EV Adoption To Accelerate in the Indian Logistic sector.
India’s environmental pollution has reached the threshold level, which is a cause of great alarm. The Climate Risk Index 2020 states that India ranks in the top 5, which means India is vulnerable to climatic change. In the interest of the future of India, e-mobility seems the only viable option in the given circumstances.
To eradicate the fear of global warming, the government, industries, and companies are continuously on a mission to make a greener earth. It's time for the most actionable outcomes to be taken to reduce carbon emissions; it is here that the introduction of EVs (Electric Vehicles) weighs in across sectors, especially the growing warehousing sector in the country.
Colliers estimates that India will need about 26,800 public charging spots by 2025, requiring space of about 13.5 mn sq ft (1.2 mn sq m). This huge demand in infrastructure building has put real estate at the centre stage. It further estimates that the Electric Vehicles (EVs) segment in India is likely to witness investments of USD12.6 billion or INR 94,000 crore across the automotive value chain, over the next five year.
The investments are likely to benefit the Indian real estate sector in the form of setting up new or augmenting manufacturing units, industrial parks and clusters with focus on last mile delivery by ecommerce firms and 3PL Logistics companies, government push for electrification of public transport, tax benefits and incentives for first time buyers amongst others.
Currently, Tamil Nadu is the frontrunner accounting for about 34% share in total planned investments for EV, followed by Andhra Pradesh and Haryana with a share of 12% and 9% respectively.
Government’s target of 30% electric vehicle sales by 2030 is an ambitious, but an achievable goal. In India, the transport sector is currently the third largest emitter of CO2. So, EVs can be a game changer. Real estate players can tap into an opportunity for manufacturing, warehousing, charging stations and dealerships of EVs.
Currently, 15 Indian States have either approved or notified EV policies, with 6 more states in the draft stage. States like Delhi, Gujarat, Maharashtra and Meghalaya are focusing on demand incentives, whereas Karnataka, Tamil Nadu are focusing on manufacturer-based incentives. States like Maharashtra, Delhi and Gujarat having strong demand side incentives should have provisions to set up industrial parks/clusters for EV or manufacturing of ancillary components with plug-and-play.
The government is also encouraging automobile manufacturers to ramp up local production of EVs to reduce the country’s dependence on crude oil imports and curb vehicular pollution. India has also committed to become carbon neutral by 2070 which will entail meeting several milestones including reducing carbon emission per unit of GDP by 45%.
Apart from this, government initiative in the electrification of public transport, strong demand from e-commerce industries, tax benefits and incentives and the running cost of EVs, which is significantly lesser than the ICE (Internal Combustion Engine), are some of the factors that support the future of EVs in India. Although the rise of EVs promises a new horizon in the real estate world, it is not free from certain challenges and shortcomings. Lack of focus on R&D for new battery technologies is undoubtedly a significant cause of concern. India imported INR6,600 crore (USD929 million) worth of lithium-ion batteries in 2019-2020.
Additionally, the lack of high-specification Grade A warehouses for storing lithium-ion batteries, the high land cost in urban centres for public charging stations and several construction permits that take months lead to higher approval costs. Ultimately, the scope for EVs in the Indian market rests on the availability of capital for original equipment manufacturers, battery manufacturers, and charge point operators and improvements to infrastructure and diversified options for consumers.
However, for the smooth development of the EV segment, the government needs to reduce the number of permits and licenses specially required for EV manufacturing set-up adn warehousing and industrial parks. Tax concessions, subsidies and dedicated EV parks can meet the specific challenges of the EV sector.