NITI Aayog recommends $4.6 billion incentives for battery maker
India’s mobility transition to Electric Vehicles (EV) transition will require a capital investment of Rs 19.7 lakh crore (US$266 billion) in EVs, charging infrastructure, and batteries over the next decade, according to a new report by NITI Aayog and Rocky Mountain Institute (RMI).
The report “Mobilising Finance for EVs in India” identifies a market size of around Rs 3.7 lakh crore (US$50 billion) for the financing of EVs in 2030 — about 80 per cent of the size of India’s retail vehicle finance industry, estimated to be worth Rs 4.5 lakh crore. The draft proposal estimates it would cost firms some US$6 billion over five years to set up manufacturing facilities with the support of government subsidies.
“Currently, the battery energy storage industry is at a very nascent stage in India with investors being a little apprehensive to invest in a sunrise industry,” the report said. The report says that annual domestic demand for battery storage and market size – currently less than 50 gigawatt hours and worth over to US$2 billion – could grow to 230 gigawatt hours and more than US$14 billion in ten years. India’s efforts to promote electric vehicles have been stymied by a lack of investment in manufacturing and infrastructure such as charging stations.
According to NITI Aayog CEO Amitabh Kant, India’s EV ecosystem has so far focused on overcoming hurdles to adoption associated with technology cost, infrastructure availability, and consumer behaviour. Financing is the next critical barrier to accelerate India’s electric mobility transition. End users currently face several challenges such as high interest rates, high insurance rates, and low loan-to-value ratios. “The need of the hour is to mobilise capital and finance towards EV assets and infrastructure,” said Amitabh Kant. “As we work to accelerate domestic EV adoption and push for globally competitive manufacturing of EVs and components such as advance cell chemistry batteries, we need banks and other financiers to step up to lower the cost and increase the flow of capital for EVs.”
Reengineering vehicle finance and mobilizing public and private capital will be critical to accelerating the deployment of the 50 million EVs that could be plying on India’s roads by 2030, says Clay Stranger, Senior Principal, RMI. The solutions include financial instruments such as priority sector lending and interest rate subvention. Others are related to creating better partnerships between original equipment manufacturers (OEMs) and financial institutions by providing product guarantees and warranties. The solutions include financial instruments such as priority sector lending and interest rate subvention. Others are related to creating better partnerships between original equipment manufacturers (OEMs) and financial institutions by providing product guarantees and warranties.
The vehicle makers feel that EVs will dominate the market by the end of the decade as prices become more aligned and infrastructure and technology improves, hopefully with help from the government. The government will have to play a significant role in developing infrastructure for EVs. “In three to five years, we will have modern electric platforms in India” and cars with internal combustion engines will start to be phased out, says Anish Shah, deputy managing director of Mahindra & Mahindra Ltd, one of the country’s biggest automakers. He says: “2030 is what we see as a tipping point where electric will overtake ICE engines in terms of sales.”
