New Delhi: In the midst of skyrocketing petrol and diesel prices, it might seem as if 29-year-old New Delhi-based businessman Himanshu Mahajan, who zooms around in his electric hatchback Mahindra e2o, has hit a lucky patch. He claims to have bought the car for all the right reasons—“to contribute positively towards saving the environment”. For now, he also spends less than a diesel car owner and even the “service cost is substantially lower”, Mahajan says. But a few months on, all those transitory benefits could be gone.
The reason: India cannot make up its mind about a planned transition to an electric economy. In the absence of clear government support, the nascent push towards electric mobility is largely being driven by personal choice and is a simultaneous bet on oil prices.
Visions of electric dreams have been propped up by the government in one form or another at least since 2012. But with the government balking at every opportunity to move past nebulous dreams towards concrete action, Indian consumers currently have roughly 10 electric/hybrid car variants to choose from, compared to 54 in the US and over 100 in China.
The most recent moment of reticence was on display at the Move Global Mobility Summit in early September, when top executives of almost all the major automobile companies present in India made a bee-line to the capital, hoping to hear Prime Minister Narendra Modi make major announcements on the electric mobility front. Most of them were left dismayed by the end of the speech.
While confusion is the order of the day in the corridors of power, a number of consumers like Mahajan are voting with their wallet. In several market surveys from this year with a sample size of 2,000 or more, 80% or more Indians express interest in buying electric vehicles (EVs)—which is similar to the levels of enthusiasm seen in the US and the UK in the late 2000s, a few years before the electric footprint started showing up in market shares.
Air pollution is a dominant reason for shifting preferences, especially among young millennial urban consumers. Alim Ahmed, a New Delhi-based young sales and marketing professional, bought his electric car when the capital was engulfed in thick smog. “I decided to buy an electric vehicle after seeing a Tesla in Dubai,” he says. Young millennials like him will constitute approximately two-thirds of the Indian workforce by 2021 and their preferences would increasingly matter.
But serious concerns still remain: lack of adequate charging infrastructure, range anxiety (mileage between each charge) and the higher initial cost compared to fossil fuel variants. Consumer mindsets can’t address those problems since they require governmental support and solutions.
India’s transition to electric mobility may also be very different from every other country at the vanguard of the shift, since India’s car ownership per 1,000 citizens is just 20, compared to 800 in the US. The Indian electric vehicle dream may not lie in the car, but in scooters or even electric public transit buses, which again would require focused government direction and hand-holding. Thus, the ball is now clearly in the court of policymakers and vehicle manufacturers to offer an emerging slice of millennial consumers, who’re increasingly concerned about the environment, with improved products and appropriate infrastructure.
Policy flip flops
Over the past year and a half, some of the Prime Minister’s cabinet colleagues such as Nitin Gadkari, Piyush Goyal, R.K. Singh, and others, have been rather vocal and boisterous about promoting electric mobility. The rationale for the push is twofold—increasing concerns about pollution across many cities and also to reduce the oil import bill, which would help meet carbon emissions targets and narrow the current account deficit.
The Global Mobility Summit was a logical fallout of these public pronouncements. However, according to one top executive associated with a leading automobile manufacturer, the event was a disappointment since no concrete announcements were made. On top of that, automobile companies had to fund the summit as well.
“It takes money to bring the vehicles here and put them on display,” said the executive, requesting anonymity. His tone of exasperation perhaps resonates with many of his peers in the automotive industry today.
Most of the automobile manufacturers in India have spoken publicly about their willingness to move towards electric mobility, but none of them barring Mahindra and Mahindra Ltd and Suzuki Motor Corp. have formally announced any major investments in EVs. They all cite a lack of clarity in the policy space.
Last month, after an inter-ministerial meeting, the ministry of heavy industries managed to finalize the draft for the second phase of the Faster Adoption and Manufacture of Hybrid and Electric Vehicles (FAME) scheme. The total outlay for the second phase was supposed to have shot up to ₹5,500 crore from a mere ₹700 crore in the first phase.
The officials in prime minister’s office (PMO) though were supposedly not in consonance with its counterparts in the heavy Industries ministry. As reported by Mint on 11 September, the PMO just four days before the MOVE summit proposed to focus more on bringing down the costs of electric batteries than subsidizing the total cost of the vehicle. Hence, the introduction of the so-called second phase of the FAME scheme will now be delayed.
This is the second instance when the union government could not make up its mind while formulating policies on EVs. Earlier this year, minister of road transport and highways Nitin Gadkari—after having mentioned once that a policy on EVs is awaiting cabinet approval—abruptly announced that there won’t be a policy solely for EVs and every other alternative fuel will be promoted.
According to Abhay Firodia, chairman, Force Motors, and ex-president of the lobby group Society of Indian Automobile Manufacturers (Siam), a policy laying down clear objectives will help the industry to plan future investments.
