Are you someone who is planning to buy an electric car? You might even be someone who is planning a startup in this space. And even if you are a student, you need to know this.

A new wave of change is coming and how! India is right now in the race to become world’s leading clean energy nation, and it’s placing its bets on reinventing the future of its transportation.

Taking India’s clean energy dreams to a new height, Ola signed an MOU with the Government of Tamil Nadu promising an investment of ₹7614 crore for the construction of India’ first and the largest gigafactory.

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What is a Gigafactory?

In simple terms, it is a manufacturing facility dedicated to producing equipment and components essential for electrification and the advancement of decarbonization technologies.

Encompassing 115 acres, the Ola Gigafactory is projected to initiate its operations by the beginning of the upcoming year, starting with an initial capacity of 5 GWh (GigaWatt per hours), which will subsequently be expanded in stages to reach 100 GWh.

Additionally, Ola has also committed to establish one of the most advanced cell and battery research and development facilities in Bengaluru.

So what does this mean for India’s dream of transitioning completely to clean energy transportation?

The Lithium Advantage in J&K

As per the Union Minister for Road Transport and Highways, Mr. Nitin Gadkari, India aims to become an EV manufacturing hub by 2025.

India has been importing 1,200 tonnes of lithium every year. But with the plans of using lithium ion found in J&K, India can become the #1 EV manufacturing country in the world.

So how is India planning to encourage the transition from fuel to electric? Here’s how!

Laying the Foundation for India’s Transport Electrification Plans

The goal is to encourage the adoption of hybrid and electric vehicles, with a target of achieving annual sales of 6-7 million units which will only grow from here.

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But because no change comes easily, the government is offering many fiscal incentives to buyers as well as manufacturers. These are as follows:

1) Production-linked Incentives (PLI): This scheme with a total payout of 18,100 crore offers various advantages to electric vehicle manufacturers, giving a direct subsidy to purchasers of EVs. Moreover, this approach extends to encompass the cell battery and vehicle component sectors too.

This scheme is applicable to the electric vehicle segment of three-wheelers, four wheelers and buses.

2) Slashing of GST & road tax: In the Budget 2023, the GST on EV sales was slashed from 15% to straight 5% that massively benefited the buyers.

Additionally, almost all the states have heavily subsidized road tax for EVs. For e.g. Maharashtra offers a subsidy to the tune of 1.5 lakhs.

The fast electrification plans also hold an added advantage for India- cutting of its oil dependency on other countries. How? Let us explain this in context.

End of India’s Oil Dependency

For starters, India is the world's third-largest oil importer. But the Ukraine-Russia war hit the oil prices badly throughout the world and we, as consumers, were horrified to see the fuel prices rise to a new high.

However, the full shift to electric vehicles (EVs) will substantially lessen India's reliance on oil. Should India successfully achieve its ambitious vehicle electrification goals, it will establish a blueprint that other developing economies can emulate.

And herein lies the big economic opportunities for India.

The Economic Opportunities for India

The opportunities of becoming a leader in clean energy via EVs are endless. But the top 3 boosters are:

1) Boost for India’s Fleet Operations Sector: As per the report by Weforum.org, the overall cost of owning and operating a petrol-based two-wheeler in New Delhi is Rs 2/km. This expense is reduced to just Rs 0.52/km when transitioning to electric vehicles.

Undoubtedly, fleet operators experience a reduction of over fifty percent in operational expenditures. Additionally, it also brings down the overall maintenance cost.

2) Employment and money in the real estate sector: Growing EV sector will also result in an increase in demand for infrastructure around EV charging stations, gigafactories, manufacturing plants, and warehouses, thus increasing the cash flow and employment in the real estate sector.

3) Growth of India’s indigenous OEM industry: Also known as Original Equipment Manufacturers, this industry produces the components that go into building an EV vehicle.

The Indian government is actively promoting the indigenization of the OEM supply chain as part of the Atma Nirbhar initiative, aiming to build a world-class electric vehicle ecosystem.

And this is where Ola’s gigafactory comes in as the stepping stone.

How Ola is Setting the Stage for Change

According to Bhavish Aggarwal, Founder and CEO of Ola, “Our gigafactory will be a major milestone in India’s electrification journey, bringing us closer to making India a global EV hub. With our focus on innovation, technology and manufacturing at scale, we are committed to driving the future of electric vehicles”.

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One of the key challenges that India has faced until now is the suboptimal battery technology and its dependence on Chinese manufacturers. But all that is now about to change.

The government is pushing private players like Ola to develop batteries composed of lightweight materials, featuring increased energy density, and utilizing renewable sources for charging. The government is providing essential encouragement through the provision of tax credits and schemes such as PLI as mentioned earlier.

With the race towards clean energy in transportation going full throttle, and with such strong focus towards developing indigenous battery technologies, it is only a matter of time before India emerges as one of the top, if not the only, leader in the EV sector globally.