After almost five months, there are currently no signs that the Russia-Ukraine war will end in the near future. The war has not only seriously affected the global economy but also created an energy crisis. The prices of coal, gas and crude oil have increased drastically in most countries of the world. High prices of conventional energy along with disruptions in its supply have made the countries of the world think about how to achieve energy security for the future. Talking about India, 85 percent of crude oil consumption in India is for running vehicles.
80 percent of the total requirement of crude oil is met through imports. In such a situation, the sooner electric vehicles are adopted in the country, the sooner massive crude oil imports and outflows of forex reserves can be prevented. Apart from relief from high import bill, it will help in curbing pollution caused by petrol-diesel vehicles. Electric vehicles accounted for 2.50 percent of the total new vehicle sales in the country in FY 2022, down from one percent in FY 2021. Special schemes are also being announced by the government to accelerate the spread of electric vehicles in the country.
Electric vehicles are currently becoming more expensive than conventional fuel-powered vehicles. Battery costs in electric vehicles are very high. 38 to 40 percent of the total cost of manufacturing an electric vehicle is battery. Apart from this, factors like limited charging facilities, affordable finance are responsible for slow adoption of electric vehicles. Speaking at an event recently, Transport Minister Nitin Gadkari announced efforts to ensure that the prices of electric vehicles and petrol-diesel vehicles are almost the same within the next one year. The reason behind the increase in the production of electric vehicles in the country so far is the subsidies and incentive schemes provided by the government. Given the recent depreciation of the rupee against the dollar, auto industry leaders are skeptical that Gadkari’s announcement will be completed within a year. The cost of chips and batteries has been increasing for the past few months due to the depreciation of the rupee.
Apart from the price disparity, charging stations for electric vehicles are also currently coming up at a slow pace. For the spread of electric vehicles in the country, the capacity utilization is reported to be very low in the charging stations that are currently being built or constructed. Businesses cannot afford to set up charging stations where only 23 to 25 percent of capacity is being utilised.
After the electric two-wheelers, the recent fire incidents in four-wheelers have alerted the vehicle buyers as well as the financing companies. Just as conventional petrol-diesel vehicles get auto finance easily, it has to be ensured that electric vehicles get finance easily. Easy financing has played a major role behind the boom in auto sales over the past two decades. More than 80 percent of petrol-diesel vehicles are purchased through loans.
It will not be easy to reduce the appeal of petrol vehicles in the country until the price difference between electric vehicles and petrol-diesel vehicles is reduced. India ranks 11th out of fifteen countries in the world in terms of market readiness to accept electric vehicles. Thus, it can be said that India still has a lot to prepare for electric vehicles. Russia-Ukraine has made countries of the world think about how to reduce dependence on petrol-diesel.
It cannot be denied that crude oil and gas prices will fall after the end of the war, but such a situation is not the first or the last. Even before this, India has experienced shocks of high crude oil prices several times. The current crude oil crisis resembles the Arab oil embargo in the 1970s and the crude oil crisis during the Iranian revolution. In the 1970s, both these events gave crude oil shocks to the countries of the world. Apart from this, even before the global financial crisis of 2008, the price of crude oil rose to over 140 dollars per barrel. Due to high prices, the fiscal calculations of many governments of the world were disrupted. If such calculations are to be prevented in the future, it is necessary to reduce the consumption or dependency on petrol-diesel. If the country’s economy is to be sustained even without petrol-diesel, its first condition is the large adoption of electric vehicles. The adoption of electric vehicles will not only reduce the import of petrol-diesel, but it will also help in maintaining the fiscal health of the country. However, for this, steps are necessary from the government to make electricity cheap and safe.