“At the request of [the] government, Siam had proposed policy measures through a White Paper on EVs, which laid down a shared industry vision—for achieving a level of 40% EVs by 2030 and 100% by 2047,” said Firodia. “However, the government has stepped away from laying down a long-term approach which is not very helpful for the industry,” he added.
The Niti Aayog, on its part, has formed several committees headed by the secretaries of seven different ministries, including heavy industries, road transport, power, earth sciences and others. Several of the ministries have already given their recommendations for promoting electric mobility.
Notwithstanding these measures, there is hardly any concrete plan of action on the ground. Ministers, on the other hand, continue to exhort automobile manufacturers to invest more in a technology without a clear roadmap.
For now, the PMO’s emphasis on subsidizing lithium-ion batteries to start with and then moving towards creating an ecosystem may actually be good since batteries are almost 40-45% of the cost of an EV, says Shaleen Jain, vice-president, technologies, EV-Motors India Pvt. Ltd.
“The government has to first decide on the standard for charging stations out the three standards available. They should look at shifting the mass public transport system to electric,” added Jain.
Recently, during the annual convention of Siam, Gadkari had announced that his ministry is almost in the final stages of formulating a list of non-fiscal incentives which will propel the share of electric cars among all new cars sold to jump to 15% in the next five years.
According to a very senior industry executive who chose to remain unnamed, mere announcements of this sort seriously don’t make much sense unless supported by policies on the ground, especially since the current government never touched the United Progressive Alliance’s Nation Electric Mobility Mission Plan (NEMMP) which was inaugurated in 2013.
“Why should we take the government’s words at face value?” the executive asked. “The current government never spoke about the NEMMP which was written and ratified by the Union government, although by another party. They never took the targets set in NEMMP seriously and the two committees related to electric mobility also never met thereafter,” the executive added.
According to documents reviewed by Mint, the union government in the second phase of the FAME scheme has set a very modest target of increasing the number of EVs to just 4% of all new cars sold in the next five years, keeping in view a number of impediments.
In the NEMMP, the target was to achieve sales of 5-6 million electric and hybrid vehicles by 2020, which is much higher than the target being set by the present government under the new iteration of the FAME scheme. None of the concerned ministers have ever gone into the possibility of meeting the original targets set in the NEMMP.
Industry also a divided house
A senior official in the ministry of heavy industries requesting not to be identified said: “We don’t know what the current status of the FAME scheme is since it now rests with the PMO. There are certain forces at play, which want the policy to be framed in a particular manner. This is making the process more cumbersome.”
The official mentioned above was indicating the lack of a cohesive voice from the automotive industry as well. While Japanese firms like Toyota Kirloskar Motor Pvt. Ltd, Maruti Suzuki India Ltd and Honda Motor Co. Ltd are batting for an emphasis on hybrid vehicles as an intermediate step towards battery-powered EVs, other manufacturers like Hyundai Motor Co., Tata Motors Ltd, Mahindra, and Renault SA are lobbying for a leap towards fully EVs.
According to R.C. Bhargava, chairman, Maruti Suzuki, the question is not only about EVs but ultimately about the reduction in the import of oil. “Having a policy may not be important. To promote all technologies, the government and the industry should do all it takes to promote these vehicles. The government will keep taking action, but the policies and the actions should go hand in hand,” explained Bhargava.
Suzuki Motor Corp. has recently announced its plan to test 50 EVs on Indian roads. It has also set up a lithium-ion battery manufacturing plant along with Denso Corp. and Toshiba Corp. in Gujarat. Other companies like Hyundai have announced plans to bring the company’s first EV to India in 2019, while Mahindra has also decided to set up a lithium-ion battery manufacturing plant with South Korean company LG Chem.
“Since there is no support for hybrid, we have put all our hybrid projects on hold,” said Pawan Goenka, managing director, Mahindra and Mahindra. “If the government of India is saying that the country is trying to go towards EVs, then just do it.”
In the two-wheeler segment, the country’s largest motorcycle manufacturer Hero MotoCorp Ltd has already invested ₹335 crore in Ather Energy Pvt. Ltd, a start-up which develops electric scooters. On the other hand, the largest scooter manufacturer, Honda Motorcycles and Scooters India Pvt. Ltd (HMSI), doesn’t have any immediate plans in the electric space.
According to Minoru Kato, president and chief executive of HMSI, electric scooters would still not be able to meet customer expectations in India and the company also didn’t have enough success in the electric two-wheeler space.
The muddled Indian approach may ultimately be a reflection of the problem of persistent lobbying by different companies, with each firm wanting to move forward differently, said Shaleen Jain.
While the full-fledged adoption of electric mobility may be quite some time away, too many bureaucratic hurdles and the lack of a cohesive voice from the industry are making things worse at a time when, globally, the automotive industry is at the cusp of a once-in-a-century revolution. In the midst of what seems to be an inevitable oncoming change, the sector’s key players in India—from the slew of ministries to manufacturers—seem to be caught up in their own battle for survival.