How PLI schemes will promote EV industry

The Indian automobile industry has outperformed its international competitors over the past ten years by making its manufacturing process greener, or by lowering the intensity of greenhouse gas (GHG) emissions and energy use.

The achievement of India's commitment to lowering its carbon emissions and reducing its reliance on fossil fuels will be largely dependent on clean energy mobility. Importantly, CO2 emissions from new vehicles have not been declining appreciably over the past few years. For 2-wheelers, it has slowed, and for passenger vehicles, it has stopped. Customers switching to higher CO2 emitting SUVs and higher cc two-wheelers appears to be one of the main causes of this slowing CO2 reduction. To combat this, the government is enacting stricter CO2 emission standards for passenger vehicles. 

India's climate action, which was presented at the 26th Conference of the Parties (COP26) of the United Nations Framework Convention on Climate Change (UNFCCC), consists of five components:
1. By 2030, double non-fossil energy capacity to 500GW.
2. By 2030, renewable energy sources will meet 50% of global energy needs.
3. From 2022 to 2030, the total projected carbon emissions will be reduced by one billion tonnes.
4. By 2030, the economy's carbon intensity will have decreased by 45% from 2005 levels.
5. Achieving net-zero emissions by 2070 as planned.

With numerous model launches, an expanding distribution network, and a strong push from start-ups, the 2-wheeler and 3-wheeler segments have clearly taken the lead in EV adoption in India. Among other developments over the past few months, there have been more OEM investment announcements (both start-up and incumbent), brownfield and greenfield capacity expansion, partnerships, and government policy announcements.

Key trends in the electric 2-wheeler industry:

- New entrants are driving the market.
- Okinawa Autotech, the largest company, holds nearly 20% of the volume market share.
- 93% of the volume is made up of the top 10 businesses.
- With a volume share of almost 18% in electric 2-wheeler sales, Maharashtra leads the other Indian states, followed by the previous leader Karnataka in second place. This is largely due to state government incentives.
- 84% of all electric 2-wheeler sales in the nation are concentrated in the top 11 states.
- Delhi has the highest 2-wheeler electric penetration rate in the nation at 8.4%.

Electric 3-wheelers have a favourable cost of ownership that is now well established, and EVs have successfully penetrated the market. However, lead-acid battery vehicles predominate there. Bajaj Auto, the market leader, has not yet entered the electric 3-wheeler segment, but the launch of its new models should increase adoption.

Key trends in electric 3-wheelers:

- Although the market is very fragmented, it is also very electrified.
- YC Electric, the largest company, has a 10% volume market share.
- Less than 40% of the volume is accounted for by the top 10 firms.
- With more than one-third of all consistently registered electric 3-wheeler vehicles, Uttar Pradesh is the segment's largest market.
- 74% of the total volume is made up of the top 11 states.
- Delhi and Bihar are the two states with the highest sales of electric 3-wheelers, followed by Uttar Pradesh.

In comparison to other major global auto markets, the average price of passenger vehicles sold in India is significantly lower. Accordingly, India would require much more time than developed markets to reach price parity between ICE and EV models. Additionally, India offers lower incentives for electric passenger vehicles than auto markets that experienced a significant shift to EVs. The launch of numerous models by industry leaders and a significant drop in battery prices are the main factors influencing the uptake of electric passenger vehicles.

Key trends in electric Passenger Vehicles:

- One state and one company control the majority of the market.
- More than 80% of the volume market is owned by Tata Motors.
- Maharashtra is the market leader in sales with a 33% volume market share in FYTD23 and a 2% EV penetration rate.
- Close to 90% of the total volume is distributed among the top 11 states.

Automobile OEMs and supporting industries must make sizable investments in EV and other zero-emission fuel technology. Additionally, the auto industry needs assistance in promoting EVs and boosting initial demand. To make the transition possible, the government and industry must collaborate on a number of fronts, including through supportive policies, new investments from industry participants, increased EV availability, charging infrastructure, investments in R&D for technological advancements, and raising awareness.

