Electrifying India’s auto industry: The potential of mandates

Global overview and lessons learned

The report begins with a global overview of ZEV policies implemented in leading economies, such as the United States, China, and the European Union. These regions have established strict regulatory frameworks and incentive systems that have significantly accelerated the adoption of EVs. For instance, Norway leads the world with 80% of its passenger vehicle sales being electric, driven by long-term tax exemptions, infrastructure investments, and supportive legislative measures.

In contrast, the United States’ ZEV mandate, first introduced in California in 1990, has been a cornerstone in promoting innovation and scaling up battery production. The report highlights that these international examples offer valuable lessons for India, particularly the importance of aligning ZEV mandates with broader economic and technological capabilities.

The Indian context: Opportunities and challenges

India’s automotive industry, currently at a critical juncture, presents both significant opportunities and great challenges in transitioning to e-Mobility. The report notes that while India has made strides with initiatives like the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme and Production Linked Incentive (PLI) schemes, the country still lags behind its global counterparts in EV adoption.

A critical issue identified is the existing imbalance within the Indian automotive value chain. The majority of component manufacturers are engaged in traditional internal combustion engine (ICE) vehicles, with only a small fraction involved in the EV sector. This poses a challenge for the widespread adoption of ZEVs, as the current supply chain is not fully equipped to meet the demands of an EV-centric market. The report emphasises the need for broader involvement across the value chain, particularly in developing technologies related to EV components, charging infrastructure, and after-sales services.

Strategic model for ZEV mandate implementation in India

A key contribution of the report is the introduction of a robust model designed to assess the feasibility and potential impact of a ZEV mandate in India. This model takes into account the unique challenges of the Indian market, such as data constraints, limited report periods, and uncertainties in manufacturing costs. The report suggests that the successful implementation of a ZEV mandate could significantly enhance EV penetration in India, reduce the country’s reliance on oil imports, and align with broader environmental and economic objectives.

The model also highlights the importance of progressive policies that support technological advancement, the introduction of a credit system to incentivise EV adoption, and the adjustment of tax incentives as market penetration increases. These measures, according to the report, could help synchronise fragmented policy efforts across various sectors and states, channeling them towards a unified economic objective.

Policy recommendations and way forward

The report concludes with several key recommendations for policymakers, automakers, and other stakeholders. It underscores the necessity of a balanced approach that integrates both demand and supply-side policies. For example, while the total cost of ownership for EVs is approximately 25% lower than that of ICE vehicles, the high upfront cost remains a significant barrier. The implementation of a ZEV mandate could play a crucial role in overcoming this barrier by driving economies of scale and reducing production costs.

Additionally, the report advocates for strengthening India’s Corporate Average Fuel Efficiency (CAFE) regulations and credit systems to compel manufacturers to prioritise EV production. The development of a comprehensive national directive on EV adoption is also recommended to address the current misalignment of initiatives, which is impeding the country’s ability to fully capitalise on the potential benefits of its EV policies.

In conclusion, the Institute for Competitiveness’ report provides a detailed roadmap for India to become a global leader in electric mobility. By learning from international best practices and addressing the unique challenges of the Indian market, the country can accelerate its transition to a sustainable and technologically advanced automotive sector. The implementation of a ZEV mandate, supported by robust policies and strategic incentives, could be the catalyst that drives India towards its ambitious 2030 goals for EV penetration.

Source: The Institute for Competitiveness