Let commercial vehicles take the lead in going electric

Context: India’s air quality has been diminishing on the back of urban development and higher e-commerce adoption, among other factors. The cost of this progress means some of our large Indian cities figure among the world’s most polluted.

Citizens’ right to clean breathable air is a fundamental need and is a critical parameter in global benchmarks used to list the world’s happiest and most liveable cities.

A shift from ICE vehicles to EVs is crucial to reversing the impact on air quality.

Efforts at reducing air pollution

India has set promising targets and taken several steps to bring about both accountability and action. For example, the government aims to reduce carbon emissions by 45% by 2030,

In 2019, it launched the National Clean Air Programme as a strategic intervention to reduce air pollution levels across the country. City-specific clean air action plans have been prepared and rolled out for implementation in as many as 132 cities.

Meanwhile, the NITI Aayog and Rocky Mountain Institute’s Shoonya campaign is building awareness around fleet adoption of electric vehicles (EV) for last-mile deliveries.

– Urban freight vehicles account for over 10% of transportation-related CO₂ emissions in India, a number that is set to increase by about 115% by 2030 due to the sharp rise in e-commerce demand for deliveries, according to the NITI Aayog.

Meanwhile, Delhi, Mumbai and Bengaluru are upgrading their public transport facilities, albeit they are still using internal combustion engine (ICE) vehicles.

Why a shift from ICE vehicles to EVs is necessary for India?

A shift from ICE vehicles to EVs is crucial to reversing the impact on air quality as ICE commercial vehicles are large users of diesel in India.

China reduced air pollution in its major cities of Shanghai and Beijing by limiting ICE vehicles, relocating polluting units and using EV incentives, among other steps.

A glance at ecology-conscious markets like Norway and Iceland offers a clear picture of how rapid EV adoption can meaningfully reduce pollution levels.

Way forward

Various Indian states have proposed independent EV policy frameworks, but these do not include light commercial vehicles (LCVs). Policy incentives need to be given to logistical service providers to shift to electric LCVs.

Incentives to EV original equipment manufacturers (OEMs) and green taxes levied on ICE vehicles based on emissions and time spent in urban areas could deter ICE vehicle usage.

An effective policy framework for charging infrastructure would help too.

As of now, no distinction is made between slow, medium and fast charging set-ups, and India’s recent battery swapping policy applies more to the 2W and 3W segments than their 4W counterparts. A push for a reliable pan-India fast-charging network will be an essential driver of EV adoption across vehicle categories.

Lowering the cost of ownership and bringing in more fleet financing options will support the EV adoption rate for commercial transport. The total cost of ownership (TCO) for EVs, a key determinant, needs parity with ICE vehicles.

An upfront subsidy for fleet owners to purchase commercial EVs could be instituted.

Recently, the NITI Aayog recommended the inclusion of EV and EV-charging in the Reserve Bank of India’s framework for priority sector lending. This would help finance EV fleet conversion, as 60-70% of vehicles are financed with little or no difference in interest rates.

Loans for EVs could be made more efficient. While banks typically offer a 25-50-basis-points benefit on ESG (environmental, social and governance) assets, lending institutions currently take a hit on their bottom line in providing ESG finance.

Incentivizing innovation among new-age electric OEMs and helping build a talent pool that will fuel this growth story are equally important.

India has the potential to leap into a global leadership position on the commercial EV front. It is among a handful of countries supporting the global ‘EV30@30’ campaign that aims for 30% of all new vehicle sales by 2030 to be electric.

Source: This post is based on the article “Let commercial vehicles take the lead in going electric” published in Livemint on 24th May 22.