A southern Indian state has established a clear lead in India’s electric vehicle journey.
Karnataka, home to India’s technology hub Bengaluru, has in recent years become a hotspot of EV businesses. The state houses some of the most prominent firms involved in EV and EV ancillary manufacturing, including Mahindra Electric, Ather Energy, Ola Electric and Bosch.
Earlier this month, one of the world’s most popular EV makers Tesla marked its entry into India by incorporating a company called Tesla India Motors and Energy in Karnataka’s capital city Bengaluru.
Karnataka’s success, experts say, is the result of the state government’s policy to engage directly with stakeholders. After all, Karnataka was the first state in the country to introduce an EV policy.
“The Karnataka government has appointed a consulting firm to bring OEMs [original equipment manufacturers], suppliers and energy suppliers onboard to discuss supply and demand issues on one platform, ” said Deb Mukherji, managing director of Omega Seiki Mobility, a New Delhi-based EV startup that provides electric three-wheelers to e-commerce firm for deliveries. “The state government’s success to bring Tesla, the world’s most valuable car company, onboard, speaks for itself.”
This early lead can go a long way in benefitting Karnataka as India moves towards achieving Prime Minister Narendra Modi’s ambitious EV dream. The Modi government is aiming that 70% of all commercial cars, 30% of private cars, 40% of buses, and 80% of two-wheelers and three-wheelers sold in India by 2030 will be electric.
The state of India’s EV plans
India has been seeing a steady uptick in EV sales, giving hope that the Centre’s 2030 goal is achievable.
In the financial year ending March 2020, overall EV sales in India increased by 20%, according to data from the Society Of Manufacturers Of Electric Vehicles.
Despite this increase in adoption, not all Indian states have stepped up their efforts to make buying and using EVs easier.
At present, only 10 states have clear and final EV policies, while four states are waiting for final approvals for their drafts. The remaining states still need to start creating a basic framework for EV adoption.
All the state EV policies in India, including the ones in the draft stage, give preference to two-and three-wheelers over cars and public transportation vehicles. These policies are also all focused on job creation. However, there are some long-term goals that make some states stand out.
For instance, Uttar Pradesh plans to replace its entire conventional commercial fleets and logistics vehicles with EVs. The state plans to make this shift initially in 10 cities by 2024 and eventually across all cities by 2030.
Other goals include setting up a single-window system for all approvals required for EV and battery manufacturing units and encouraging new apartments, high-rise buildings, and technology parks to make provisions for EV charging infrastructure.
However, most of the states that have policies, including the national capital New Delhi, are focused only on providing incentives to increase adoption. Experts believe that’s based on a narrow view of the situation.
Karnataka’s stake in India’s EV ambitions
For sustainable long-term growth in EV adoption, experts say, states need to develop an overall ecosystem for the nascent industry to bloom. And that is something Karnataka is doing very well.
“What other states can learn from Karnataka is that giving subsidies is not enough,” suggested Mukherji of Omega Seiki Mobility. “The state governments need to engage with the industry to understand the ground-level issues and resolve them accordingly.”
And while the adoption is increasing across the country, it is Karnataka that has been witnessing a constant flurry of investments. At an investors’ meet called Invest Karnataka in February 2020, the state government received proposals for investments worth Rs72,000 crore, a large chunk of which was for EV infrastructure.
Meanwhile, the state itself has allocated massive funds to boost its position in EV space. In December, the BS Yeddyurappa-led government approved funds worth $3.03 billion to establish an EV manufacturing base in the state. Recently, Karnataka also launched the first-ever battery-swapping network in its capital Bengaluru to ensure clean last-mile connectivity in the city.
These developments are the result of Karnataka’s Electric & Energy Storage Policy from 2017, which focuses mainly on manufacturing and creating infrastructure.
“The state takes the EV projects as priority ones under its ‘Invest Karnataka’ scheme,” explained Mukherji. “It has come out with an EV policy with various kinds of fiscal incentives such as capital subsidies, stamp duty exemption, power tariff subsidy, and skill development for setting up EV projects in the state. Such initiatives provide direct benefits and the return on investment also gets positively impacted.”
He added that Karnataka’s decision to set up an auto cluster for EV component suppliers will further help the state. “Sizeable land has been earmarked for this cluster wherein EV suppliers can acquire land and set up factories,” he added. “This initiative eliminates the entire process of land acquisition, clearances and speeds up the process of factory set up.”
Can Karnataka be overtaken?
Despite being ahead in the race, Karnataka is not necessarily a clear winner.
It recently lost out to neighbouring Tamil Nadu when ride-hailing unicorn Ola decided to set up a Rs 2,400-crore EV factory there. Ola is headquartered in Bengaluru, yet it chose Hosur in Tamil Nadu for the plant that will manufacture 2 million units per annum. The reason for this decision reportedly is that Tamil Nadu offered larger land and other facilities at a “better” price.
Karnataka lags Uttar Pradesh and New Delhi in the number of registered e-vehicles in the state. Besides, the state also recently faced criticism for the poor working conditions of factory workers after crises were reported at Toyota and Wistron factories in the state.
But this does not bother the state’s administration.
“Bengaluru is a technology hub and a place for innovation, not only for electric vehicles but also in the field of space because of the presence of the Indian Space Research Organisation,” Gaurav Gupta, additional chief secretary for commerce and industries in Karnataka told The News Minute, hoping to boost the state’s industry-friendly image. “We have a number of startups, a talent pool, and a consumer market of people who have lived abroad and returned.”
This article first appeared on Quartz.