India’s fleet focus for electrification is gaining momentum

FAME II legislation excludes private buyers from EV subsidies. Industry groups hope this will change, but a focus on ride-hailing fleets also makes good sense. By Xavier Boucherat

India’s Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme is in its second phase, following the conclusion of the original initiative in March 2019. The scheme expands on the federal government’s original goals with a focus on accelerating battery technology development and building charging infrastructure outside of the Tier 1 cities. However, subsidies on new electric vehicles (EV) remain pivotal to the scheme, with buyers benefitting from a 20% discount on qualified vehicles for an average of between Rs 200,000 (US$2,688) and Rs 300,000. This comes in combination with a reduced Goods and Services Tax: internal combustion engine (ICE) vehicles are subject to a 28% rate, whilst qualifying EVs receive a 5% rate.

India’s new vehicle market: prospects to 2024 and beyond

However, aspects of FAME II have faced criticism from the industry. Among the points of contention are the limiting of subsidies to commercial and corporate buyers, meaning that private buyers looking for a family vehicle or commuter car cannot benefit. This comes a time when attractive EV offerings are beginning to arrive in the country, with domestic manufacturers Tata and Mahindra lining up model launches and foreign manufacturers including Hyundai already offering models. Even Tesla has expressed an interest in the market, with Chief Executive Elon Musk announcing in October 2020 that the company has plans to launch an order configurator for the market in January 2021.

We expect the demand in EVs to be driven by fleet-based operators, and then gradually in the personal space

Alok Ray, Assistant Director at the Society of Manufacturers of Electric Vehicles (SMEV), agrees this is an issue. “Individual buyers looking of EVs cannot receive the subsidy because only corporate institutions are eligible,” he says. “Talks continue with the government. When the FAME policies were framed, there was little demand from the private segment. That has changed: private buyers are now very curious because good EVs are available. So why not start subsidising?” This aspect of the policy, adds Ray, is a major differentiator between the Indian EV market and those in Europe, the USA and China.

Fleet focus

Rather than private buyers, the policy has been framed around commercial fleets such as ride-hailing operations, including Uber and Ola. Their presence in the market is by no means negligible: in 2019, Uber estimates it facilitated 14 million rides a week in the country, up from 11 million in 2018. Domestic competitor Ola says it now has a network of 2.5 million drivers working in 250 cities and towns across India, using a mix of two-, three- and four-wheel vehicles. Ride-hailing’s popularity in India is such that a 2020 study by Deloitte found that 57% of consumers prefer the service to owning and using their own vehicles. This is higher than similar studies in China and the US, where the figures are 53% and 29% respectively.

A charging hub in Pune, where Lithium Urban Technologies runs a zero-emissions taxi service

In this context, the government’s focus on fleets begins to make sense, and other initiatives have accompanied the FAME II programme. In 2019, India’s Energy Efficiency Services, a group that works to replace state-owned vehicles with new, greener alternatives, began leasing EVs to Ola and taxi firm Meru Cabs. In addition, fleets are given access to the organisation’s charging network.

Automakers have taken note of the fleet focus. Speaking in 2019 to Automotive World, Mahesh Babu, Chief Executive of Mahindra Electric, agreed that there were opportunities in the segment. “The lower cost of operations means it is easy to attract fleet operators, public transport providers and shared mobility platforms,” he said. “We expect the demand in EVs to be driven by fleet-based operators, and then gradually in the personal space. The aggressive push by the Indian government will also ensure India becomes the manufacturing hub for EVs and that we will play a larger role in moving to world to e-mobility.”

The automaker’s product plan, he added, is aligned towards electric fleets, last mile connectivity for vehicles and personal EVs. Mahindra was the first to sell EVs to private customers in the market, with models including the eVerito sedan, “a go-to EV for fleet operators” and a popular option for the small number of private buyers.

After some delays, electric fleets are gaining momentum. Uber has announced it will deploy over 1,000 EVs in a partnership with Lithium Urban Technologies, a Delhi-based start-up that already runs the country’s largest EV fleet. A partnership with Mahindra means over 1,000 of its vehicles are from the automaker. Sanjary Krishnan, Co-Founder and Chief Executive at Lithium, has stressed that  partnerships with the industry are vital for “delivering superior customer experiences.”

State policies are an important factor in driving overall adoption. After all, it is the state where plants are located, and so some are offering skill development incentives to manufacturers, and others are providing land

The new partnership with Uber will roll out 1,000 vehicles in cities including Delhi, Mumbai and Bengaluru for the ride-hailing giant’s Rental and Premier services. The former is an hourly car-sharing rental service launched in August 2020, whilst Premier is an in-app upgrade on the conventional service featuring comfier vehicles, more experienced drivers and shorter pickup times. The partnership will integrate the Lithium fleet into Uber’s offerings, boosting the 100 estimated zero-emission vehicles it currently has in operation throughout India. The company has pledged to scale up EV usage to 2,000 vehicles by mid 2021.

Meanwhile, Ola established its own EV division, Ola Electric Mobility, in 2017. It has ambitions to assemble its own electric two-wheelers in India, following a production launch in the Netherlands after the acquisition of two-wheeler start-up Etergo. Reports indicate that the SoftBank-backed aggregator has been in talks with manufacturers including Bosch and Samsung. Two-wheeler taxis, such as scooters and bike taxis, are extremely popular in India, particularly for short, inner-city trips. The Institute for Transportation and Development Policy estimates that scooters were the most popular vehicle in India over 2018, accounting for more than 79% of vehicles sold. India is also home to the world’s largest bike-sharing fleet, which grew over 2019 to more than 66,000 units.

Other important fleets backed by FAME II legislation include buses, where electrification is also accelerating. JMK Research, an Indian firm specialising in renewables and e-mobility, predicts that India could see as many as 6,490 electric buses arrive on its roads by the end of FY2021-22. By March 2020, there were an estimated 1,031 buses in service. Bengaluru is among the latest to commence new trials, with the goal of serving ten key routes with zero-emission transport. Tata is the biggest electric bus manufacturer in the region.

Role of the state critical

Among India’s 28 states, around 20 have gone on to develop their own EV policies. Delhi, for example, offers an additional 10% subsidy on purchases, an attractive proposition for manufacturers which can then benefit from both local and federal support.

“These state policies are an important factor in driving overall adoption,” says Ray. “FAME is not the only thing looking to support the EV ecosystem. After all, it is the state where plants are located, and so some are offering skill development incentives to manufacturers, and others are providing land.” These non-direct incentives are essential for building the ecosystem at a time when return on investment isn’t necessarily forthcoming, he concludes.