Managerial Economics

India's Big Push to Go All-In

on Electric Vehicles By 2030

Submitted by: Submitted to:

Kamal Khandelwal Prof. A.K Mohpatra
Sahil Dudeja
Rochelle Amanna
Shivangi Khosla
Ankita Gupta
Shashikant Kumar

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 How We got Here
Air pollution levels have increased manifold in several cities across India. Recently Delhi
being the most polluted city in the world Allahabad, Lucknow, Patna, and Gwalior are now
among the most polluted cities in the world. According to one WHO study, the injurious
effects of air pollution – asthma, bronchitis, lung cancer, and even premature death – may
have killed around 600,000 Indians in 2012. With coal production in India set to double by
2020, the situation appears slated to get worse.

While until recently air pollution was treated as a localized incident, climate change was
rightly considered global is scope. Scientific studies now confirm that air quality has an effect
on climate change and vice versa. Both feed on each other in an internecine cycle. Polluted
air consists mainly of black carbon or soot, which is formed by incomplete combustion of
fossil fuels, biofuels, and biomass. Black carbon is the primary component of PM2.5 and is
the second major source of global warming after CO2. It is a short-lived climate pollutant
(SLCP) responsible for nearly 50 percent of the global warming till date and has a warming
impact on the climate 460-1,500 times stronger than CO2. It has accelerated the melting of
glaciers in the Himalaya-Hindu Kush and Tibetan plateau. Black carbon is also shown to
have an impact on extreme weather events such as intensified heat waves and cyclones and
disrupted monsoon patterns, with consequent effects on health, livelihoods, food security, and
the economy.

But SLCPs such as black carbon and its co-pollutants – ozone, methane, and
hydrofluorocarbons – also have a silver lining. While CO2 emissions can remain in the
atmosphere for hundreds of years, SLCPs remain in the atmosphere for a shorter duration,
ranging from only a few days to a decade and a half. Therefore, reducing SLCPs can deliver
immediate to near-term benefits. This is especially true for cities and towns, which tend to be
densely populated. A decline in SLCP emissions will result in air quality improvement and
public health. Millions of premature deaths can be prevented. Regional climate systems such
as the monsoon rains will normalize and provide crucial time to adapt to climate change and
prevent loss of livelihood. The economic benefits of SLCP reduction, such as lower public
health expenses, lower crop loss, and slowed climate destruction, will far outstrip its costs.

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 The Ingredients of Air pollution
Air pollution from cars and trucks is split into primary and secondary pollution. Primary
pollution is emitted directly into the atmosphere; secondary pollution results from chemical
reactions between pollutants in the atmosphere. The following are the major pollutants from
motor vehicles:

 Particulate matter (PM). These particles of soot and metals give smog its
murky colour. Fine particles — less than one-tenth the diameter of a human hair — pose the
most serious threat to human health, as they can penetrate deep into lungs. PM is a direct
(primary) pollution and a secondary pollution from hydrocarbons, nitrogen oxides, and
sulphur dioxides. Diesel exhaust is a major contributor to PM pollution.

 Hydrocarbons (HC). These pollutants react with nitrogen oxides in the

presence of sunlight to form ground level ozone, a primary ingredient in smog. Though
beneficial in the upper atmosphere, at the ground level this gas irritates the respiratory
system, causing coughing, choking, and reduced lung capacity.

 Nitrogen oxides (NOx). These pollutants cause lung irritation and weaken
the body's defences against respiratory infections such as pneumonia and influenza. In
addition, they assist in the formation of ground level ozone and particulate matter.

 Carbon monoxide (CO). This odourless, colourless, and poisonous gas is

formed by the combustion of fossil fuels such as gasoline and is emitted primarily from cars
and trucks. When inhaled, CO blocks oxygen from the brain, heart, and other vital organs.
Foetuses, new-borns children, and people with chronic illnesses are especially susceptible to
the effects of CO.

