Union minister for road transport and highways, Nitin Gadkari, at a recent event in New Delhi gave a jolt to automakers when he said he would not mind “bulldozing” fuel-based vehicles if they hamper his “dream” of E-vehicular India.
The auto-industry retorted soon with car makers giving interviews on every other channel, hailing the decision even as they tried to grapple with the reality and said that one must avoid taking the Minister’s statement at “face value”.
After all these days, let’s take a step back and come to terms with the statement.
When the minister said that the government has “crystal-clear” policy to curb pollution, he intended to “underline the urgency” of the issue along with underscoring government’s take on clean fuel.
With policy on E-vehicles (EV) yet to be brought on the table, auto industry is left on its own to explore various possibilities to switch to electricity based transportation system.
The shift, however, will not be easy.
Also read: Switch to clean vehicles or be bulldozed: Nitin Gadkari to automakers
Moneycontrol talked to industry experts to seek their views on the minister’s statement along with simplifying the entire fiasco.
The transition from internal combustion (IC), incumbent engine system, to electricity based system looks “very difficult”, according to Abdul Majeed, partner, PricewaterhouseCoopers, a consulting firm.
He said that, at present, penetration of EV is at three to four percent globally, thus going completely electronic in India will need time.
“Ecosystem, in India, will take time,” said Majeed adding that how one goes about the entire process of transition will decide the future of auto-industry.
Voicing similar concerns, S.P Singh, senior fellow, Indian Foundation of Transport Research and Training (IFTRT), an autonomous research body said that domestic manufacturers may find it “tough” to make such a hasty shift.
“Unless (car) producers have high stakes (in EVs), (there is) definite investment in research and development and government comes out with clear road map, it will be difficult,” said Singh.
Experts opine that shift to EVs is need of the hour albeit the target is “ambitious”.
“EVs have huge business potential and benefit to the society,” said Singh.
Rakesh Batra, partner at EY India said that having electronic vehicles is “feasible”, however, the “adoption” could vary from segment to segment.
Don’t fear the 'bulldozer'
“We should move towards alternative fuel... I am going to do this, whether you like it or not. And I am not going to ask you. I will bulldoze it. For pollution, for imports, my ideas are crystal clear... The government has a crystal-clear policy to reduce imports and curb pollution,” Gadkari had said at Society of Indian Automobile Manufacturer's (SIAM) annual convention.
It must be noted that he did not say the statement in isolation and did add another point related to investment in research. “I urge you (car makers) politely to do research…” he had said.
The minister’s comment thus throws weight on his resolve to promote R&D, allowing the transition to be less painful.
“I think, minister meant hand-in-hand transition,” said Majeed. “He is only putting urgency (in the mind of the manufacturers)”.
Also read: Full-fledged electric fleet to hit roads by December: Nitin Gadkari
“The policy of the government for electric vehicles, in the long term, is a very sensible policy,” said R.C Bhargava, chairman, Maruti Suzuki, soon after the minister’s statement.
He said that the policy must be looked at in terms of “energy security” and not anti-cars per se.
Industry analysts said that the transition to EVs would require “hand holding” by the government coupled with due consultation with various stakeholders.
Roadblocks and roll out
Industry insiders say that time given for roll out could be reconsidered as 2030 could be a little too early to push for E-vehicles.
EVs in India hold less than one percent market share of total auto sector, of which 95 percent are low speed scooters.
Against three million fuel based cars in India, there were merely 2,000 electric cars in 2016-17. The number stand at 23,000 for e-scooters against more than 16 million fuel based two-wheelers.
The target set by the union ministry for roll out of EVs in India is 2030, which is 2032 for Scotland and 2040 for France and Britain. Recently, China announced its plans to phase out fuel based vehicles but did not specify the time.
“The target is ambitious,” said Batra.
He, however, said that 2030 could be the deadline for new vehicles to be electric, not all (existing) vehicles.
Also read: Progress report: Automakers’ plans for introducing electric vehicles on Indian roads
Experts pointed out a few hits and misses in the minister’s “ambition” and said that a lot of issues need to be ironed out.
