Commercial EV Revolution – The Way to a Clean Future

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Electrifying commercial transport will play a crucial role in reducing the overall carbon footprint of the transportation sector. In this guest article for EVreporter, Ms Ashpreet Sethi, Head – Public Affairs and Government Relations at EVage, makes recommendations for the Indian states to encourage and enable electric vehicle adoption in the commercial vehicle space.

India is making substantial efforts to meet its net-zero carbon emission targets. However, with rising pollution from industries and transportation, clean air has become a distant dream for citizens residing in urban areas. Waking up to “moderately polluted air” has become a regular phenomenon in 20 of the world’s most polluted cities. And these cities are unfortunately too close to home – including the national capital.

Global studies have suggested that transportation is among the most polluting sectors with the highest share of greenhouse emissions. While the situation is grim, developing countries like India show tremendous potential to lead a green revolution. Decarbonising the commercial transport and logistics sector through cleaner forms such as electrification will play a crucial role in actualizing the global ambition for a clean and green planet.

India’s global to ‘glocal’ ambition

India has pledged to achieve net-zero emissions by 2070 at COP26, while other major countries have set a new target of becoming 100% electric by 2040. RBSA Advisors, a consulting firm, estimates the Indian EV market to grow at a CAGR of 90% by 2030.

About 20 Indian states and union territories (UTs) have released their draft and final EV policies and preparing their electrification vision. Fiscal and non-fiscal incentives through central and state policies have given a massive fillip to two-and-three-wheeler segments. However, several states took a conscious call to keep commercial four-wheelers out of the incentive ambit due to a lack of a good product range in this category.

The Indian EV market needs to shift gear

The electric 4W commercial segment has started gaining momentum in India. Global experts and think tanks estimate the highest transport emissions by 2050 if India does not electrify its vehicle (delivery and logistics) fleets. Accelerated adoption of zero-emission commercial EVs could significantly improve air quality and lower carbon emissions. According to our estimates, the running cost of a commercial EV is about 85% lower than its combustion engine counterparts.

The e-commerce sector’s EV drive can be a significant catalyst for higher adoption across cities. With rising fuel prices, there is massive potential for an uptick in demand for commercial and passenger EVs. Moreover, a NITI Aayog and RMI report highlights that EVs sold through 2030 can help India save 474 million tons of oil equivalent (Mtoe), worth INR 15 lakh crore.

Bold measures can lead the way

The commercial electric 4W market is attracting massive investments this fiscal year along with the electric 2W, 3W and 4W passenger segments. India needs to fast-track commercial EV adoption to develop sustainable and innovative clean mobility solutions.

With policies at a developing stage, states could explore the following measures:

Battery manufacturing

Currently, the Indian EV industry is mainly dependent on importing batteries. India can become ‘vocal for local’ by producing batteries and cells locally as we have plentiful raw materials. Significant encouragement to domestic manufacturers through financial incentives, especially start-ups driving the EV revolution, can further lower India’s import dependency.

Additionally, to strengthen the battery recycling and reuse system, the Ministry of Environment, Forest, and Climate Change could mandate standards defining residual value for batteries under the battery management rules. This will make EV manufacturing and purchase financially viable.

For instance, Japan has an active program to reuse batteries for home emergency power- what we popularly call inverters in India. The Japan Battery Recycling Centre (JBRC), established in 2004, is a producer-responsibility organization that helps recycle and reuse waste batteries. JBC bears the cost of delivery and recycling. The residue waste is then segregated after they reach the recyclers and is sold to users of recycled resources or transported to final disposal businesses. This reduces the financial burden on recyclers. India can adopt a similar approach.

Charging infrastructure

Accessible charging infrastructure for all categories, including commercial EVs, will boost EV penetration in India. According to the power ministry, India is significantly expanding its EV charging infrastructure, which has led to a 2.5 times increase in charging stations across nine major cities in the time period between October 2021 to January 2022. However, the government needs to deploy a more comprehensive network of fast chargers for the commercial EV segment to grow.

Measures such as a single-window clearance platform by the Delhi government are transformative steps. The consumer can access the nearest DISCOM portal, compare prices provided by impaneled EV charging infrastructure providers, and buy accordingly. Furthermore, consumers can schedule the installation conveniently through the same platform.

Additionally, a PPP (Public-Private Partnership) model to set up a robust, fast charging network can play a crucial role in accelerating EV charging infrastructure and encouraging mass EV adoption.

An all-inclusive policy with Commercial 4-wheelers EVs

16 Indian states have announced their EV policies, which mainly focus on mass production of electric 2W, 3W and public buses. However, there is no provision for commercial e-4W. With the rapid growth in e-commerce, logistics and delivery sectors, propelled further by the pandemic, it is expected that by 2030 as many as eight million vehicles will be on the road in the urban delivery segment. With rising fuel prices, e-commerce and logistics players will consider electrifying their delivery fleets in a phased manner. Several players have already set internal targets and are part of fleet electrification campaigns, such as Climate Group’s EV100 and NITI Aayog and RMI’s Shoonya. The commercial space is evolving, and it is ripe for central and state policymakers to include commercial e-4W EVs in their policies and provide adequate financial incentives.

EV financing

According to a NITI Aayog and RMI report, India aims to achieve a 30% market share for EVs by 2030. The public and private sector investments are likely to accelerate India’s EV financing sector. However, Indian financial institutions are still hesitant to sanction loans at a lower rate for commercial EVs.

The government must initiate dialogue with financial institutions such as NBFCs, state and private banks and lending companies to provide easy access to finance and persuade the Reserve Bank of India to bring EVs under the priority sector lending ambit. The Inclusion of commercial EVs under the State Bank of India’s green lending initiative can lead the way for other banks to follow and make commercial EVs affordable.

Ecosystem readiness

Central and state governments need to adopt a multiple-fold approach to make the freight and delivery market clean and cost-effective. Authorities can do so by developing a resilient EV readiness plan that:

1. Includes freight and deliveries in EV policies and provides fiscal benefits,

2. Promotes partnerships,

3. Creates awareness about the benefits of adopting commercial EVs,

4. Mandates 100% electrification of mid and last-mile deliveries, and

5. Uplifts start-ups that are bolstering EV manufacturing

Hence, financial incentives under the National Skill Development Corporation (NSDC) to train the current workforce can make India EV ready. Another push toward ecosystem readiness could encourage micro-modular manufacturing to support India’s 2030 carbon emission reduction target.

Carbon trading scheme

India is the largest exporter of carbon credits. To meet the demands of net-zero carbon emissions by 2070, the central government is considering setting up a carbon trading scheme. Carbon trading is buying and selling carbon credits that allow companies to emit a certain amount of carbon dioxide or greenhouse gases. India could encourage the concept of capping and trading carbon credits like the European Union to promote the auto industry to offset higher carbon emissions.

Delaying the need to embrace commercial EV adoption is no longer an option. India has set the bar relatively high with its net-zero ambitions. India can become a role model for other developing nations with implementable solutions to electrify the commercial transport segment. As global leaders have rightly said: the time to act is now as there is no planet B!