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 Sulphur dioxide (SO2). Power plants and motor vehicles create this
pollutant by burning sulphur-containing fuels, especially diesel. Sulphur dioxide can react in
the atmosphere to form fine particles and poses the largest health risk to young children and
asthmatics.

 Hazardous air pollutants (toxics). These chemical compounds have been

linked to birth defects, cancer, and other serious illnesses. The Environmental Protection
Agency estimates that the air toxics emitted from cars and trucks — which include Benzene,
acetaldehyde, and 1,3-butadiene — account for half of all cancers caused by air pollution.

 Greenhouse gases. Motor vehicles also emit pollutants, such as carbon

dioxide, that contribute to global climate change. In fact, cars and trucks account for over
one-fifth of the United States' total global warming pollution; transportation, which includes
freight, trains, and airplanes, accounts for around thirty per cent of all heat-trapping gas
emissions.

Transportation contributed more than half of the carbon monoxide and nitrogen oxides,
and almost a quarter of the hydrocarbons emitted into our air. This air pollution carries
significant risks for human health and the environment. Through clean vehicle and fuel
technologies, we can significantly reduce air pollution from our cars and trucks.

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 Automobile Industry

The Indian auto industry is the sixth largest in the world. The industry accounts
for 7.1 per cent of the country's Gross Domestic Product (GDP). India is also a
prominent auto exporter and has strong export growth expectations for the near
future. In April-March 2016, overall automobile exports grew by 1.91 per cent.
PV

Market Size
The sales of passenger vehicles (PVs), commercial vehicles (CVs) and two
wheelers (2Ws) grew by 9.17 per cent, 3.03 per cent and 8.29 per cent
respectively, during the period April-January 2017.

Government of India aims to make automobiles manufacturing the main driver

of ‘Make in India’ initiative, as it expects passenger vehicles market to triple to
9.4 million units by 2026, as highlighted in the Auto Mission Plan (AMP) 2016-
26.

Road Ahead
India’s automotive industry is one of the most competitive in the world. It does
not cover 100 per cent of technology or components required to make a car but
it is giving a good 97 per cent, as highlighted by Mr Vicente Kobe, Corporate
Vice-President, and Nissan Motor’s Datsun.

Leading auto maker Maruti Suzuki expects Indian passenger car market to reach
four million units by 2020, up from 1.97 million units in 2014-15.

Mr Young Key Koo, Managing Director, Hyundai Motor India Ltd, has stated
that India is a key market for the company, not only in terms of volumes but
also as a hub of small products for exports to 92 countries.

Mr Joachim Drees, Global CEO, MAN Trucks & Bus AG, has stated that India
has the potential to be among the top five markets, outside of Europe, by 2020

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for the company, which is reflected in the appointment of its most experienced
managers to India for increasing volumes and exports out of India.

The Indian automotive aftermarket is estimated to grow at around 10-15 per

cent to reach US$ 16.5 billion by 2021 from around US$ 7 billion in 2016. It
has the potential to generate up to US$ 300 billion in annual revenue by 2026,
create 65 million additional jobs and contribute over 12 per cent to India’s
Gross Domestic Product.

According to Mr Guillaume Sicard, president, Nissan India Operations, the

income tax rate cut from 10 per cent to 5 per cent for individual tax payers
earning under Rs. 5 lakh (US$ 7,472) per annum will create a positive sentiment
among likely first time buyers for entry level and small cars.

What is an Electric Car?

The electric car (EV) is a relatively new concept in the world of the automotive industry.
Although some companies have based their entire model of cars around being proactive and
using electricity, some also offer hybrid vehicles that work off both electricity and gas. An
electric car such as Nissan Leaf, Ford Focus Electric or Tesla Model S, Chevrolet Volt is a
great way for you to not only save money, but also help contribute towards a healthy and
stable environment.

Cars produce a lot of carbon emissions that are ejected into our natural atmosphere, leaving
us vulnerable to things like pollution and greenhouse gases. In order to help positively the
environment, we live in, an electric car is a great step forward. By buying an electric car, you
can also receive government subsidies for being environmentally conscious. Although you
may end up paying more for your vehicle, the positives greatly overshadow the negatives.
However, there are still two sides to consider when you’re thinking about investing in an
electric vehicle.

