On 28th March, the European Parliament and Council reached an agreement that all new cars sold and registered in Europe will be zero emission cars by 2035.

The agreement sends a strong message to manufacturers and citizens that Europe is moving towards zero-emission mobility.  According to the council, the new legislation will make the European Union’s transport system more sustainable, provide cleaner air for Europeans, and marks an important step in delivering the European Green Deal. The aim is to make Europe the world’s first climate-neutral continent by 2050.  Many European passenger vehicle manufacturers are already working towards making affordable electric cars.

What impact will this have on India?

Prima facie, the Indian automotive industry will not have any impact. While Europe can ban vehicles running on fossil fuel, India cannot. Though the government is currently pushing for the use of electric vehicles (EVs) and aiming to cut down on its oil imports, it has no plans to completely ban the use of petrol- and diesel-powered vehicles soon. India’s electric success has been limited to its two-wheeler segment and it is a difficult task to replicate the same for larger vehicles.  The economics of 2-wheeler electrics works well in the country, while for larger vehicles, it won’t.

India will see the transition in phases with the introduction of strict emission norms (e.g., BS VI – Phase II, RDE and E20 compliance engines). The government would initially support the transition of two-wheelers and three-wheelers to EVs in a phased manner.

Considerable planning and execution are required to simultaneously develop a complete ecosystem around EVs, which India is currently lacking. The supply of electricity isn’t consistent in many parts of India. The switch is highly challenging in the short-to-medium-term (3 – 7 years), and it will impact the industry that’s an exporter of ICE vehicles.

Many global vehicle manufacturers intend to start selling EVs in India, however, they are not committing to setup huge production operations yet and are preferring to gauge demand in the country for the next couple of years. This means that manufacturers first want to bring in realistic solutions (hybrids) that work for the energy transition.

Current adoption of EVs in India

In the two-wheeler segment, EVs contribute about 4.5% of the total two-wheelers sold in India, and by 2030, it is estimated that EVs will contribute to over 52% of the sales. Last-mile connectivity modes like three-wheelers are likely to be 70% electrified by 2030.

Weak consumer sentiment, lack of charging infrastructure, and a high payback period are holding back the adoption of electric passenger vehicles for personal use in India. EVs contribute about 1.3% of the total passenger vehicles sold in the county. By the year 2027, it is estimated that EVs will contribute about 5.3%, and by 2030 about 12%.

In the commercial vehicle segment, electrification is currently limited to the bus segment. The small commercial vehicle segment (GVW < 3.5 tn) will lead the electrification in the future and electrification will play a leading role in last-mile connectivity.

To conclude

While the move to EVs is inevitable, the Indian government will give reasonable time to the auto industry for this transition. India will see the end of ICE sometime beyond 2035 in select vehicle segments, e.g., two-wheeler, three-wheeler, and small commercial vehicles (majorly used for last-mile connectivity).

How F&S mobility experts can help in EV transition

Frost & Sullivan is a leading growth opportunity analytics company that has partnered with corporations, cities, governments, and investor communities over the past 60 years to identify, prioritize, and execute opportunities that power clients toward a future shaped by growth.

Electrification is now a reality requiring constant alignment to continue rapid growth in the next decade. Frost & Sullivan’s Mobility team is well-placed to support clients’ growth initiatives across the spectrum. Our E-mobility capability covers the entire EV-eco system, which includes product development, material and batteries, components, sales/ marketing, charging, and end-of-product life.

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