Leap of faith

Reigniting growth in the auto sector - Is India ready to take the EV leap?

Aug 07, 2020 SHWETA BHANOT MEHROTRA No Comments

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Is Indian auto industry ready to take the EV leap? A million-dollar question that everyone wants an answer to! While we have witnessed isolated developments on setting up of electric mobility infrastructure in the country and the optimism of the industry to offer a new technology despite the first quarter overall sales of FY2020-21 at the lowest in 12 years due to the pandemic, auto experts believe it is not the time to race behind timelines but a crucial phase to build local capabilities and create a sustainable EV ecosystem. 

The Government of India has set an ambitious target for EVs by 2030 with 30% penetration in private cars, 70% in commercial vehicles, 40% in buses and 80% for two and three-wheelers. 

“We are right now in the phase of customer adoption to a new technology and this phase is always gradual. Government should just leave the timelines to the industry and by corollary to the market forces where customers decide what to buy,” says V G Ramakrishnan, Founding Partner & MD, Avanteum Advisors LLP.

While the current situation will only slightly slowdown the pace of EV launches, Ramakrishnan says that the competition is a potent force to change the industry dynamic rather than government diktats. “Companies like MG Motors are going the EV way and once customers start buying in large numbers then competitors will be forced to offer EV products. The Government should focus on stable policies, taxation and ecosystem development,” he says. 

He further adds that currently in the EV space, significant “shift is taking place at the bottom of the pyramid i.e. [with] e-rickshaws and 2Ws, where we will continue to see launches.”

Highlighting that the economic uncertainty could derail India’s EV target and make buyers postpone their buying decision of conventional (ICE vehicles) or EVs, Supparoek Sawangwong, Senior Analyst, Asia Powertrain Forecast, LMC Automotive, says, “OEMs will be looking to prioritise their spending and new product plans with a focus on conventional and flagship models. We believe that it may be prudent for some OEMs to possibly take stock of the market before introducing new xEV in the market. And while we expect Maruti-Suzuki to launch the Wagon R BEV this year, but a slight delay to this timeline could be possible.” 

Anil Shrivastava – Mission Director, National Mission for Transformative Mobility & Battery Storage in NITI Aayog, at India e-Mobility Conclave 2020, pointed out on the impact of the pandemic on e-mobility in the country and the rise in demand for e-2W, including petrol and diesel “as people have realized that this is going to be the new normal and in that perspective the demand is going up.”

Shrivastava said, “Battery and EV will disrupt Indian scenario. We have taken steps to improve EV demand, the Ministry of Power and Department of Heavy Industries is working on how to push e-2W and exploring a model that will separate cost of vehicle from the source of its energy i.e. battery. If we separate electric vehicle from battery, the upfront cost will be less and we are encouraging model where battery can be separated be it leasing, swapping so on -- so we are exploring these options.”

In a recent virtual media gathering, Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM) without mincing words said, “If there is no revenue then there is no business case for EVs.” He went ahead to say that if the EV transition had to be made then “we (the auto industry) would need support on it. We would need funding for common development.  It has to be well thought through when volumes are lowest in 12 years and the next 4 years seen to reach back to volume levels of 2018, else there is no case for EVs.” 

The automotive industry has been demanding lowering of GST rates, an incentive-based vehicle scrappage scheme and procurement program for commercial vehicles (CVs) to reignite the overall growth engine.  

“If there is one area where the government can play [it] is in city buses as these are owned by the government (institutions). Jawaharlal Nehru National Urban Renewal Mission (JNURRM) modernised the fleet across India. A scheme like that can increase electrification in city buses,” says Ramakrishnan. 

Addressing the India e-Mobility Conclave 2020, Nitin Jairam Gadkari, Minister for Road Transport & Highways, Minister of Shipping, and the Minister of Micro, Small and Medium Enterprises, Govt. of India highlighted the “strong need to develop import substituting, cost-effective, indigenous, and pollution-free sustainable transportation system in the country, and (that) one of the most important solution is public transport on electricity.” 

Gadkari said, “India is power surplus so the benefits of e-mobility solutions is very much in the interest of the country.” 

Currently, the auto industry is the highest taxed in the country with taxation making up to 60%. GST stands at 28%. The industry has been demanding a reduction of 10% in the GST rates across vehicle categories. 

“The existing GST tax schemes as well as FAME II program are not sufficient to lure both vehicle makers and suppliers to invest in xEV programs in a big way. A number of measures to develop and support xEV ecosystem is the need of the hour. These include further incentives to localise high-quality key components, a strong supply chain, and widespread charging stations and purchase benefits,” says Sawangwong.

He adds, “Once these fundamental factors are ready, it will be easier for demand-supply side to push and pull each other. OEMs would be able to price xEV more competitively, driven by localised parts and lower production costs, which in turn would help to attract more buyers to the market.”

Highlighting the global impact of the pandemic on the EV strategy, Dr. Wilfried G Aulbur, Senior Partner, Roland Berger, says, “As the current crisis has hit major passenger vehicle OEMs globally, we have seen a re-evaluation of investment decisions. Some of the actions that companies have taken include a delay in EV launches and a stronger focus on common platforms for electrified vehicles. This course of action would be relevant for Indian players as well, but strongly depends on the overall position of the company from a product portfolio and cash perspective. “ 

Survival is crucial for the automotive industry and a stimulus-led economic revival backed by the increased awareness among people about environment during the current situation could become an accelerator for growth and put EV adaption on fast track in the country.



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