Government’s renewed EV push bothers auto industry     

Even before the dust settled on the allocation of portfolio of ministries in the newly formed government, a steady flow of government initiatives on the electric vehicles (EVs) front is causing concern in the auto industry.

The moves, primarily driven by the government’s think tank NITI Aayog along with several ministries such as transportation and heavy industries, have proposed a rapid shift to electric vehicles in the next decade. Firstly, NITI Aayog suggested that 40% of all cars used by cab operators like Ola and Uber should be electric vehicles by 2026. It was also proposed that all new cars sold for commercial purposes post 2026 should be electric.

An unconfirmed report in television channel CNBC-TV18 said that the Ministry of Road Transport and Highways led by Nitin Gadkari was proposing to ban internal combustion engines in three-wheelers by 2023 and in two-wheelers by 2025. The report said that “the work on draft notification has started and it would be put for stakeholder consultation in the next 7-10 days.”

The government is also likely to issue tenders to companies to set up a battery manufacturing base whose combined capacity will be 50 gigawatts. The cabinet is said to be considering offering incentives for setting up battery-making units, which will be up and running by 2022. The investment outlay is $50 billion. India’s biggest carmarker Maruti Suzuki is already setting up its battery plant in Gujarat. Taken together with the Faster Adoption and Manufacturing of Electric Vehicles Scheme, which entered its second phase in April 2019, the intent for a sustained EV push is becoming evident. The scheme also outlines plans for indigenising a whole range of auto components.

When the idea was mooted by Gadkari to stop sale of conventional vehicles by 2030, the industry was very vocal in their protest. The government later clarified that it was only a proposal. This time, too, two-wheeler industry players have urged the government to make a more realistic road map for EVs. Pawan Munjal, chairman of Hero MotorCorp, India’s biggest two-wheeler maker, warned that the move (to push EVs) could have serious implications.

He said: “Coming close on the heels of the implementation of BS-VI norms in 2020, this move could have serious implications on the industry and the millions who are dependent on it.” Earlier, two other large local manufacturers, Bajaj Auto and TVS Motors, too advised caution in setting earlier deadlines for EV adoption in the two-wheeler space.

In an interview to the Economic Times, S.S. Kim, managing director of Chennai-based Hyundai Motor, said that electrification is a step in the right direction but OEMs need time to prepare for it. He said that if the government’s intent was true, the decision appears to be hasty. Hyundai, however, has been planning its EV strategy in India for some time now. It invested $300 million in Ola to jointly develop a electric car and the company will also assemble its new EV, Kona, in the country. On the other hand, Mahindra & Mahindra, India’s largest EV manufacturer, expects to double sales of battery-powered vehicles by 2020.

Industry observers feel that the government’s intent to push EVs will be much harder this time around. Both Gadkari and Piyush Goyal, who is now the minister for railways and commerce and industry, are proponents of the change. Gadkari’s stand on EV is already well known, while Goyal pushed hard for green energy initiatives even though many of these projects did not appear commercially viable at the start.

With China’s success with EVs, especially in the two-wheeler space, where it pushed out conventional motorcycles from cities and enforced an EV-only rule in several polluted areas, chances are India may lag behind in the race if the local industry doesn’t begin investing in the business. Having successfully led their ministries, it is unlikely that the two ministers would want to carry the blame for lagging behind in the EV race. Expect faster and harder changes going ahead.