If 2016 was a year of bans, restrictions, and regulatory challenges for the Indian automobile industry, the current year has been no less ‘exciting’. Early in the year, when the industry had just started to recover from demonetisation, Piyush Goyal, then minister for power, said the government was assessing the possibility of having an all-electric vehicle market by 2030.
Few in the industry took that statement seriously. But soon, the government’s intent became clearer when the Goods and Services Tax (GST) Council decided to tax all electric vehicles at a low rate of 12 per cent compared to a minimum of 29 per cent on small petrol cars and other vehicles. On prices of cars, most of which are priced in the range of Rs 3 lakh to Rs 7 lakh, this difference of tax rate is significant. It is a different story that electric cars
are 60-70 per cent more expensive than conventional fuel cars due to the cost of lithium-ion battery.
But the buyer of an electric car also has the advantage of substantially low operating cost, approximately one-fifth to a petrol car.
The GST panel also decided to tax hybrid cars at 43 per cent (including cess), prompting players like Hyundai
to drop their hybrid car projects in India midway. The Korean auto major, instead, decided to focus on electric vehicles for India. Market leader Maruti Suzuki, however, was not ready. “It will be very difficult for the industry to change things from tomorrow... I have never seen that kind of a change in the world,” Kenichi Ayukawa, managing director and chief executive
of India’s largest car maker, Maruti Suzuki, said in May. But Maruti’s parent, Suzuki, had already announced in April a plan to set up Rs 1,151 crore lithium-ion battery-manufacturing unit in Gujarat in association with Toshiba
Two months later, Ayukawa said there was a lack of good and affordable electric mobility solutions.
“We need charging points for electric vehicles. We have to review these practical problems. We need a road map for the future. You can import cars from a company like Tesla
but people are not looking for such options. People expect an affordable vehicle, else they will not opt for it. They look to buy electric cars
in a price range of Rs 5-10 lakh,” he said.
The industry was taking its time to respond and there was limited action. But a number of start-ups had already turned active, particularly in the electric two-wheeler space. Ather Energy, Tork Motorcycles, and Okinawa had started work even before the government started talking about electric mobility. In October 2016, the country’s largest two-wheeler maker, Hero MotoCorp, decided to invest Rs 205 crore in Bengaluru-based Ather Energy while getting ready for its own internal electric projects.
As talks of India’s ambitious electric mobility plan were making headlines, Tesla
chief Elon Musk lauded India’s plan. M&M Chairman Anand Mahindra
took this tweet of Musk as an opportunity to excite him to expedite the India entry. “Time you got out here Elon. You don’t want to leave that whole market (India) to Mahindra do you...the more the merrier and greener,” he tweeted.
M&M has been selling electric cars
in India for some years now, though the volume has been small. It also forayed into electric cargo vans. Players like Tata Motors, Ashok Leyland, and JBM started work on electric buses.
A veiled threat welcomed auto makers at the annual convention of industry’s apex body, the Society of Indian Automobile Manufacturers
(Siam), in September. Union Road Transport Minister Nitin Gadkari, speaking at the convention, told the industry to switch to production of clean vehicles or else get “bulldozed”. Later in the same month, EESL, a company promoted by power sector PSUs, floated a tender to purchase 10,000 electric cars
worth Rs 1,000 crore. Since the industry was not prepared, only three players -- M&M, Tata Motors and Nissan
-- participated in the bids. Tata and M&M were winners.
A policy on electric vehicles is still in the works. “The government made several statements on electric vehicles. However, the strongest signal was a preferential GST rate followed by bulk procurement under EESL.
This spurred actions from industry players in the form of alliances and portfolio diversification into EVs. The winds of change that started in 2017 are expected to amplify in 2018,” said Ashim Sharma, Partner & Group Head (Auto, Engineering & Logistics) at Nomura Research Institute
These events acted as a catalyst for the industry. American car maker Ford tied up with M&M to work together on electric mobility, among other areas of cooperation. Last month, Suzuki said it was partnering Toyota
for the introduction of electric vehicles in the Indian market by 2020. Players in the energy sector have made small beginnings in setting up electric vehicle charging stations. Cab aggregators are getting ready to roll out electric vehicles on their platform. Component makers are forming joint ventures to cater to the demand for electric vehicle manufacturing.
The transition is slow, but a beginning has been made.
Electric vehicles are seen as a disruption in the automobile space. “Technology always causes some disruption and electric mobility is a major technological change. The internal combustion engine has existed for more than a century. When a new technology comes people have to adapt to it. Those who do not adapt will be left out,” said R C Bhargava, chairman at Maruti Suzuki.