This article is more than 2 years old.

September 19, 2017 This article is more than 2 years old.

India is shifting gears.

The world’s fifth-largest auto market is readying for a stupendous transformation: moving completely towards electric vehicles (EVs) by 2030.

This is part of the Narendra Modi government’s vision to helm a renewable-energy revolution in the country. It reckons that the automobile sector’s massive conversion will cut its oil bill by some $60 billion, reduce emissions by 37%, and curb the burgeoning demand for road infrastructure over the next 13 years.

Recently, India’s road transport minister Nitin Gadkari quite bluntly made the government’s intentions clear. “We should move towards alternative fuel…I am going to do this, whether you like it or not,” Gadkari told India’s automobile lobby group, SIAM, on Sept. 07. “And I am not going to ask you. I will bulldoze it.”

So how does a country of 1.3 billion people, with 21 million vehicles sold annually, embark on such a gigantic drive? It will obviously require the united efforts of the administration, the private sector, and the general public.

But before that, why the transformation at all?

Desperate India

The country’s shift to EVs was inevitable, if not imminent, for several reasons.

A signatory to the Paris climate agreement, India is obligated to bring down its share of global emissions by 2030.

Many of its cities are among the world’s most polluted, suffering utter degradation over the years, and vehicular pollution is one of the major causes for this.

Besides, India imports 82% of its oil requirements, making Asia’s third-largest economy desperate for alternatives to fossil fuels. After all, it is estimated to spend up to $85 billion in financial year 2018 on oil imports, according to India’s oil ministry. And the automobile sector forms a bulk of this demand.

So what is the government doing?

In 2015, India had launched a scheme, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME), to promote clean fuel technology cars. But it failed to take off.

Now the Modi government is set to roll out a national policy for EVs by December this year. It will set the standards and specifications for the vehicles and provide guidelines to incentivise their use. It is also expected to provide clarity on the rules regarding the manufacturing of and subsidies for their batteries.

As a precursor, India’s new and renewable energy ministry has been appointed the nodal agency to help procure some 10,000 electric cars this year to replace existing government vehicles.

Various state governments are making their own plans in this regard.

Last week, the southern state of Karnataka approved a policy to promote research & development in electric mobility. It has now made it mandatory to have charging points and pods in all high rises. Maharashtra had waived various taxes for EVs when it became India’s first state to have an electric mass mobility system—in May, taxi aggregator Ola began operating 200 EVs, including taxis, buses, e-rickshaws, and auto-rickshaws in the state’s Nagpur city.

Primarily, there are two areas which the government needs to focus on.

Battery cost: EVs are expensive primarily due to their costly batteries which are mostly imported. “Owing to this challenge, we see EV demand continuing to be low in India,” a spokesperson for Tata Motors, India’s largest automaker, told Quartz.

Today, just about 22,000 EV units—a mere 2,000 of them being four-wheelers—are sold annually in India. The National Electric Mobility Mission Plan, launched in 2015 to achieve fuel security, wants sales of electric and hybrid cars to hit six to seven million by 2020, CNN reported.

“The government needs to subsidise battery and lithium imports or incentivise companies to set up this business in India,” Yaquta Mandviwala, a partner at Boston-headquartered consultancy firm Bain & Company said.

Over the past few years, however, prices have declined from $600 per battery unit in 2012 to $250 in 2017. They are further expected to fall to $100 by 2024, making it cheaper than the capital cost of petrol vehicles. “Several forecasts are predicting the price per unit of electric car to be equivalent to that of a gasoline car by 2025,” Amitabh Kant, CEO of NITI Aayog, the public policy think-tank headed by prime minister Modi, said last week. “That will be the tipping point.”

The government also plans to set up a lithium-ion battery-making facility under Bharat Heavy Electricals.

Nevertheless, it’s not just batteries alone.

Infrastructure: ”The support infrastructure needs to be in place—charging infrastructure and a robust smart electricity grid to take the additional load,” Mandviwala said.

There are only 100-odd charging stations across India, which makes it difficult for vehicle owners to undertake long travels. That means EVs are still used mostly within city limits. In China, in contrast, the State Grid Corporation of China plans to install 100,000 charging stations along 11 major routes by 2020, covering 202 cities and 36,000km of expressway.

The task is, thus, cut out for India. “It can’t be business as usual for industry and the government,” Kant of NITI Aayog said.

How are the companies reacting?

India’s first electric car was launched in 2001 by REVA, a Bengaluru-based company. Back then, it cost Rs250,000 per unit. (Mumbai-based Mahindra bought over REVA and renamed it Mahindra Electric—it remains the only electric passenger vehicle-maker in India.)

Since then, except for 2016 when the segment saw 36% growth to 22,000 units, including four- and two-wheelers, the EV industry has been subdued.

Nevertheless, companies are increasingly embracing EVs.

On Sept. 14, Suzuki, the parent firm of India’s largest car-maker, Maruti Suzuki, announced its plan to set up a $600 million lithium ion-battery factory. Mahindra, too, is investing some Rs600 crore to ramp up its EV division, and is expected to launch electric variants of its popular SUVs, Scorpio and XUV 500.

And it isn’t just about vehicle makers.

Engine manufacturer Cummins India is ramping up research on electric mobility solutions. Bus-maker Ashok Leyland has announced a strategic partnership with SUN Mobility, a transportation-solutions startup, to develop a battery swapping system for electric buses. Mumbai-based JSW Energy, too, plans to invest $623 million in electric cars, batteries, and charging infrastructure.

“We believe the auto industry and manufacturers are willing to make this change since most of these have electric car platforms ready,” Arun Malhotra, managing director of Nissan India, said.

However, it may not be an easy ride.

For one, securing long-term battery supplies and developing a battery management system technology that helps recharge batteries are tough. “There are currently only a few large global battery suppliers such as LG Chem, Samsung SDI, BYD—no Indian company seems to be doing this currently,” Mandviwala said.

Are Indians ready?

First things first: Value is everything.

“Unless the EV is good for the customer, I can’t push him to buy it,” RC Bhargava, chairman of Maruti Suzuki, said on Sept. 12. “Before I start pushing EVs, I have to make sure they give him the value that they should give to him, which is what a customer expects from Maruti.”

While costs are the primary problem, they are not the only one.

EVs in India average about 120km on full charge, making them unsuitable for long drives. Then there is the lack of speed—the top two India-made battery-powered cars have a top speed of 85km/hour. That can turn off buyers.

Convincing the price-conscious Indian consumer, even if the infrastructure is in place, will still come down to two factors: the cost of ownership and vehicle quality. While EV costs have fallen, boosting demand, better performing vehicles will be key to achieving the 2030 target.

No doubt that companies like Tesla are making a beeline for the Indian market, and India’s uber rich have begun pre-ordering the Tesla Model 3, even before the product is launched in India.

“However, for a significant proportion of vehicles to be electric, a lot more needs to be done,” Mandviwala said. “Getting to 100% e-vehicles over the next decade is unlikely, but I do expect it to be a significant share of the market.”