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EV’s get their power from rechargeable batteries installed inside the car. These batteries are
not only used to power the car but also used for the functioning of lights and wipers. Electric
cars have more batteries than normal gasoline car. It’s the same kind of batteries that are
commonly used when starting up a gasoline engine. The only difference comes in the fact
that in electric vehicles, they have more of them which are used to power the engine.

Advantages of an Electric Car

An electric car is a great alternative, to save a lot of money on gas. However, there are so
many different reasons why one should invest in an electric car in the modern day of
technology.

1. No Gas Required: Electric cars are entirely charged by the electricity which means there
will be no need to buy any gas ever again.

3. No Emissions: Electric cars are 100 percent eco-friendly as they run on electrically
powered engines. It does not emit toxic gases or smoke in the environment as it runs
on clean energy source.

4. Popularity: EV’s are growing in popularity. With popularity comes all new types of cars
being put on the market that are each unique, providing you with a wealth of choices
moving forward.

5. Safe to Drive: Electric cars undergo same fitness and testing procedures test as other fuel
powered cars. In case an accident occurs, one can expect airbags to open up and electricity
supply to cut from battery. This can prevent you and other passengers in the car from
serious injuries.

6. Cost Effective: Earlier, owing an electric car would cost a bomb. But with more
technological advancements, both cost and maintenance have gone down. The mass

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production of batteries and available tax incentives have further brought down the cost,
thus, making it much more cost effective.

7. Low Maintenance: Electric cars runs on electrically powered engines and hence there is
no need to lubricate the engines. Therefore, the maintenance cost of these cars has come
down.

8. Reduced Noise Pollution: Electric cars put curb on noise pollution as they are much
quieter. Electric motors are capable of providing smooth drive with higher acceleration over
longer distances.

Disadvantages of an Electric Car

Although the evidence of the positives has become very clear, there are also some
downsides that each individual needs to consider before they decide to make an electric car
their next big investment. These reasons are:

1. Recharge Points: Electric fuelling stations are still in the development stages. Not a lot of
places you go to on a daily basis will have electric fuelling stations for your vehicle, meaning
that if you’re on a long trip and run out of a charge, you may be stuck where you are.

2. Electricity isn’t Free: Electric cars can also be a hassle on your energy bill if you’re not
considering the options carefully. If you haven’t done your research into the electric car you
want to purchase, then you may be making an unwise investment.

3. Short Driving Range and Speed: Electric cars are limited by range and speed. Most of
these cars have range about 50-100 miles and need to be recharged again. You just can’t
use them for long journeys as of now, although it is expected to improve in future.

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4. Longer Recharge Time: While it takes couple of minutes to fuel your gasoline powered
car, an electric car take about 4-6 hours to get fully charged. Therefore, you need dedicated
power stations as the time taken to recharge them is quite long.

5. Silence as Disadvantage: Silence can be a bit disadvantage as people like to hear noise if
they are coming from behind them. An electric car is however silent and can lead to
accidents in some cases.

7. Battery Replacement: Depending on the type and usage of battery, batteries of almost all
electric cars are required to be changed every 3-10 years.

8. Not Suitable for Cities Facing Shortage of Power: As electric cars need power to charge
up, cities already facing acute power shortage are not suitable for electric cars. The
consumption of more power would hamper their daily power needs.

10. Some base models of electric cars are still very expensive because of how new they are
and the technology it took to develop them.

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 Government’s plans to transform India into an
E-Vehicle Ecosystem by 2030
the National Institution for Transforming India Aayog, headed by Prime Minister Narendra
Modi, are aimed at electrifying all vehicles in the country by 2032 and will likely shape a
new mobility policy.

“India can become the first country of its size which will run 100 per cent of electric vehicles.
We are trying to make this programme self-financed. We don’t need monetary support from
the government. We don’t need investment from the people of India,” said Piyush Goyal,
Union minister for energy and power, at an event organised by the Confederation of Indian
Industries Young India in New Delhi.

