Maharashtra’s New EV Policy to Bolster Supply and Demand
Maharashtra's aggressive push for electric vehicle (EV) adoption and manufacturing is defining in the overall EV transition discourse for India. At state level, it would need a lead nodal agency and strong political leadership to achieve the desired speed and scale for its EV transition.
This OpEd was originally published on CNBCTV18.com.
Maharashtra unveiled its new Electric Vehicle Policy earlier this week. With an ambition to electrify 10 percent of the state’s new vehicle registrations in 2025, the policy holds significance given the state’s leading position in India’s automotive manufacturing landscape and vehicle market.
Maharashtra occupies the top spot in terms of car registrations of nearly 50 lakh and is the second biggest vehicle market with almost 11 percent (3 crore) of the country’s vehicles. It is also home to the highest number of automotive manufacturing plants with about 21 of India’s 100 such units located in the state. An aggressive push for electric vehicle (EV) adoption and manufacturing by the state, hence, is defining in the overall EV transition discourse for India.
The EV ambition of the state is not new. It was among the first few states in the country which had notified its EV policy back in 2018. Given the experience of the past policy and the changes in technology, market and policy landscape, the new EV policy was the need of the hour for one of the country’s fastest-growing vehicle markets.
Maharashtra’s new policy takes a system-wide approach to overcome the primary barriers that stand in the way of EV adoption. It explicitly aims to realise the benefits of EVs in terms of reducing vehicular emissions while enhancing energy security and industrial competitiveness. It sets itself as a model policy in terms of the five key first-ever/progressive features and measures.
Well-defined targets and differentiated incentive strategies that promote first-mover segments
While several other state policies have set broader goals for EV adoption, the Maharashtra policy has taken a segmented approach to define targets for penetration of these vehicles in different categories including public transport, shared transport and government fleet. These segmented targets translate into differentiated incentive strategies and help the state promote electrification of first-mover segments and use cases that are rapidly approaching competitiveness on a total cost of ownership basis.
The enhanced ambition of 20 to 25 percent penetration in 2025 for last-mile delivery, commercial vehicles and fleets, and public transport reflects this intent of the state government. The policy concentrates efforts in these segments that are ready to electrify and provide disproportionate benefits of public incentives in terms of realising more electric kilometres than EVs.
Targeting concentrated impact through five EV lighthouse cities
Maharashtra’s EV policy focuses on the five most populated Urban Agglomerations (UAs) in the state—Greater Mumbai UA, Pune UA, Nagpur UA, Nashik UA, and Aurangabad UA, which also happen to be the state’s most polluted cities in terms of PM2.5 emissions. The policy aims to electrify public transport, last-mile delivery and commercial fleets in these cities apart from targetting strong non-fiscal measures such as the creation of low emission zones and parking reforms to disincentivise internal combustion engine vehicles. A dense network of public and semi-public charging stations is also being planned for these five cities. This move would be critical for shifting city residents and businesses to EVs.
The concentrated geographic focus of the policy will help in effectiveness of public incentives and will also help in making EVs and their benefits more clearly visible at higher scales than if they were dispersed throughout the state. The five UAs have the potential to establish themselves as model cities that can inspire others to follow and replicate the path of rapid electrification.
Pull and push for industry through incentives and ZEV credit programme
By offering D+ incentives to all EV components and battery manufacturing facilities, Maharashtra will perhaps be one of the most lucrative destinations in the country for setting up EV manufacturing. If the state is able to attract even one giga scale battery manufacturing facility over the next two years, it would be a huge win in terms of cascading investments in EV manufacturing.
Besides the measures to attract EV and battery manufacturing, Maharashtra has taken a bold step forward in terms of pushing the industry. The policy indicates the creation of a Zero Emission Vehicle (ZEV) requirement and credit programme for the state which will be the first of its kind in India. Currently being implemented in all top three EV markets globally i.e., China, EU and 12 states in the USA, a ZEV regime requires auto manufacturers to produce a number of ZEVs annually, based on the total number of cars sold. It leads to increased model availability in the market.
In California, where the ZEV programme was first adopted in 1990, more than 550,000 zero-emission vehicles and plug-in hybrids have been registered since 2010. The programme, as seen in these global markets, becomes critical in accelerating EV adoption as consumer incentives alone aren’t fully able to trigger market growth.
Given Maharashtra’s leading position in India’s auto manufacturing, a ZEV credit programme adoption could be the much-needed game-changer that is needed on the supply side. It could inspire other states and perhaps even the Centre to design a similar nationwide programme.
New categories of incentives to address technology barriers
Like the FAME II scheme and several other state policies, Maharashtra’s EV policy also offers strong upfront purchase incentives to consumers. These incentives are bolstered by road tax and registration fee waivers by the state. Additionally, the state becomes the first in terms of developing new incentive categories in extended battery warranty and buyback agreement.
A key barrier to EV adoption pertains to concerns related to the battery life and resale of such vehicles. The policy provides for additional incentives to original equipment manufacturers (OEMs) for offering a minimum five-year warranty for batteries and assured buyback for vehicles which are up to five years old. The measure should be able to encourage the industry to offer such warranties/buyback assurance to consumers.
Focus on electrification of intercity movement
Another noticeable policy provision pertains to the electrification of highways and the Maharashtra State Road Transport Corporation (MSRTC) intercity bus fleet. The policy targets creation of charging infrastructure on four selected highways and 15 percent electrification of the MSRTC fleet. Both these measures shift the attention of electrification efforts to intercity movement; so far primary focus on electrification efforts has been on cities. If successfully integrated and implemented, this could pave way for the electrification of long-haul medium and heavy-duty vehicles on these model EV highways in the state over the next couple of years.
As witnessed globally, the electrification of medium and heavy-duty trucks is gaining significance on account of its economic and environmental benefits. Maharashtra has the opportunity to lead some of these early pilots that could be critical for policy and business decision-making in the electrification of the long-haul segment.
Maharashtra has set itself for an increased uptake of EVs over the next two-three years. If successful in achieving its targets, the state would have nearly 10 lakh EVs on road by 2025. It would be critical that the state government follows up the policy notification with clear operational guidelines, a transparent and easy-to-use incentive disbursement mechanism and regulatory reforms necessary to kick start implementation. An awareness campaign would be needed for critical government, industry and civil society stakeholders along with a strong monitoring mechanism to assess the progress and impact. Most importantly, Maharashtra would need a lead nodal agency and strong political leadership to achieve the desired speed and scale for its EV transition.