Electric mobility in India: an aspirational dream or a foreseeable reality?

Suhana Islam Murshedd

AQUILAW, Kolkata

suhana.islam@aquilaw.com

Kanchan J Modak

AQUILAW, Delhi

kanchan.modak@aquilaw.com

Milind Anand

AQUILAW, Kolkata

milind.anand@aquilaw.com

Introduction

As the world looks towards a sustainable future, India stands at the verge of a major transportation upgrade, where the promise of e-mobility shines as a tangible, foreseeable reality. As India’s urban landscape faces the challenges presented by burgeoning environmental concerns, electric vehicles (EVs) emerge as a compelling solution, bridging the gap between sustainable living and economic progress.

The nation’s ambition to reduce its dependence on crude oil imports, coupled with the global momentum towards sustainability, has spurred significant interest in electrifying India’s transport ecosystem. From visionary policies to emerging indigenous innovations, India's pursuit of e-mobility symbolises a convergence of environmental stewardship, technological advancements and economic opportunities.

While India is the third largest automobile market globally in terms of sales, EV penetration in India remains low at 7.44 per cent (2024). Questions around affordability, infrastructure readiness, limited battery production and consumer acceptance towards new technology, remain core challenges. Addressing these issues, along with increasing the public’s awareness about the long-term cost of EVs and the environmental advantages, is crucial for EV adoption.

This article delves into the interplay between ambition and pragmatism, exploring whether India’s e-mobility drive is supported by its evolving regulatory framework. 

Market dynamics, the battery ecosystem and EV sector potential in India

In 2024, India saw a record total EV sales of 1.67 million units, marking a 42 per cent year-on-year increase.[1] This growth was a direct result of the aggressive policies at the union and state level and technological innovation responding to consumer demand. With initiatives like the Faster Adoption and Manufacturing of Electric Vehicles in India Phase II Scheme, otherwise known as the FAME II scheme, and the new Electric Mobility Promotion Scheme 2024 (EMPS), the government continued to subsidise EV adoption, particularly for two and three-wheeler vehicles, to sustain momentum in the sector.

Further, in a complementary step, the Union of India government has also imposed a restriction on the lifespan of diesel vehicles of up to ten years and for petrol vehicles up to 15 years, under its vehicle scrappage policy, a move that aims to further accelerate EV adoption. Substantial investments have also been made in recent years in domestic battery manufacturing, based on effective government incentives, such as the Production Linked Incentive (PLI) Scheme for advanced chemistry cells.

As one dives deep into the alternate energy sources for transportation, the leading EV battery categories appear to be lithium-ion batteries and nickel hybrid batteries. Among these battery types, the technology for battery manufacturing and industrial applications have proven lithium-ion batteries to be more efficient, due to their power-to-weight ratio, high energy efficiency, long life and low self-discharge.[2]

India’s EV battery ecosystem is at a pivotal moment, as it seeks to reduce import dependency and foster domestic innovation. With the EV battery market growing exponentially in Asia Pacific, the demand for producing home-grown lithium-ion batteries in India has also surged. However, despite its promising trajectory, the sector still faces significant challenges, particularly in light of its heavy reliance on imports of critical components, such as lithium-ion batteries and cells, which in turn, gives rise to concerns about supply chain vulnerabilities and long-term sustainability.[3]

To address the import-dependency challenge, the Indian government has introduced the Advanced Chemistry Cell (ACC) PLI scheme, which is part of the broader ‘Make in India’ initiative. Involving a substantial outlay of INR 18,000 crores (approximately USD 2.2bn),[4] the PLI scheme enables the disbursement of benefits, such as quarterly subsidies to battery manufacturers who fulfil the minimum investment and domestic value-addition criteria. This programme is designed to enhance India’s battery production capacity, reduce the cost of batteries and attract foreign investments in cutting-edge battery technologies​.

With limited global lithium reserves, the need for a sustainable battery ecosystem is paramount. While the initial extraction of lithium ore and its conversion into batteries is vital, the long-term success of this sector hinges on an equally robust battery recycling framework. That said, India is also making significant strides in the exploration of critical minerals like lithium, cobalt and nickel. Geological surveys are driving efforts to mine domestic reserves in regions like Rajasthan and Karnataka,[5] while partnerships with global leaders aim to establish a sustainable battery supply chain. Simultaneously, India is investing in alternative battery chemistry, including sodium-ion and solid-state batteries, which promise greater efficiency, safety and environmental sustainability.[6]

Complementing these advancements, the country is also embracing battery-swapping technology to address challenges like range anxiety and charging times, particularly in regard to two and three-wheeler vehicles.