The following are the ways by which govt. is planning to achieve its objective: -

1.) The government plans to buy 10,000 e-cars for the national capital region
(NCR) in the next six to eight months.

This is a part of the government’s plan to put around 1 million electric three-wheelers and
10,000 electric city buses on Indian roads by mid-2019. The tender to buy 10,000 e-cars for
NCR has already attracted bids by six of the nation’s leading car makers (Tata Motors,
Maruti Suzuki, Hyundai, Renault, Nissan and Mahindra & Mahindra).

Apart from e-cars, the state-owned Energy Efficiency Services Limited (EESL) has also
invited bids for 4,000 chargers that will be set up in Delhi and NCR for the convenience of e-
vehicle users. This expected to boost demand public demand for e-cars in the region. Fiscal
incentives such as tax breaks shall also be given to automobile manufactures to encourage
increased production of e-vehicles.

This step will be followed by the government inviting bids for 50,000 electric three-wheelers
(by the end of 2017) and battery-powered buses (in 2018). Interestingly, Mahindra &
Mahindra Ltd has just launched its first electric three-wheeler that goes on sale from
September 9. Called e-Alfa Mini, it is powered by a 120Ah battery and aimed at intra-city
movement. On a full charge, it can travel for up to 85 km at its top speed of 25 kmph.

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2.) An effort will be made to recreate the ‘LED moment’ in Indian transport.

The ‘LED moment’ refers to what was famously called the “largest energy transformation
project in the world” by the Vienna Energy Forum — India’s effort to replace over 700
million street and household lights with energy-saving and long-lasting LEDs, taking
electricity to thousands of poor villages for the first time.

The competitive procurement of LED lights by EESL had also helped prices crash in the
open market, making it affordable for consumers to buy LEDs for their homes. A similar
competitive tendering for electric vehicles as well as their batteries is expected to help bring
the capital costs of an e-vehicle within a price range that will be lower than that of a
petrol/diesel vehicle.

Steps have already started being taken in this direction. In 2017, Nagpur became India’s first
city to have a fleet of 200 electric vehicles, including taxis, autos, e-rickshaw and buses. The
country’s first multi-modal electric vehicle project was also inaugurated at the Nagpur
Airport Complex, making Maharashtra the first Indian state to provide such incentives to e-
vehicle users. Popular taxi aggregator Ola has also established over 50+ charging points at
four strategic locations across Nagpur.

3. The government will set up industries for the production of 2nd generation
ethanol.

Under the road map laid down by the National Policy on Biofuels, the government had
expected to achieve its ambitious target of 20% ethanol-petrol blending by 2017. However,
due to the shortage of availability of ethanol for transport industry, this target couldn’t be
achieved (India is currently doing less than 3% of ethanol-petrol blending).

To fill in this demand-supply gap, the government has decided to start 15 industries for
production of 2nd generation ethanol (cellulosic ethanol made from agricultural residues such
as the stalks, leaves, bagasse, bamboo, sawdust, and husks of rice and wheat. A cost effective
and non-polluting fuel, it is a great way to tackle the twin problems of rising pollution and an
increasing import bill for crude oil.

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4. The Indian government has been trying to push sales of EVs.

The Centre is exploring measures ranging from leasing of EVs to transferring technology to
firms for commercial production of lithium-ion batteries developed by the Vikram Sarabhai
Space Centre for use in automobiles. It is also exploring a strategy that involves reducing the
battery size to bring down EV prices,

5. Government extends FAME-India scheme to promote electric vehicles

The government has extended demand incentives worth Rs 127.77 crore for purchase of over
1.11 lakh electric and hybrid vehicles under the FAME-India scheme.
The FAME-India (Faster Adoption and Manufacturing of (hybrid &) Electric vehicles in
India) scheme is proposed to be implemented over a period of 6 years, till 2020, wherein it is
intended to support the hybrid/electric vehicles market development and its manufacturing
eco-system to achieve self-sustenance at the end of the stipulated period.
6. New Green Urban Transport Scheme

The Government of India plans to introduce a new Green Urban Transport Scheme with a
central assistance of about Rs 25,000 crore (US$ 3.75 billion), aimed at boosting the growth
of urban transport along low carbon path for substantial reduction in pollution, and providing
a framework for funding urban mobility projects at National, State and City level with
minimum recourse to budgetary support by encouraging innovative financing of projects.

