Market size key to battery investments 

The Budget proposal will encourage the private sector to innovate battery models

By Sumana Sarkar calendar 13 Feb 2022 Views icon3114 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
This picture is representational

This picture is representational

While the Centre has made its intent clear on faster adoption of electric vehicles, there are a host of issues that need to be sorted out first.

According to Anumita Roychowdhury, Executive Director — Research and Advocacy, Centre for Science & Environment (CSE), the adoption of battery swapping strategy is an option to embrace faster EV adoption. “Within that, the private sector will be encouraged to innovate business models for battery or energy services,” she says.

Yet, when it comes to scale, Roychowdhury believes that an idea about the real market size is what will make a difference. This is where “we would still expect” the Centre to give a sense of what kind of market transformation “we are looking at”.

Otherwise, she continues, why would businesses respond to battery swapping or battery manufacturing if there is uncertainty about the level of EV penetration in the coming years. In her view, an exclusive battery swapping policy signals delinking (the battery) from the vehicles and making it separate as an independent business for someone else to invest. 

However, there is a need to quantify scale in this case too as “whoever is coming into the market needs to be assured of a certain scale of the market, that is set to or expected to happen.” By the end of the day, says Roychowdhury, there is still need for a “lot more certainty” in terms of setting targets one could expect going forward so that “we don’t get caught in the typical chicken-and-egg syndrome” about what should come first. 

Her other concern is that the Budget is “technically not talking about allocations” except for where the grants are going to be given — there is “some promise” to the state governments about allocations. “What will really determine the transformation is how this Budget is going to activate the funding levers for what has been planned,” says Roychowdhury.

Clearly, the Centre is throwing its weight behind faster EV adoption and linking it with urban development. As she elaborates, “We need to reimagine the city and then within that they have linked up the new generation policies like modernisation of building bylaws, town planning and transit-oriented development.” The provisions in the Budget along with the PLI scheme for battery chemistry and the ongoing FAME incentives will collectively define the EV trajectory across the country.

Given India’s net zero target by 2070, the Deloitte Global Automotive Consumer Study 2022 indicates that the future of mobility in India is electric. More than a third of Indian consumers have expressed interest in electrified and hybrid vehicles. The Budget in this context brings about a “better alignment of policies with the overall clean air and low carbon growth path that India is now committed to after COP26,” says Roychowdhury. 

The direction is clear but within industry there are some anxieties like battery prices and the obvious limitation of the FAME incentives which cannot last forever. Yet, world over, EVs have become the buzzword even while carmakers are concerned about the return on investments being made.

Within India, it is quite obvious that the transition will happen in the two and three-wheeler space first before expanding into cars. The internal combustion engine may be on its last lap but it will be a while before petrol and diesel are completely taken over by electric. For now, neither fuel will top a popularity poll given the crude oil price spiral which has seen their retail prices in India soar to giddy levels. 

 

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