The regulatory framework for the EV sector in India

India’s focus on EVs began with the launch of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME I) Scheme in 2015. The FAME I Scheme sought to accelerate the adoption of hybrid and electric vehicles through demand incentives for consumers in the form of upfront reduced purchase prices, technology development and the development of charging infrastructure. The scheme provided subsidies for hybrid cars, electric two-wheeler vehicles, three-wheeler vehicles, four-wheeler vehicles and public transport, initiating the shift towards cleaner mobility solutions. Building on this progress, the FAME II Scheme was introduced in 2019, which continued the support for hybrid vehicles, but only in terms of the four-wheeler vehicle category. In addition to this, demand incentives were also introduced for vehicles fitted with advanced batteries that satisfied certain performance criteria. In 2021, the Union Government of India introduced the PLI Scheme for automobiles and automobile components and the national programme on advanced chemistry cells, under its umbrella ‘Make in India’ initiative. Under the PLI Scheme, the disbursement benefits can be secured up to 2026–2027 on the basis of the fulfilment of minimum domestic manufacturing criteria for the production of EVs, advanced automotive technologies and critical components, like batteries.

Another flagship initiative, the EMPS, was introduced in 2024, with a focus on low-end electric two-wheeler and three-wheeler vehicles that fall below a specified ex-factory price threshold. The incentives have been extended to original equipment managers (OEMs) under the phased manufacturing programme. Moreover, the EMPS also encourages state governments to offer a range of fiscal and non-fiscal incentives, such as concessional road tax, toll tax, registration charges and parking fees, etc.

To consolidate various incentive programmes and in supersession of the FAME II Scheme and the EMPS, the PM Electric Drive (PM E-Drive) Scheme, implemented with effect from 1 October 2024, extends the relevant subsidies to a broader range of EVs, including two-wheeler vehicles, three-wheeler vehicles, buses, trucks and even electric ambulances. However, unlike the FAME II Scheme, it notably excludes electric four-wheeler vehicles and hybrid vehicles from the subsidy benefits to incentivise the use of pure EVs in the commercial and public transport space.

In tandem, various state governments have taken proactive measures to complement the central government’s policies. Maharashtra, Karnataka and Tamil Nadu, among others, have introduced state-specific EV policies offering benefits like tax exemptions, subsidies for the purchase of EVs and incentives for setting up manufacturing units related to EVs. For instance, Maharashtra’s EV Policy 2021 aims to achieve a 10 per cent share of new EV registrations by 2025, while Tamil Nadu has targeted the establishment of EV parks and battery manufacturing hubs.[7] Gujarat, with its forward-looking EV policy, provides substantial subsidies for the buyers of EVs and promotes investments in EV startups and innovation hubs.[8] In addition to direct incentives, states like Delhi have prioritised the development of charging infrastructure, mandating the installation of such infrastructure in residential and commercial spaces.[9] Rajasthan and Kerala have embarked on renewable energy integration in regard to the power for EV charging networks, ensuring a holistic and green mobility ecosystem.

Complementing the EV-specific policies are the globally recognised corporate average fuel efficiency (CAFE) norms adopted by the Government of India in 2017, through the implementation of the Bharat stage emission standards (BSESs). The CAFE norms measure the average fuel consumption against the sales made each year, by car manufacturer, thereby assessing the carbon footprint of each car manufacturer. All passenger car manufacturers are rewarded with super credits for producing and selling EVs and plug-in hybrid EVs. These super credits help car manufacturers comply with the BSESs and the CAFE norms.

Global insights and lessons for advancing the EV sector in India[10]

The development of the EV sector is based on the foundation of an enabling policy framework. Countries, such as Norway, have demonstrated the impact of comprehensive incentives, including tax rebates, subsidies and reduced registration fees, in regard to the acceleration of EV adoption. A well-structured policy environment in India, complemented by long-term incentives, can stimulate demand and encourage both manufacturers and consumers to embrace sustainable mobility solutions.

The creation of a robust charging infrastructure is another critical area where India can benefit from global experiences. China’s success, for instance, lies in its integration of government-led initiatives with private sector partnerships, ensuring seamless accessibility to charging infrastructure for EV users.

Germany’s leadership in the EV sector has been driven by its commitment to innovation and technological advancements, underpinned by substantial public and private investments. For India, fostering a culture of innovation through incentives for local manufacturing, skills development and battery technology research, will not only reduce its dependence on imports, but will also position the country as a global hub for EV production. Strategic alliances with global leaders in EV technology could further expedite this process.

Conclusion

From aggressive government policies to increasing consumer awareness in regard to the benefits of EVs, it is safe to say that India is ready to achieve its ‘30 by 30’ mission, namely 30 per cent EV penetration by 2030. The country’s ambitious goals, underscored by policies like the FAME Scheme, PM E-Drive Scheme and state-level EV incentives, highlight a clear intent to embrace sustainable transportation. The rapid increase in EV adoption, particularly in regard to two and three-wheeler vehicles, and burgeoning investments in battery manufacturing and charging infrastructure, suggest a sector on the brink of transformation. While the dream of electric mobility is inspiring, its realisation hinges on consistent policy execution at union and state levels, technological innovation and consumer confidence.

India’s journey towards an e-mobility revolution has immense potential benefits. The possibility of new export restrictions on technologies used to extract minerals vital for the EV sector,[11] coupled with global trade policies, may create an opportunity for India to emerge as a leader in sustainable energy solutions. By fostering an export-driven approach, which goes beyond the ‘Make in India’ initiative, and incentivising the production of EV components and batteries, coupled with a focus on pure EV units (as opposed to hybrid vehicles), India can establish itself as a reliable alternative in the relevant global markets.