7. No Permits for Charging Stations:

The government has come out with a new scheme to promote e-vehicles. As per Indian
Express reports, no permits will be required for commercial electric vehicles (EVs), charging
stations will be set-up by state-owned power utilities and a plan to swap drained batteries of
e-buses with fully- charged ones at depots across key metros.

8. Charging Stations

NTPC Ltd, India’s largest power generation utility, has been directed to work on a blueprint
fro setting up charging stations, while other energy public sector undertakings would also be
roped in to set up charging infrastructure across major metros

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 Response of Automobile Industry and their Strategies

1. Maruti will make electric cars in Gujarat

The government’s push to electric vehicles received a boost with Maruti’s Japanese
parent Suzuki Motor deciding to make electric cars at its factory in Gujarat for India and
the world. It will also be the first commercially-available electric car for Suzuki.

2. India's first lithium ion battery facility

Suzuki Motor will invest more than Rs 1,150 crore along with Japanese partners
Toshiba and Denso to set up India's first lithium ion battery facility in Gujarat.
Denso, a Toyota company, will provide the technology, while Toshiba will chip in with
cell modules.

3. Mahindra unveils growth strategy for electric vehicles business

Mahindra Electric, the manufacture of electric vehicles (EV) and a part of Mahindra
Group, has laid out a growth plan for its electric vehicles business by unveiling a
comprehensive technology and product roadmap, leading to the next generation of
electric vehicles, which the company internally refers to as EV 2.0.

Mahindra is actively engaging with the ecosystem stakeholders, both private and public
to drive faster adoption of electric vehicles. This includes setting up of charging
infrastructure and fleet operations, delivering mobility as service. The connected car
solution that is already rolled out will serve as the building block for smart mobility in
the smart cities, which are currently under development.

4. Electric Vehicle Charging infrastructure

Tata Power, India’s largest integrated power company, has been a frontrunner in
technology adoption and innovation while also setting benchmarks in sustainability. As
part of its commitment towards sustainability and another green milestone, the
Company has installed their first Electric Vehicle charging station at Tata Power
Receiving Station at Vikhroli, Mumbai.

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 Tata Power's aim is to build a network to make it easier for people to adopt to EVs and
be future ready. Such an adoption of smart charging infrastructure will help the country
achieve its ambitious plan of mass scale shift to electric vehicles by 2030.
5. Hyundai plans premium electric car in strategic shift
Hyundai Motor Co. says it will place electric vehicles at the center of its product
strategy -- one that includes plans for a premium long-distance electric car as it seeks to
catch up to rival automakers.
Hyundai had initially championed fuel cell technology as the future of eco-friendly
vehicles but has found itself shifting electric.
6. Nissan unveils new Leaf e-vehicle, eyes India electric vehicle push
Japanese automaker Nissan Motor Co is willing to partner with the Indian government
in its push for electric vehicles in the country, Executive Vice-President Daniele
Schillaci has said.
said Nissan is already working on a long-term plan for India, which will be unveiled
soon. As part of the broader process, the Japanese automobile major launched its new
Leaf electric vehicle (EV) on September 6, which will go on sale in Japan from October
2 and in Canada and the US from January next year. And may unveil in India too.
7. Ola’s Strategy
Taxi aggregator Ola has already invested upwards of Rs 50 crore towards EVs and
charging infrastructure, starting with 50 plus charging points and 100 of Mahindra’s
new e20 plus across four strategic locations in Nagpur.
8. Tata’s Strategy

Tata Group is working on a comprehensive hybrid and electric vehicle strategy that
includes developing lithium batteries as well as charging stations, as India promotes
zero-emission automobiles in a bid to reduce the alarming levels of pollution in its
cities.

