Incentive for EV makers - Will really charge the India EV market?

The New and Renewable Ministry, of Indian Govt announced an incentive scheme for EV manufacturers in India amounting to INR4000, 5000 and 100,000 for low speed 2 wheeler, high speed 2 wheeler and EV car respectively. This could amount to 20-25% of prevailing ex-factory prices. The incentive comes with a tag of filling 30% of supply chain through locally developed parts. 

SMEV (Society for Manufacturers of Electrical Vehicle) a consortium of EV, technology and aggregators announced, through the incentive they receive the EV makers might plan to pass on this further to the buyer that could fuel the sales of EV market in India.

However the optimism of officials at SMEV that this move could even double sales of EV in next year seems far fetched considering the ground realities in India that could support this growth.

The incentive program in itself may not serve much purpose without a proper roadmap since India does not have any policy framework related to EV growth yet. The incentive program itself is a halfhearted attempt that came so late compared to its global peers and

here are some fallacies why the Electrical Vehicles may not gain momentum in India.

1. A major benefit of EV is to Reduce dependency on Petroleum products – However India is fast becoming dumping ground for all OEMs in the world for the ICE based vehicles with companies churning their capacities like there is no Tomorrow.  According to some statistics, around 100,000 electric vehicles exist in India, majority of them are two wheelers compared to car maker Maruti suzuki selling over 100,000 car per month. Emission taxes are predominantly imposed in Western countries now to curb the driving of cars where as in India the Petrol and Diesel are subsidized. The recent outburst from Environment Minister Jairam Ramesh to ban SUVs that are heavy on fuel consumption or asking them to sell the Diesel at un-subsidized price is the first vocal protest heard on this issue.

2. Need for Power - The basic challenge for India to promote EVs at this point is not the infrastructure or demand but the availability of Power itself. According to Expert committee at planning commission, for its target of 8-10% GDP growth until 2030 to eradicate poverty, Indian power growth has to be at least 6% on annual basis. So the primary focus for India now is to meet its power requirement. Govt of India setup this expert committee to draft a comprehensive energy policy to meet the challenge through Planning commission that sets plans for India covering 5 years span (presently India is in 11^th five year plan). All the energy demand recorded in the policy are for the Industrial, house hold, agriculture, rural electrification etc., and not for transportation need like charging EVs.

3. Another basic benefit of EV is for the Green cause to control emission – This makes it even trickier for India since around 70% of Power is generated using thermal power plant where coal is the primary source of energy. Since India has large Coal reserves, coal would continue to be the primary source till 2031-32 according to the energy report. So it may not make much sense to promote EVs on greener cause where they are charged by electricity that is generated by burning coal. Govt is putting enough thrust on investing in technology to reduce the carbonization due to burning coal.

There are some incentives offered by the Govt. like for 2 wheelers there is no registration required from the road transport authority, there by avoiding road tax. But from common person’s perspective EV is not fully ready to lure the customers due to its own challenges of cost/reliability and infrastructure like anywhere else in the world.

The present EV market scenario in India where there are around 15 players in 2 wheeler segment, however most of the parts sourced from the Chinese imports and assembled and sold in India. There are some isolated battery operated 3 wheelers (Auto rickshaws) which use Liquid batteries that are under the radar from environmentalists. The erstwhile Reva is now a Mahindra group company. But Reva was never a successful EV company with around 600 cars sold last year, about 300 in India despite of its 10 years of existence. But its capital is the IP that Mahindra would be interested to use for its small LCVs (sub ton category) mainly for export market. GM India had partnered with Reva for technology collaboration for Chevy Spark, but since the Mahindra took the control of Reva, the relationship ended. The Auto Major TATA has good amount of thrust on EVs with some of its models like Indica EV is scheduled to hit UK/Scandinavian market by 2011.

So the EVs to gain grounds on Indian Road seems quite far, may be as far as 2030, however one trend could be seen in near term is that, with some localized promotion by private industries/institutes who are investing in RE sources could use the vehicles for their organizational use within their premises. Even local Municipalities could take initiatives to tie up with private players to own some fleet..