Rapid economic development coupled with a never-ending surge to save travel time has resulted in widespread adoption of automobiles throughout the globe. The first combustion engine was invented in the late 19th century and there was no turning back after that. While combustion engines have helped human beings develop at an exponential rate, they have also adversely contributed to global warming. India, along with various other countries, has signed and ratified the Paris Agreement to limit global warming in the interest of climate change.
This has led to the Indian Government effecting various methods to decrease India’s CO2 emissions. Some initiatives were by adopting stricter emission norms for combustion engines, promoting electric vehicles (EVs) by giving a host of incentives to manufacturers and end-customers etc. Initially, EVs were plagued with various issues such as less range, mediocre performance, lack of electric vehicle charging infrastructure (EVCI) etc. Most of all, they lacked the cool quotient that comes with owning a vehicle. All of this was singlehandedly transformed by Tesla Motors who pushed the general masses to embrace EVs. With passage of time, while most of these issues were resolved to an extent so as to allow practical usage, EVCI was yet to catch up. In this article, we will discuss the emergence of startups developing EVCI to bridge the gap and provide fast and reliable charging solutions for EV owners, who are set to grow at a rapid pace.
Advent of EVCI
Reports suggest that several potential customers are shying away from purchasing an EV as they suffer from charging anxiety. The Indian Government has set an ambitious yet realistic goal of having 30% EVs on its road by the year 2030. As is obvious, the increase in demand for EVs directly translates to the requirement for building EVCI. Eyeing this opportunity, many startups like Charzera Tech Private Limited, Sharify Services Private Limited etc., have come up in this sector.
These startups provide charging facilities to the general public in exchange for a specific amount. The user can simply drive up to a charging station, plug-in the charging cable to the EV, wait for the EV to charge and thereafter drive away. Charging stations are generally of two types i.e., fast charging stations and standard charging stations. Many startups are finding innovative places to set up these charging stations where users can easily access them like in parking lots of supermarkets, restaurants etc. This minimizes the waiting time required for charging an EV. By the time the user is done with his errands, the EV is conveniently charged and ready to go. Some of these startups are also encouraging people to host a charging station by installing it in their business premises and sharing the revenue with the startups.
Regulatory regime governing EVCI
The Ministry of Power (MoP) released the revised guidelines and standards for charging infrastructure for electric vehicles on October 1, 2019 (Guidelines). The Guidelines superseded the earlier guidelines issued on December 14, 2018. The objectives of the Guidelines clearly show the MoP’s intention to support faster adoption of EVs and create a market for EV charging business. The Guidelines broadly differentiate between two types of charging stations i.e., private (for personal use) and public (for use of public at large). Setting up a public charging station is categorised to be a de-licensed activity subject to such station being compliant with certain technical, safety and performance standards. The Guidelines also state that a person seeking to set up a public charging station may apply for connectivity, for which he will be provided a connection on priority by the distribution company.
Further, the Electricity Act, 2003 (Act) also provides for certain licensing requirements in relation to transmissions, distribution or trading in electricity. In another positive move for this nascent industry, the MoP has released a clarification dated April 13, 2018 (Circular) which states that the charging stations, while charging the battery for use in an EV, do not perform any such activities for which a license is required under the Act.
Reviewing the Guidelines and the Circular, it seems that the current regulatory regime in India is in favour of developing the EVCI by enticing startups to enter this sector.
According to Infoholic Research, the Indian EV infrastructure market is expected to grow at a compound annual growth rate of over 40% during the forecast period 2019-2025. The recent incorporation of a company by Tesla Motors in Bengaluru has further added fuel to the fire. Established OEMs are also partnering with private players to set up charging stations at various locations.
The automobile sector is a completely open market for foreign investors to enter. 100% FDI is allowed in the automobile sector under the automatic route i.e., without taking permissions from the Government. On similar lines, the setting up of EVCI is also permitted under the automatic route for foreign investors. There is no doubt that EVs are here to stay and with time will only expand their presence throughout the globe. However, EVs cannot grow without an infrastructure to support it. Therefore, it is very clear that the development of both EVs and EVCI are inter-dependent and must happen simultaneously.
As on date, there are no restrictions or licensing requirements on new entrants from entering the EVCI market. The Government also seems to be very bullish and might soon realize the attraction of tying up with growing startups, led by innovative investors, to encourage the use of EVs and develop EVCI at the earliest. Considering these circumstances, it seems like a bright opportunity for investors to hop on the bandwagon by spotting innovative startups in this space.
Ajay Joseph | Partner, Veyrah Law; Anshul Pandey | Associate, Veyrah Law
Views expressed above are for information purposes only and should not be considered as a formal legal opinion or advice on any subject matter therein.