Review: NITI Aayog’s report estimates future electric two-wheeler penetration under different conditions

Electric Two-Wheelers in India_Featured Image

NITI Aayog along with TIFAC recently released a report, ‘Forecasting Penetration of Electric Two-Wheelers in India’. The report estimates future electric two-wheeler penetration in India under various constraints & conditions. A tool was jointly developed by TIFAC and NITI Aayog, to analyse the future penetration of electric two-wheelers in the country across eight separate scenarios. Here is a review.

Countries around the world are encouraging a shift to electric vehicles through incentives and policies. In the last two decades, there have been considerable technological advancements in the case of electric vehicles which have helped improve their utility, reduce costs, and lower GHG emissions from the transport sector, thereby increasing the demand for electric mobility. Likewise, India is also pushing for a shift towards electric mobility to control carbon emissions and reduce the huge imports of petroleum. A national target of achieving 30% electric vehicle sales penetration by 2030 has been set by India. To achieve this, various measures such as boosting localization of EV component manufacturing, subsidies, incentives, are some central level interventions. Several states have also come up with their own policies covering subsidies and tax exemptions, among other incentives, for buyers of electric vehicles. 

NITI Aayog and TIFAC released a report to forecast electric two-wheeler penetration in India

Two-wheelers dominate the Indian road transport sector, including the electric vehicles segment. According to the Vahan dashboard, a total of 5.05 lakh electric 2-wheelers have been registered in the country so far. Furthermore, the technology for electric two-wheelers has now reached a critical stage of development, and several manufacturers have launched marketable models. Considering this, Technology Information Forecasting and Assessment Council (TIFAC) and NITI Aayog came up with a bottom-up estimate of the annual growth of the use of electric two-wheelers which provides crucial information about the necessary infrastructure, manufacturing capacity, policy initiatives, and technological development objectives. The report, Forecasting Penetration of Electric Two-Wheelers In India was released recently.  

A tool was jointly developed by TIFAC and NITI Aayog, to analyse the future penetration of electric two-wheelers in the country across eight separate scenarios. The scenarios have been constructed based on three major factors influencing the market penetration of electric two-wheelers- demand incentives, battery cost, and vehicle performance in terms of range and power. Each factor has been analysed further at two different levels. Additionally, four constraint levels were developed depending on vehicle production capacity and charging infrastructure. Full constraint means both production capacity and charging infrastructure are constraints.

Source: NITI Aayog

Shift to electric mobility in the 2-wheeler segment can be faster than anticipated

According to the report, the shift to electric mobility, particularly in the two-wheeler segment, may happen faster than anticipated. The analysis observed that 100% market penetration could be obtained in a scenario with full constraints with the base level of production capacity and charging infrastructure. However, it called for an increase in production capacity, or else, the sales of electric two-wheelers would be constrained by supply, thereby leading to a decline in their relative market share. Furthermore, a combination of technological improvement and incentives are required to achieve 100% penetration in the full constraint scenarios. A maximum penetration, which is 71.5% in the technology-driven scenario, can be achieved with the demand incentives removed after the financial year 2024. Even if incentives are maintained through the financial year 2031, only a penetration level of 21.9% can be achieved in the absence of technological advancement and a decline in battery costs. 

The demand for different scenarios has been discussed below.

Domestic manufacturing of components should be enhanced alongside policy intervention

The report suggests that the performance of vehicles and improved battery technology can help increase penetration even compensating for the impact of financial incentive withdrawal. Though demand incentives are necessary to increase the penetration level of electric two-wheelers, the larger issue of manufacturing costs remains, which is mainly influenced by the battery cost. The cost can be reduced significantly if the domestic manufacturing of components picks up alongside relevant policy interventions. Sustained high prices of petrol, and a ‘positive mindset’ about electric vehicles also influence the shift to electric vehicles. However, the recent incidents in which electric scooters caught fire have the potential to sow seeds of doubt. As per recent reports, the government set up a panel to suggest certification, testing SOPs for batteries

Additionally, a higher ratio of charging points to electric vehicles is necessary for the initial stages to bring about confidence in people. Even in Europe, charging points is a concern. According to WEF, 10 countries in Europe including Greece, Poland, Romania and Latvia, do not have one charger for every 100km of key road and a total of 18 EU members have under five charging points per 100km of road. 

The International Energy Agency also suggests that governments should not abruptly change the incentive structures in place. Instead, the incentives and subsidies must transition to more targeted and financially sustainable tools. Further, it suggested that governments clearly lay down policy frameworks and foster international collaboration to tackle the strains on the material supply chain when the battery industry expands. 

Featured Image: Penetration of Electric Two-Wheelers in India