Before the COVID-19 pandemic, India’s electric vehicles sector was languishing and rates of adoption were petering out. Now, India could be the next major market for electric vehicles, in large part thanks to commercial EV adoption.In fact, the subcontinent’s demand for EVs for commercial use alone is expected to increase a stunning 15-fold in the next six months alone. The sudden spike in uptake is being fuelled by the confluence of a number of factors including rising fuel prices, lower EV prices, government support and incentives, and the electrification of fleets for ecommerce delivery. The Indian economy has seen record fuel prices this year, even as oil prices dipped. The rapid increase in fuel costs is almost entirely due to hikes in both state and federal taxes on both gasoline and diesel. “Central taxes on petrol went up from about Rs 9.48 per litre in April 2014 to Rs 32.9 per litre in May 2020, a nearly 250% increase, per Ministry of Petroleum and Natural Gas data,” Indian new outlet Business Standard reported in July at the height of the fuel price spike. This has hit the transportation and shipping sector especially hard. "[Fuel price hikes are] easy money for the government [but] a slow poison for us," Suresh Khosla, secretary of Bombay Goods Transport Association (BGTA), told Business Standard. "Think of [it in this way]... we are in a Titanic which is about to sink," Khosla told IndiaSpend. It makes good financial sense, then, that Indian companies are seeking to wean themselves off of traditional fuels. Over the course of 2020, even as the world battled the first wave of the novel coronavirus pandemic, India increased its electric bus registrations by 34%, according to the International Energy Agency’s 2021 global EV outlook report. At the same time that the Indian government is making fuel prices rise, both state and central government entities are ramping up incentives to make EVs more accessible and affordable. The government is targeting EV sector growth as a means to lower dependence on foreign crude imports and to improve the country’s infamously poor air quality. At present, the Indian EV sector is small, and the commercial EV sector is negligible. But all of that is set to change. Indeed, India counts itself among a handful of countries that have signed on for the global EV30@30 campaign, in which nations aim to make 3 out of every 20 new car sales an electric vehicle by 2030. Just this year India’s cabinet approved an incentive scheme to the tune of approximately 260 billion rupees ($3.5BN or €3Bn) over a five-year period, which will go toward the production of EVs (both battery and fuel cell vehicles) as well as domestic drone manufacturing. The Indian government is hoping that this will help India become competitive in the global automobile sector and attract new investment. While Teslas are not available in Indian markets, largely due to their high price point, Tesla has already set up a subsidiary in Bangalore this year and plans to build a plant on the subcontinent. Currently, India’s transportation sector consumes far less energy per capita than developed countries. “Petroleum product consumption to meet all transport demands in 2009 ranged from 52 GJ/capita in North America to less than 4 GJ/capita in Africa and India where mobility for many people is limited to walking and cycling,” according to the IPCC. As more and more Indians join the middle class, however, growing rates of vehicle ownership pose major challenges to the country’s infrastructure and the climate. India’s cities, already choked with traffic and smog, have much to gain from the widespread adoption of EVs. The rest of the world, too, has a vested interest in the success of EV adoption in India. This year the IPCC and the UN released a damning assessment report on the state of climate change which showed that humans have already irreversibly altered the climate, and that it’s now necessary to do everything possible to mitigate further damage. As vehicle demand grows around the world, it is absolutely essential to make sure that EVs represent the lion’s share, if not all, of new vehicles hitting the roads. Demand for electric vehicles for commercial use is estimated to increase 15 times in the next six months, driven by the rise in fuel prices, incentives rolled out by the central and state governments and renewed emphasis by ecommerce companies to electrify their last-mile delivery fleets, said a financier of such vehicles. Sameer Aggarwal, founder of RevFin, which has been financing purchase of electric vehicles since 2018, said in the last 6-9 months, the market has recognised the need to move to EVs. Both central and state governments have announced incentives which have made electric vehicles a lot more affordable, while with low interest rates, EMIs have become smaller. “In July and August alone, there has been a three-fold increase in demand compared to pre-pandemic years. We expect a 15x rise in demand in the next six months (compared with pre-pandemic times),” said Aggarwal, who is also the company’s chief executive. With the government aggressively encouraging the use of e-mobility to cut down on crude oil imports and reduce vehicular pollution, major ecommerce companies have started looking at electrifying their delivery fleet and are placing orders for new products. “The momentum is already there, sizeable scale will kick in in the next 9-12 months,” said Aggarwal. He estimates India’s market for electric vehicles for commercial use to grow to $15-20 billion in the next five years. The market currently is negligible. Economics alone will propel the drive towards EVs — the running cost per km for an electric vehicle for commercial use is nearly a fourth of the current Rs 4 a km for a petrol or diesel vehicle, Aggarwal said. “There is already a sharp uptick in demand for electric vehicles for commercial use in Delhi, Madhya Pradesh, Odisha, Jharkhand, Uttar Pradesh, Uttarakhand, Punjab and Haryana.” Niti Aayog CEO Amitabh Kant earlier this month told ET that in the next two years, all urban delivery vehicles must go completely green. The government think tank already has onboard 30 companies including Mahindra Electric, Tata Motors, Zomato, Sun Mobility, Lightning Logistics, BigBasket, Blue Dart, Hero Electric and Swiggy for the recently launched Shoonya initiative. The objective of the initiative is to facilitate faster transition to green technologies in the urban delivery segment to reduce emission, and simultaneously leverage the volumes to enable the establishment of a charging infrastructure and vendor base for EVs. Given the rapid growth in ecommerce — accelerated now by the pandemic — as many as 8 million vehicles are expected to be on the road in the urban delivery segment by 2030, shows a study available with the government body. If India were to fully electrify its urban delivery fleet, the country’s EV financing industry is projected to be worth Rs 3.7 lakh crore at the time. To tap into the potential demand, RevFin is looking at raising $40 million in the ongoing financial year. The resources, which will be raised through a mix of equity and debt, would help sustain operations for the next 12-18 months, said Aggarwal. RevFin aims to disburse Rs 200 crore of loans by fiscal 2022. It aims to fund more than 80,000 electric vehicles in the coming three years. Revfin has disbursed 2,100 loans worth Rs 21 crore till date with a repayment record at 95%. By Haley Zaremba for Oilprice.com More Top Reads From Oilprice.com: Europe Must Act To Avert An Energy Crisis This Winter U.S. Shale Is Finally Ready To Drill The Harsh Truth Behind Europe’s Energy Crisis Read this article on OilPrice.com