White paper

Incentivizing electric vehicles to meet fuel consumption standards for passenger cars in India

Market projections for electric vehicle growth in India are ambitious but uncertain. In addition, the passenger car CO2 standards enforced in India are amongst the most lenient, and the super-credit multipliers available for electric vehicles are more generous compared to global practices. Further, in India, electric vehicles are not treated as zero-emission vehicles, nor are they required to account for upstream emission impacts. Instead, they are assumed to be displacing an equivalent volume of gasoline that would have been combusted in a conventional vehicle and resulting emissions. India also does not have sales targets declared for electric vehicles.

The prevailing super-credit multiplier values prescribed in the Indian standards offer excessive compliance flexibility to manufacturers. This study demonstrates that if the current super-credit multipliers for electric vehicles in India prevail, fuel consumption of conventional vehicles can significantly lag fleet average levels and can even stay stagnant near 2017 emission levels through 2030.

As followed in the United States, the European Union, and China, super credits in India are appropriate only if they are phased out as electric vehicle markets start to scale. Gradually lowering the multiplier benefit and phasing them out completely by 2022–23 before the next phase of standards come into effect is recommended. This can offer adequate time for manufacturers to avail incentives for initial market entry, while reducing fuel consumption of conventional vehicles.

If India implemented a credit multiplier of three, the cost of deploying EVs would be reduced by nearly 60% when compared with the gasoline-equivalent accounting incentive only. At this level, electric vehicles are a cost-effective pathway to meet India’s passenger vehicle efficiency standards, assuming no multipliers are used for hybrid vehicles. Strengthening of the passenger vehicle fuel efficiency standards in a post-2022 environment will further increase the cost-effectiveness of deploying electric vehicles, even if multipliers are reduced.