By Dr. Gyan Pathak
India had a dream to unlock a $200 billion opportunity in transitioning to Electric Vehicle (EV), but trailing far behind the target, chiefly due to policy paralysis and lack of financing. There have been many other challenges too that remained unaddressed.
Even though the recently released report of NITI Aayog titled “Unlocking a $200 Billion Opportunity: Electric Vehicles in India” does not take into consideration the latest international challenges including the Trump’s trade war and constraints of importing or producing rare earth materials, the other challenges it mentions in the way of India’s transition to Electric Vehicles seems to be too difficult to overcome in short term.
India seeks to attain a 30% share of electric vehicles, in the total vehicles sold, by 2030. However, India’s transition has been very slow, and progressed to only about 7.6 % of the sales in 2024 being electric. Thus, it has taken nearly 10 years to reach a penetration level of 7.6% and now needs to increase this share by over 22% in the next 5 years alone.
In order to achieve its ambition, India has set up a National Mission on Electric Mobility and has also introduced specific schemes aimed at providing financial support to further the adoption of electric vehicles. The first of these schemes was the Faster Adoption and Manufacturing of Electric Vehicles (FAME– 1). This was in operation from 2015 to 2019 and had an allocation of Rs 895 crores. This was followed by a more ambitious FAME – 2, which was in operation from 2019 to 2024 and had an allocation of Rs11,500 crores. This has then been followed by an equally ambitious programme known as the PM e-Drive, which has been launched on 2024 and will be operational till 2026. It has an allocation of Rs10,900 crores.
The achievement so far is not satisfactory at all, and hurdles in the way are by and large still unaddressed. The sale of EVs in India went up from 50,000 in 2016 to 2.08 million in 2024 taking the total EV stock in the country to 5.45 million in 2024. Thus, EV penetration rate in India stands at only 7.66 per cent, and is obviously off the track from achieving its target of reaching a 30% by 2030.
If EV penetration in India is compared with the US, EU and China for different types of vehicles, it can be seen that India has done fairly well in the 2-wheeler and bus segments, but has been slow in e-cars and electric trucks. It is a leader in the electric 3-wheelers segment. China is the leader in all categories, except 3-wheelers.
As far as electric trucks are concerned, this has been very slow. Out of 8,34,578 trucks sold in India in 2024, only 6,220 were electric. 95% of these (5940) were of less than 3.5 tonne capacity. These are generally used for carrying short haul freight, largely in urban areas. In fact, several countries do not count trucks of less than 3.5 ton capacity in the category of trucks, given their usage pattern. Only 280 of these electric trucks sold in India in 2024 were of more than 3.5 ton capacity, which are used for longer hauls.
The NITI Aayog report has enumerated many challenges behind this slow progress in the EV transition in the country. The top challenge, it says is the challenge of financing vehicles, especially electric buses and electric trucks, due to several risks perceived by financial institutions. The main challenge within this is that the truck and bus ownership is highly fragmented with most of the owners being small players. Since electric trucks and buses cost about two to three times as much as their ICE equivalent, the higher amounts of loan and equity make it difficult for the small players to shift to electric buses and trucks. Financial institutions are also uncertain about the ability of small players to service the higher EMI. The near absence of reliable e-Truck and e-Bus performance data makes it more difficult for them to take lending decisions.
Inadequacy of charging facilities on one hand and low utilisation of existing public charging facilities on the other, is another challenge that plagues the transition. There have been problems in getting upstream power supply connections from power distribution companies and there are significant differences in the fee structures both for getting the connections as also in the tariff structures for the electricity supplied. Many Resident Welfare Associations (RWAs) perceive a safety risk with charging stations and so do not permit their establishment in the housing colonies.
The other challenges in respect of charging that the cost of charging at public charging stations are much higher than the cost of home charging, due to the margins needed by the charge point operators, the absence of subsidies, and the fact that such charging is liable to pay 18% GST. There are difficulties in securing land, both within cities and on highways. Many of the public charging facilities are poorly utilised, leading to a serious problem of viability. DISCOMs, ULBs, transport departments, and state nodal agencies rarely collaborate effectively, leading to planning gaps and slow infrastructure rollout. The absence of an integrated app that allows locating the nearest charging station, booking charging time and paying for charging makes charging EVs inconvenient.
There is also lack of adequate awareness regarding EV performance among public and private stakeholders, including financiers, in limiting EV adoption rates. National and state-level awareness efforts are fragmented or non-existent, highlighting the lack of public education campaigns. The TCO benefits are unclear to users, as many consumers only see the higher capital costs but do not recognise the savings during use, compared to ICE vehicles. Different states offer different kinds of incentives such as exemption for permits of lower tax rates, to encourage EV adoption. However, the range of these is often confusing, thereby hampering adoption. Persistent misconceptions like fire safety, battery degradation, range anxiety and resale anxiety continue to suppress buyer interest.
Inadequate data and regulatory gaps hinder evidence based decision making. VAHAN data does not accurately capture data on different categories of electric vehicles, making policy design, subsidy targeting, and progress monitoring difficult. Absence of unique battery IDs weakens tracking, resale, and recycling ecosystems, hindering battery lifecycle transparency and market trust.
NITI Aayog has broadly recommended that India to overcome the hindrances should move from incentives to mandates/ disincentives; Focus on a subset of the vehicle fleet, based on the potential benefits from transitioning such vehicles to electric and the ease of providing the required eco-system for them; Focus on saturation in limited geographies rather than on an even distribution across the country; Enabling finance for e-buses and e-trucks; Focus on services delivered rather than assets procured; Shifting capital costs to operating costs; Scaling R&D on new battery technologies; Strategic scaling of charging infrastructure; and Enhance awareness and information systems. (IPA Service)
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