India's drive towards sustainable mobility has gathered substantial momentum in recent years, especially within the electric two-wheeler (E2W) sector. This progress is largely attributed to the supportive measures introduced by the Central and various State Governments through subsidy schemes aimed at boosting electric vehicle (EV) adoption.
According to Yogesh Bhatia, MD and CEO of LML, a pivotal element of these schemes is the localisation mandate, which requires manufacturers to source a significant portion of their components locally. This policy is designed to reduce reliance on imports for the emerging sector and strengthen the domestic EV ecosystem. A decade since the launch of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME I) scheme, this initiative has not only facilitated India's transition to clean and affordable mobility but has also resulted in several other tangible benefits, he noted.
Subsidies, Localisation
The FAME scheme, currently in its second phase (FAME II), is a cornerstone of India's strategy to accelerate EV adoption. Launched in April 2019, FAME II provides financial incentives to manufacturers who meet specific criteria, with localization being the most critical requirement. To qualify for subsidies under FAME II, manufacturers must source a certain percentage of their components locally. This requirement not only supports the development of a robust local supply chain and job creation but also reduces production costs for Original Equipment Manufacturers (OEMs).
Lowering Costs, Boosting Affordability
Importing components often incurs high costs due to tariffs, shipping, and exchange rate fluctuations. By sourcing components locally, EV manufacturers can optimize costs, making E2Ws more affordable for consumers. This price reduction is crucial for the growth of the industry in a price-sensitive market like India.
Building Supply Chain
Local manufacturers are rapidly developing capabilities to produce batteries, motors, chargers, controllers, and other critical components. This not only reduces lead time for manufacturers and allows for better quality control but also fosters innovation as local suppliers invest in research and development to meet the specific needs of the Indian market.
Harnessing Local Production
Considering that battery costs account for 40% to 50% of an EV's total cost, increasing local production could significantly unlock the potential of EVs. Larger volumes of EVs will make it economical to set up cell manufacturing plants. Additionally, this will encourage research and development to upgrade technology and reduce costs, further supporting the growth of India's EV ecosystem, Bhatia said.
Job Creation & Economic Growth
According to him, the growth of the E2W sector is poised to generate millions of direct and indirect employment opportunities, significantly contributing to economic growth. As more manufacturers establish operations in India, ancillary industries such as charging infrastructure, maintenance services, and recycling facilities will also benefit. The transition of the existing workforce from internal combustion engine (ICE) manufacturing to electric vehicle (EV) production necessitates extensive reskilling, leading to the emergence of new academic and industrial training institutes.
Bhatia emphasises that the fundamental difference between ICE and EV technology lies in the powertrain. In EVs, the powertrain comprises the motor, controller, DC-DC converter, wiring harness, instrument cluster, vehicle control unit, battery, and battery management system (BMS). 'We need trained manpower to design powertrains, provide service for powertrains, and oversee quality in powertrains. This is the heart of EVs,' he said.
Improved Energy Independence
Electric vehicles (EVs) significantly reduce India's dependence on hydrocarbons, which constitute a major portion of the country's import bill. By relying on electricity, EVs help mitigate the risks associated with volatile commodity and currency prices in the hydrocarbons market, contributing to long-term economic stability.
As of the 2023-2024 fiscal year, approximately 75.66% of India's electricity is generated from thermal power plants. This heavy reliance underscores the continued importance of coal, gas, and other thermal sources in India's energy mix. The electricity generation target for the year is set at 1,750 billion units, with thermal power playing a pivotal role.
When asked about the feasibility of EVs in a country heavily dependent on thermal power, he pointed out the government's well-defined policy to shift power generation towards solar, wind, and nuclear energy. The government has set ambitious targets to reduce dependence on coal and increase the use of gas for power generation. Additionally, vehicular pollution, which adversely affects human health and productivity, has a direct impact on GDP, making the shift to EVs a crucial strategy, he said.
Road Ahead
While localised E2W manufacturing offers clear advantages and has garnered government support, there is still a long way to go to realise its full potential, he mentioned. Developing a local supply chain requires massive investment in technology and talent. The initial costs of transitioning to local production can be high and challenging for manufacturers without significant financial resources.
Government support through subsidies is beneficial, but further incentives for R&D, technology transfer, and skill development programmes are necessary. Industry players need to proactively share knowledge and resources, while academia can contribute through relevant R&D and educational courses, he pointed out.
Providing subsidies to nurture local production is a strategic move transforming India's E2W sector. Although challenges remain, comprehensive collaboration among all stakeholders can position India as a global leader in the electric mobility revolution.
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