With government as facilitator, industry can drive e-mobility faster in India: Deloitte

Rapid urbanisation has stimulated mobility needs and in turn created a surge in demand for vehicles. This has not only impacted air quality but also increased the country’s dependence on crude oil, leading to higher import bills.

However, economic development often involves judicious trade-offs and call for a need for green mobility solutions. Given that India has pledged to reduce carbon emission intensity by 33-35 percent by 2030 (compared to 2005 levels), emerging automotive technologies and alternative fuels seem to be the way forward, says a study by Deloitte.

Deloitte says the introduction of electric vehicles (EVs) in India currently lies at the core of sustainable mobility solutions, which is likely to require a robust ecosystem and a conducive environment. There is also a potential need to develop appropriate business models for government and private sector stakeholders to facilitate and optimise the interplay amongst various actors in EV ecosystem.

Development of robust ecosystem key to EV adoption
The study finds that while India is leapfrogging in electric mobility and each stakeholder has been seen spearheading the initiatives to promote EV adoption, the interplay of these stakeholders is essential for streamlining EVs in transport systems and in creating a favourable EV ecosystem. The elements comprising the ecosystem include demand as well as supply side factors, and enablers that bind these factors together. Deloitte briefly discusses it as: 
- Demand-side factors involve well-designed incentives (fiscal and non-fiscal) to kick-start EV programmes by motivating to acquire EVs by reduction in costs and increased returns on investments.
- Supply-side factors that include strengthening the manufacturing base through a host of interventions and promote R&D activities by encouraging OEMs and component manufacturers.
- Enablers are expected to bridge the gap between the demand and supply factors and help develop a cohesive environment.

It says that making EVs mainstream will require interplay of policy, regulatory and institutional framework, demand and supply, charging infrastructure, incentives, R&D and technological improvements.

Identifying each stakeholder’s role
To ensure a smoother adoption of EVs in India, the consulting firm says that multiple stakeholders involved in the EV ecosystem would need to develop guiding rules of interplay with well-defined roles, responsibilities, and expectations. All the stakeholders would need to be mapped to try to make sure that they play the role in synergy.

The government at all three levels – central, state and municipal level – is expected to play a crucial role in supporting EV adoption and developing a supportive ecosystem. Deloitte suggests that OEMs would need to build the supply of EVs at minimum cost with use of latest technology; battery providers to play a key role in providing technology to improve battery density and battery performance to support the ecosystem through improved driving range, energy density, power, life, charging system and reduced cost of batteries; power utilities’ to define the technical framework for easy charging of vehicles from the grid and reducing impact of EV deployment on the grid through innovation in distribution of power; while energy supplier’s may need to act as service providers relieving the vehicle operator from responsibility of battery acquisition and charging; vehicle aggregators may have to act towards accelerating adoption of EVs by bringing in economies of scale through bulk procurement and operation of EVs.

The company says that in view of the high acquisition cost of EVs as compared to conventional vehicles, large amount of funds is likely to be required for acquisition, which could be facilitated by financial institutions. It suggests that the government may also support acquisition of EVs and infrastructure by way of grants or interest-free loans for accelerating adoption of EVs. And finally, the commuters and the citizen groups complete the value chain of the EV ecosystem.

The study further suggests potential business models for improving adoption of electric buses, e-three-wheelers, public transport and electrifying first- and last-mile connectivity, charging stations.

The road ahead
In the initial phases of EV penetration, the aim should be to reduce dependence on fuel-based private vehicles by developing e-public transport system supplemented by electric last-mile connectivity. To facilitate and optimise the interplay amongst various actors in the suggested ecosystem, various business models could be adopted.

The primary focus is to divide responsibilities based on existing capabilities, diversify the risk based on risk appetite, leverage private sector expertise and promote self-sufficiency. The study says that as mobility plays a central role in a city’s economic prosperity, that is why it is important for cities to reap the benefits of electrifying and providing smart solutions to the city.

Deloitte says as India embarks on the journey to shift towards EVs, the government support in terms of regulatory framework, reduction in battery cost, and widespread availability of charging infrastructure are expected to be the key pillars for mass adoption.

Collaboration with a range of ecosystem players (ministries, utilities, manufacturers, financiers) as partners in the e-value chain is considered paramount to succeed, as will be crafting of new business models suited for the value-conscious Indian consumer, including battery swapping, battery leasing or rental.

The study finds that initially, it will be important to leverage the global experience as the mobility space is evolving. This can be done by engaging private players who have rich experience and expertise in this domain. The government should initially not consider taking all the risk and should rather be more of facilitator in developing the conducive environment for growth of players and electric mobility by providing funds, subsidies, and developing policy framework among others.

On the other hand, private players are expected to be able to bring innovation in the era when technology is evolving. It is essential for the government at this juncture to develop insights on the functioning of the overall ecosystem for electric mobility.