MAKING EVs ECONOMICALLY VIABLE IS THE PREREQUISITE !!

Most important question for success of EVs is to develop a strategy, to make them economically viable especially for small vehicles. The strategy is basically required to address two key variables affecting the costs of EVs: battery costs and fiscal policies that can either increase the costs of an ICE vehicle or decrease the costs of an EV.

Reducing the battery costs means reducing the number of batteries that an electric vehicle needs and making batteries cheaper on a per kilowatt-hour basis.

For the first approach, reducing the cost of batteries needed for a given EV, there are two possible ways:

 1. Providing charging infrastructure: The limiting factor of batteries on driving range can be addressed by developing fast-charging or swapping of batteries. This can be managed by creating required infrastructure, possibly after every kilometer, in dense areas. A smaller battery will lower costs by reducing the total weight of the vehicle, resulting in higher energy-efficiency and improved ability to upgrade as the technology evolves.

Charging infrastructure can be rolled out on a city by city basis with select cities and regions leading the transition. This would be consistent with global experience where 33 percent of all EV sales take place in only 14 cities where charging infrastructure is widespread and convenient to use. Approaches for creating effective charging infrastructure are outlined below.

2. Increasing efficiency of vehicles: To increase vehicle efficiency, it is required to reduce energy consumption. Means enabling the vehicle to travel the same distance on a smaller battery pack. Energy efficiency can be enhanced by using more efficient electric motors using better tyres, enhancing the aero dynamics of the vehicles and reducing its weight. This would reduce battery size needed for a certain range.

For the second approach, reducing the unit costs of each battery, India can explore several options:

 a. Selecting appropriate battery chemistry: As batteries dominate costs of electric vehicles, the strategy would be to use battery chemistry with optimized cost and performance at Indian temperatures. India should encourage manufacturing of such battery cells in India. India is already making battery packs

b. Exploring new battery chemistry: Focusing on materials like lithium, manganese, nickle, cobalt and graphite that are used in batteries and determine its costs. While it is important to secure mines which produce these materials, India must also obtain these battery materials through recycling of used batteries and should aim to become the capital of “urban mining” of used batteries.

Beyond reducing battery costs, India can explore potential avenues of fiscal support for EVs to accelerate adoption. The standard approach in other countries to providing fiscal support to EVs has been direct subsidization. For example, EVs in USA, Europe and China have up to 40% “all-in” subsidies. Those subsidies include direct federal or state subsidy to buyers, mandates to manufacturers, utility subsidies or subsidy in the form of fee bates where vehicles are taxed based on their CO2 emissions, whereas EV receives support. As costs decline and the share of EVs in total vehicles increases, most nations plan to taper off such subsidies. For India, however, those paths are not viable; the elimination of direct subsidy will be the policy basis. Therefore India has to be creative to make electric vehicles and its infrastructure economically viable from the very beginning.

Direct financial demand-incentives / subsidies could be replaced by Tradable Auto-Emission Coupons or credits based on CO2 emissions per km as well as on a sliding scale for vehicle efficiency. This will encourage the market to build efficient vehicles with lower emissions per km. Thus, while vehicle manufacturers exceeding CO2 emissions targets would have to purchase coupons or credits, the manufacturers meeting the targets would be rewarded with coupons. Market will decide the prices of these coupons. This will incentivize EVs and low-emission vehicles as well as energy-efficient vehicles at the expense of the vehicles with high emissions and lower-efficiency. Accelerating the availability of necessary electricity network infrastructure as well as domestically produced technologically superior EVs, chargers and components will bring down costs and increase the options available for transportation electrification in India. This could bring total cost of ownership (TCO) of EVs to parity with ICEs by as early as 2025.