Economic Competitiveness of Battery Electric Vehicles vs Internal Combustion Engine Vehicles in India: A Case Study for Two- and Four-Wheelers

Abstract

The initial cost of battery electric vehicles (BEVs) is higher than internal combustion engine-powered vehicles (ICEVs) due to expensive batteries. Various factors affect the total cost of ownership of a vehicle. In India, consumers are concerned with a vehicle’s initial purchase cost and prefer owning an economical vehicle. The higher cost and shorter range of BEVs compared to ICEVs severely limit their penetration in the Indian market. However, government subsidies and incentives support BEVs. The total cost of ownership assessment is used to evaluate the entire cost of a vehicle to find the most economical option among different powertrains. This study compares 2W (two-wheeler) and 4W (four-wheeler) BEV’s cost vis-à-vis equivalent ICEVs in Delhi and Mumbai. The cost analysis assesses the current and future government policies to promote BEVs. Two assumed policies were applied to estimate future scenarios. Annual distance traveled, battery replacement assumptions, and fuel/electricity prices were used for sensitivity analyses. It was found that the total cost of ownership of 2W BEVs in Mumbai and Delhi was lower than the ICEVs, only if heavily supported by government subsidies and incentives. In contrast, with assumed future policies, owning 4W BEVs was costlier, even with government subsidies. This study showed that if a vehicle travels more than the average annual distance traveled, BEVs can be a better option and make sense for niche applications such as taxi fleet operations or ride-hailing services. The current incentives were much more for 4W than 2W, implying a disproportionate allocation of subsidies to the wealthier, who can afford 4W vehicles. The funds required for subsidies, losses in fuel taxes because of lower sales, and tax exemptions offered to BEVs could cost up to ₹146,062 crores (i.e., $19 billion) annually to the Indian government in 2030, which is ~ ₹973 per capita, excluding investments required to build charging infrastructure. Therefore, India needs a targeted subsidy allocation plan, prioritizing 2W, and a phased strategy for an orderly and inclusive transition to a sustainable mobility future. Graphical Abstract