Tata Motors is holding discussions with various state governments to conduct road trials
of its electric vehicles. Those discussions are going on about the whole ecosystem - one
is the bus, the other is the battery, and finally charging they are discussing all the three
aspects as to how the company can be present in all the three areas instead of being
dependent upon somebody else

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 Impact on Country and Economy
1. Emissions impact
The use of electric cars in metropolitan areas would definitely reduce emissions
locally, which is beneficial because that is where people live and work. The
emissions are transferred to whatever emissions are created at the power plant
location (which may be a distance away from the metropolitan area). Transferring
the emissions to power plants would eliminate the unhealthy emissions of
hydrocarbons, nitrogen oxides, and carbon monoxides from automobiles. India can
save 64% of energy demand from the road sector for passenger mobility and 37% of
carbon emissions in 2030 through its EV programme.
2. Increased life Expectancy
Increased life expectancy in metropolitans as these alarming high levels of pollution
will significantly come down when petrol and diesel vehicles will be replaced by the
zero emission Electric vehicles.
3. Reduced Noise Pollution
Electric vehicles don’t use combustion engine rather they use motorised component
which do not make any kind of or minimum noise and will help in reducing the
noise pollution in the country.
4. Lower Import Bill
This would result in a reduction of 156 Mtoe (million tonne of oil equivalent) in
diesel and petrol consumption for that year (2030). At USD 52/bbl of crude, this
would imply a net savings of roughly Rs3.9 lakh crore (approximately 60 billion
USD) in 2030,” the report said.
5. Paris climate change agreement
The government plans to generate 175 giga watt (GW) of renewable energy capacity
by 2022 as part of its commitments to the Paris climate change agreement. Of this,
100GW is to come from solar power projects. With storage being the next frontier
for India’s clean energy push from sources such as solar, the batteries in EVs offer a
solution. Given that solar power projects generate electricity during the day, the EV
batteries can be used to store that energy.

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 6. Growth of Battery Industry
With the rise of electric vehicles, the demand for batteries will also rise resulting in
growth and more opportunities in this sector. Govt. is also spending on the Research
and Development of better and efficient batteries.
7. May Cause another Oil Crisis
After a deep dive, oil prices are slowly crawling back up on the back of resurging
demand from China and India in particular, as well as looming supply shortages
from Nigeria to Venezuela. And as both of these country China and India are
moving towards renewable energy and promoting Electric Vehicle the Demand of
oil will again take a hit and have direct impact on the Oil backed Economies such as
Saudi Arabia and other middle east countries.

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Refrences

1. Mint reported. http://bit.ly/2puSIFV

2. http://economictimes.indiatimes.com/articleshow/60515331.cms?utm_source=content
ofinterest&utm_medium=text&utm_campaign=cppst
3. http://nationalinterest.org/feature/will-electric-cars-destabilize-the-world-16387
4. http://www.ucsusa.org/clean-vehicles/vehicles-air-pollution-and-human-health/cars-
trucks-air-pollution#.Wb4PcvkjHIV
5. http://www.ucsusa.org/clean_vehicles/why-clean-cars/air-pollution-and-health/trucks-
buses-and-other-commercial-vehicles/diesel-engines-and-
public.html#.Wb4Qk_kjHIU
6. http://thediplomat.com/2016/11/fighting-indias-pollution-and-climate-change-at-the-
same-time/
7. http://www.actiononclimate.today/act-on-knowledge/tackling-climate-change-and-air-
pollution-together/
8. http://www.davidsuzuki.org/issues/climate-change/science/impacts/impacts-of-
climate-change/
9. http://www.conserve-energy-future.com/advantages-and-disadvantages-of-electric-
cars.php
10. http://ansnuclearcafe.org/2011/02/15/economic-and-emission-impact-of-electric-
vehicles/#sthash.sBnMuNlx.dpbs
11. https://www.thebetterindia.com/114887/e-vehicles-indian-government

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