December 13, 2024 : KPMG in India and CII has released a report titled “Enabling Infrastructure Changes Through Policies for Growth of EVs”. The report comes at a pivotal time as India’s economy is set to grow from USD 3.7 trillion to over USD 5 trillion in the next three years, positioning itself as the world’s third-largest economy. While the booming automotive industry is driving this economic growth, it is also contributing to higher oil import bills and CO2 emissions.

Electric Vehicles (EVs) are emerging as a transformative solution, in line with India’s COP26 commitment to transition to 100% zero-emission vehicles by 2040. With EV sales reaching 1.2 million and achieving 5% market penetration in FY24, the shift toward electric mobility is rapidly gaining momentum. The report identifies four key pillars essential to accelerating EV adoption: Physical Infrastructure (expanding charging networks and improving battery recycling), Power Infrastructure (managing demand and integrating renewable energy), Economic Infrastructure (ensuring affordable financing and optimized taxation), and Social Infrastructure (raising stakeholder awareness and promoting education).

Key Findings:

Physical infrastructure – Challenges Hindering Charging Infrastructure Growth:
· High setup costs (₹15-20 lakhs for a 60kW station) and low utilization rates deter expansion.

· Multiple connector types (CCS, CHAdeMO, Bharat AC/DC-001) lead to hardware incompatibility and low utilization.

· Lack of Unified Access Platforms: No universal system to locate and access charging stations.

Power infrastructure 03 Need for augmentation and green energy:
· Infrastructure and Future Demand: India’s installed power capacity is approximately 430 GW, with an additional 156 GW under construction. By 2032, total capacity is expected to reach 900 GW, comfortably outpacing the anticipated peak demand of 370 GW by 2030.

· While the electricity demand for EVs at 30% penetration is estimated to add only 1-2% to the total demand by 2030, the infrastructure is well-positioned to meet this growth.

· Challenges of EV Charging: The push for fast-charging stations for electric vehicles (EVs) could introduce technical challenges such as phase imbalances, voltage fluctuations, and power quality issues in distribution networks. These may strain distribution assets like transformers and capacitors. DISCOMs need to implement smart grid technologies and storage solutions to address these challenges, particularly in urban centers.

Economic infrastructure:
· GST Parity for EV Components: The current inverted GST structure, where EV components are taxed at 18-28% compared to 5% for EVs, creates financial challenges for OEMs, battery-as-a-service businesses, and EV owners. A uniform 5% GST across EVs and components would reduce working capital blockage, promote battery leasing, and lower replacement battery costs.

· Improving EV Financing: EV financing options are limited and less favourable than those for ICE vehicles, with higher down payments, shorter loan durations, and higher interest rates.

· To address this, the government can add EVs to the priority sector lending list, encourage public sector banks to lead fleet transitions, and promote partnerships between financiers and new-age companies offering battery-as-a-service to mitigate asset risks and improve loan terms.

Social infrastructure 05 Need for right skills and perception:
· Evolving Automotive Value Chain: The shift to EVs is transforming the automotive industry, requiring new components (e.g., battery packs, electric motors) and creating roles for new entrants like battery recyclers and charge point operators. After-sales services now demand higher technical expertise but lower repair frequency.

· To address potential job losses, targeted training for mechanics, fleet drivers, and manufacturing workers is essential, supported by government initiatives like adding EV-specific courses in ITIs and reskilling programs.

· Public Perception and Adoption: Enhancing public understanding and acceptance of EVs is vital. This includes addressing concerns about costs, safety, and re-sale value through sustained campaigns (e.g., testimonials, charging station maps) and offering non-fiscal incentives such as free parking, toll tax exemptions, and dedicated EV parking spots to encourage adoption.

Way Forward – Key Suggestions:
Charging Infrastructure: High EV penetration in states like Karnataka, Maharashtra, Delhi, and Kerala with 1,000+ charging stations shows the importance of infrastructure. The World Bank finds infrastructure focus four times more effective than demand incentives.
Policy Focus: Streamline charging standards, approvals for CPOs, and support pay-per-use parking/charging for e-bus operators. Establish battery recycling with updated waste management rules.
Power Solutions: Strengthen distribution networks, integrate smart grids and energy storage, and promote renewable energy sources like on-grid solar for EV power.
Economic Incentives: Ensure GST parity for EVs and components, prioritize EVs in bank lending, and support battery leasing with favourable tax policies.
Skill Development & Awareness: Introduce EV topics to licensing tests, reskill mechanics through ITIs/universities, and boost public awareness with campaigns and incentives like toll exemptions and reserved EV parking.

Commenting on the report, Raghavan Vishwanathan, Partner- Automotive, KPMG in India, said, “The electric vehicle revolution marks the dawn of a new era for India—one defined by innovation, economic growth, and environmental stewardship. This is more than just a shift to zero-emission transportation; it’s a systemic transformation of infrastructure, finance, technology, and mindsets. India stands at a pivotal moment to lead the global transition through strategic policies, public-private partnerships, and forward-thinking investments. By addressing infrastructure gaps, creating affordable pathways for consumers, and building societal trust in EVs, India can set a global benchmark for sustainable mobility, green growth, and inclusive prosperity.”