Tearing hurry

EV move will backfire if the industry doesn't get transition time

The government’s plan to ban sales of fossil fuel-driven two- and three-wheeler vehicles by 2025 could not have come at a more inopportune time. Sales of two-wheelers grew at a meagre 4.86 per cent in FY19, and the outlook for FY20 isn’t very encouraging. At the same time, the industry is coping with the transformation to meet the Bharat Stage VI (BS-VI) emission regulations, which will come into effect on April 1, 2020. Against this backdrop, it isn’t surprising that the NITI Aayog’s two-week deadline to the industry to come up with a comprehensive plan for introducing electric vehicles (EVs) in the next five-odd years has been met with considerable scepticism. Industry leaders have questioned the urgency and have pointed out the increase in the cost of vehicles and inadequacy of the existing supply chain. Batteries, which constitute 40 per cent of the cost of vehicles, would increase the price of two-wheelers. In addition, considerable planning and execution are required to simultaneously develop a complete ecosystem around EVs, including charging stations.

 
In the NITI Aayog’s worldview, however, the transition will address two main concerns: According to a report by Greenpeace and Airvisual, India has 22 of the most polluted cities in the world, with Gurugram being the world’s most polluted. And two-thirds of the pollution load is due to two-wheelers running on the internal combustion engine (ICE) in major cities. Two-wheelers account for 79 per cent of the number of vehicles whereas economy and premium cars have only a 14 per cent share. Another cause for worry is India’s growing dependence on oil imports. The NITI Aayog estimates savings of Rs 1.2 trillion (at Rs 70 per litre) in the oil bill if the transition takes place.

Both sides need to take a more rational approach now. While a move to EVs is inevitable, the industry should be given a reasonable time. China took the EV route as early as in the 1990s by classifying electric two-wheelers that move at 20 km per hour as bicycles. Beijing made them attractive by doing away with registration and allowing it to be ridden in bicycle lanes. Soon, it restricted the ownership of gasoline-powered two-wheelers in some cities. And it has been giving tax benefits and other subsidies to carmakers for almost a decade. China, the US, and Europe have up to 40 per cent “all-in” subsidies.

 

To spruce up their supply chain, Chinese companies have been aggressively buying lithium mines — the critical component for making batteries — in countries like Australia, Mexico, Argentina and others. Today, it is both the biggest manufacturer and biggest consumer for EVs globally. And some estimates suggest that the EV market share will be 50 per cent by 2025. In comparison, India seems to be in a tearing hurry in its EV transition without the required infrastructure. For some reason, the NITI Aayog believes an ecosystem of either fast-charging or swapping of batteries can be created by 2023. That is almost impossible as the challenges — from acquiring minerals to installing charging stations across the country to reducing the cost of the vehicle — are manifold. The threat of a ban can’t be the answer.