Even though they are targeted, the Indian government's numerous incentive programmes are essential in promoting the use of electric vehicles there. The government has made announcements about policies that will encourage demand as well as ecosystem development. A total of Rs. 870 billion has been allocated to incentives to stimulate demand for FAME 2 benefits, and they have been extended until March 2024. Investment incentives have been made available for OEMs and ancillaries for emerging technologies under the Production Linked Incentive (PLI) scheme. One of the key elements of an EV, the Advanced Chemistry Cell (ACC) or battery, has a PLI scheme with a total investment of Rs. 180 billion.

Currently, 17 of the 28 Indian states have adopted EV policies at the state level. In addition, while three other states were supposed to begin developing theirs early this year, Himachal Pradesh has approved its draught policy.

The PLI programme aims to promote cutting-edge and modern automotive technology and components. The programme should increase localization and investment in India's automobile industry. Along with other incentives like FAME II, PLI for ACC, and state-level incentives, the PLI incentives should encourage the use of newer vehicles like electric vehicles (EVs), which should help narrow the price gap between EVs and ICE vehicles.

The scheme is classified as:

1) Champion OEM Incentive Scheme: Applicable to battery electric vehicles and hydrogen fuel cell vehicles of all segments;
2) Component Champion Incentive Scheme: Applicable to the Advanced Automotive Technology components of vehicles completely knocked down (CKD)/semi knocked down (SKD) kits, vehicle aggregates of 2-wheeler, 3-wheeler, passenger vehicles, commercial vehicles and tractors.

The PLI plan calls for a quicker localization of Li-ion battery production in India. Advanced chemistry cell localization under PLI, however, is a difficult task, so it will be interesting to see how the chosen companies handle it. This is a contributing factor to why some important auto OEMs, like Maruti Suzuki and Ather, have chosen not to take part in the ACC PLI scheme.

List of listed entities participating in EV-related PLI programmes:

1. AUTOMOTIVE AXLES LTD:

A joint venture between the Kalyani Group and the US-based Meritor Inc. is called Automotive Axles Limited (AAL). Drive axles, non-drive axles, front steer axles, speciality and defence axles, drum brakes, and disc brakes are all manufactured by the company. It has manufacturing facilities in Jamshedpur and Mysore, both in Karnataka (Jharkhand). The business is currently in talks with customers (important OEMs) about creating e- axles for them.

2. BOSCH LTD:

Robert Bosch Company's subsidiary in India is called Bosch Limited. The company has 18 manufacturing facilities in India and is present in the fields of consumer goods, energy, and building technology as well as automotive and industrial technology. Chassis Systems India, Bosch Automotive Electronics India, Bosch Electrical Drives India, ETAS Automotive India, Robert Bosch Automotive Steering, and Automobility Services and Solutions are just a few of the auto companies that fall under the umbrella of Bosch India. By 2026, the company plans to invest Rs. 20 billion in digital mobility and advanced automotive technologies in India. Currently, the company manufactures all EV parts, including batteries, individual parts, and e-axels.

3. LUMAX AUTO TECHNOLOGIES LTD:

Lumax Auto Technologies Limited produces automotive parts as a member of the D.K. Jain Group. The business has more than 30 years of experience supplying OEMs and the aftermarket with automotive components. To expand into new markets for electronics, electrification, and light-weighting, the company plans to invest $150 million in capital expenditures and another $80 to $100 million in acquisitions. Plastics and the electronic sector are the areas of focus for either an acquisition or a JV. In order to produce and supply onboard antennas and other vehicle communication products to the Indian automotive industry, the company announced a JV with the Japanese firm Yokowo.

4. SCHAEFFLER INDIA LTD:

The German company Schaeffler Technologies AG & Co. has a subsidiary in India called Schaeffler India (also known as Schaeffler Group). In order to improve mobility across three market segments—industrial, automotive technologies, and automotive aftermarket—Schaeffler India is working to develop new technologies, products, and services. For e3 wheeler in 2020, Schaeffler created an automatic two-speed transmission and worked with significant OEMs to implement it. The item is based on a mechatronics system, which combines mechanical, electrical, electronic, and software components to create a smart powertrain solution.

5. SHARDA MOTOR INDUSTRIES LTD:

Sharda Motor creates suspension and exhaust systems. The business and Kinetic Green Energy and Power Solutions Limited have formed a joint venture (JV) to develop battery packs with battery management systems (BMS) for electric vehicles (EVs) and stationary applications in India.