, we don’t actually import the battery packs. The assembly happens in India, but the cells are fully imported. We can actually very well say almost 98% to 99% of the lithium-ion cells which are being used in vehicles, no matter which segment, it is not being imported. The third part is the electronic components. High-tech electronic components like motor controllers and power electronics, are also often imported. To reduce this import dependency, the federal level as well as the state level, are encouraging investments in domestic battery manufacturing facilities to produce cells and packs.
At the central level, the Advanced Chemistry Cell program with 2.4 billion US dollars is one example. In fact, it is the biggest example of a 50 gigawatt-hour of capacity setup. Out of 50, 30 have already been allocated. And for the 20 there is another bid which is happening. And after that, there is another program, i.e. Advanced Chemistry Cell which will come. In addition to this, manufacturing facilities, even in the states, are also revising their EV policies again and giving a lot of incentives for setting up these manufacturing facilities. So that is on top of the federal government’s incentives. Then the R&D investment Department of Science and Technology is giving a lot of incentives. The industry itself is also working a lot. They are now collaborating with different manufacturers, and different research institutes in India, and outside India to set up the R&D labs here. The third part is the supply chain localization. Whatever the government is doing is fine. But in addition to this, the industry has also seen a lot of potential.
So if you see the type of investment which has come up for the localization of different parts in India in the last six to seven months, it’s humongous. In the full value chain, everybody is getting a lot of investment. This is not only because of the potential but also because people see that we have the capability to develop. For example, two months back, the cathode active material manufacturing along with the ARCI, a company named Altmin actually launched its cathode active material. It’s a very very big step. Then the Amara Raja Batteries launched a common facility center. Excide has launched its own battery cell manufacturing facility along with Amara Raja batteries. The Log Nine has launched its cell manufacturing facility with around two gigawatt hours capacity. Reliance has acquired three different companies for cell manufacturing. So lot of action is happening from the supply chain localization from the battery manufacturing perspective. Incentives for local sourcing are also there. The higher the localization they propose, the better ranking they get. Because most of the tenders are happening through the QCBS mechanism (Quality cum Cost Based Mechanism). So more sourcing you will do, the more points you get and you have the better chances of winning up the bids.
One area which in fact is considered to be the most crucial around the world is the skill. So around two years back, Volkswagen has come out and they said the biggest challenge for them to move into the EVs is not about the cell, not the batteries, not the vehicles or the platform. It’s finding the right talent. This is what they are finding difficult. So even in the skill development part lot of action has happened. In fact six to seven IITs have started EV specific courses. It’s a big step. So it’s not only, why I’m talking about the IITs is from the top down approach. They have started EV specific courses because they also see the potential, their students also see the potential. And many of the polytechnic colleges have also started specific courses. You will see at least one advertisement in the newspaper which talks about the EV-specific course or the certification. I think by addressing these areas, India can significantly reduce its import dependency, which is happening also. The most important part, industry has realized that this is the growth potential and they can only make more profit and have control on their supply chain if they localize, if they have a long-term contract.
IBT: Can we have some insights on the current scenario of charging and battery swapping infrastructure? Is it also on a growing trajectory?
Randheer Singh: Yeah, I mean, these are two different areas. One is the fixed charging and the second is the battery swapping. In terms of the final usage, these business models are going to prevail together, but the segment-wise adoption differs. If I talk first about the battery-swapping infrastructure alone, definitely it’s something which is rising and not many players are there right now. There are hardly three to four players in this area and the industry will consolidate in the next four to five years. The reason is the adoption, the asset utilization and a lot of CAPEX are required because, in the case of the battery swapping, you need to have the float batteries. For example, if 100 vehicles are in the market, you need to have at least 1.2 to 1.3 times the batteries which are already down there for the swap, which includes the deployed battery plus the batteries in your docking station. Plus, the cost involved at the docking station is also very high.
Third, the docking stations need space. So in urban centers and the major cities, getting these spaces in itself is a challenge. From the business model perspective, battery swapping is mainly concentrated right now with the captive users, with the commercial three-wheeler or two-wheeler users. In fact, mainly it’s the three-wheeler commercial users at the captive level who are using it. But definitely, as we progress further, instead of having 10, 20 battery swap stations, 4 battery swap stations which can rest at the paan-wala, somebody who is actually at the barber shop or anywhere, the four batteries can rest and anybody can go and operate this. Of course, the industry has to work together to make this interoperable. Then only the asset utilization and the ease of switching to consumers will increase, which happens in the telecom right now.
When it comes to charging infrastructure, there are exciting plans in the works. Oil marketing companies have already allocated 800 crores from FAME II to set up 22,000 charging points. Currently, IOCL has put out a tender for 4000 DC charges, with 3000 at 60 kilowatts and 1000 at 120 kilowatts, and BPCL has a tender out for DC charging. Across the country, there are already 3000 to 4000 DC chargers and around 10,000 to 12000 public charging points, including AC chargers. However, when we consider captive and semi-public chargers, the number goes up to more than 30,000, including private chargers. There are different models for charging, such as OEMs setting up charging points, charge point operators operating them directly, or collaboration between the two on a revenue-sharing basis. Some discounts have also been offered for setting up charging infrastructure in bigger residential areas and using existing assets, such as batteries or telecom towers. Overall, home charging remains the most popular option, as it is convenient and cost-effective due to lower domestic tariff rates. Public charging is only used when necessary, as the tariff rates are much higher, ranging from 18 to 24 rupees per unit.
IBT: Please share your perspective on what more needs to be done in FAME.
Randheer Singh: Indeed, I must highlight the significant developments that have taken place following the revamped FAME II program, launched in June 2021. Initially, the program’s focus was on electric buses, two-wheelers, and three-wheelers. However, as a nation, we must now consider what’s next in terms of vehicle adoption. Should we continue concentrating on two-wheelers, three-wheelers, buses, and shared mobility for four-wheelers, or should we also prioritize commercial vehicles, a significant contributor to pollution? To address the pollution issue comprehensively, it’s crucial to extend our efforts to this segment as well.
Moreover, in the context of buses, FAME II primarily targeted public buses. Shouldn’t we explore models that incentivize the larger portion of the public transport contract, including private operators? This approach would encourage a broader audience to adopt EVs for passenger kilometres travelled. An intriguing statistic in public transport is that only 3.5% of registered vehicles are public sector public buses, yet they account for 37% of overall passenger kilometres. Including private buses in this equation could have a substantial impact on passenger kilometres travelled.
When considering “what’s next,” we should move beyond simply extending current initiatives. Electric bicycles, for instance, hold significant potential. Our research in ten countries shows a high adoption rate for hyper-local delivery and electric bicycles in developed nations. India already has a substantial number of bicycle users, and making electric bicycles more affordable through incentives and subsidies could be a game-changer. Therefore, when discussing demand-side subsidies like FAME, we should consider including electric bicycles, commercial vehicles, and private buses in the conversation.
Another critical area that demands attention is the processing of critical minerals. To achieve self-dependence, this sector requires substantial incentives. Lastly, there’s the aspect of recycling and refurbishing, which currently lacks incentives. Considering the mineral dependency, cyclicity, urban mining, and other factors, offering incentives for this area, which typically involves capital expenditure, is vital.
In summary, when contemplating incentives for EV development and adoption, it’s essential to look beyond the present and address areas such as electric bicycles, commercial vehicles, private buses, critical minerals processing, and recycling and refurbishing. These aspects deserve our focused attention for a comprehensive and sustainable EV ecosystem.
The CEO and Co-Founder of Foresee Advisors, Mr Randheer Singh, has worked as a key advisor to the government to decarbonize India’s transport sector.