Hits
The minister has hit the bull's eye by starting the roll out with public transport and two wheelers. Two wheelers accounted for a whopping 80 percent of the entire automobile sales during 2015-16 as per data provided by SIAM.
E-scooters were also adopted more than 11 times by people against e-cars during 2016-17. Thus, introducing EVs through two wheelers in the market is the logical nudge to the scheme.
“There can be a faster adoption of EVs in the public sector than the passenger vehicle segment,” said Batra.
Analysts said that by pushing EVs through public transport, not only will the people become comfortable with the mode but it would address 85 percent of traffic at one go.
Road transport ministry plans to float tender for e-rickshaws, by November, to be used as public transport.
Another advantage that analysts feel is the achievement of economies of scale, or per unit cost reduction.
They feel that though the initial investment required will be huge but achieving low cost per unit would not be an issue.
“India has a huge population so economies of scale can be created soon,” said Singh. He said that India is a huge market, waiting to be tapped for E vehicles.
Lastly, experts feel that the urgency was needed to address the growing environmental concern. With global temperatures increasing constantly, they feel, it’s time that India targets roll out of EVs on priority basis.
Misses
The biggest concern for industry right now is the absence of EV policy. The ministry has pressed the automakers to shift towards EVs but has failed to lay out the road map for future.
“Country is on a spring board with no clear cut policy, “said Singh adding that government needs to lay out a long term plan, giving clear instructions to the automakers.
Batra said that Centre must adopt a “systematic approach” to bring out the policy.
“It’s difficult to comment on EV’s future in India without any policy… How do you go about it remains to be seen,” said Majeed.
Singh said that automakers have been in doldrums due to frequent policy changes. With government giving recurrent directives about various auto-norms, automakers are confused about investment.
“Automakers have huge amount invested in upgradation of fuel already… they will think twice before investing in EVs,” said Singh.
Automakers have been asked to switch from Bharat Stage-IV standard of fuel emission to BS VI (skipping V) by 2020 to control pollution levels.
He said that if automakers are being asked to invest in fuel technology, investing in EV would need deliberation.
“A long-term stable technology-agnostic roadmap for the automotive industry driven by a sound regulatory framework is therefore the need of the hour so that the industry can invest for sustainable growth and development, in line with the aspirations of all stakeholders,” said Rattan Kapur, president, Automotive Component Manufacturers Association of India (ACMA), the apex body representing the auto component manufacturing industry, in a statement.
Next issue to look at is the time constraint. Experts feel that domestic players need more time for R&D rather than manufacturing. With no technology in hand, it will be difficult to bring EVs at mass scale.
“Mahindra came out with Reva but had trial and errors for a long time,” said Singh adding that manufacturers in India are not yet sure about EV manufacturing. “Domestic manufacturers need time”.
“The process is slow to my mind,” said Majeed. “No one is ready yet”.
Third and the biggest challenge is the lack of manufacturing site. India has no manufacturing site for EVs that could cater to mass scale production.
“There is no battery manufacturing site in India right now,” said Batra.
Import of batteries render them expensive, constituting 30 to 40 percent of total cost of production.
India also has deficit of charging stations. There are only 500 charging stations in India, against a requirement of approximately 3 lakh stations in Delhi.
Lastly, built-up inventory needs due consideration. Auto industry has huge inventory which should be sold off before sale of EVs begin in India.
“It will be a big challenge to sell off the inventory,” said Majeed.
Market growth of EVs will depend on the consumers’ acceptability and adaptability, feel experts.
Bhargava had also flagged the issue and said that companies would defer making plans till they could sense their respective customer base’s sentiments.
“There are no plans yet,” he said. “Real issue is that customers will have to become comfortable with buying these cars”.
“Consumer’s acceptance matters as they carry the onus of purchasing it,” said Singh.
On the whole, while India is gearing up for adoption of E-vehicles in the wake of alarming pollution levels, the transition can come about only with a long term, clear policy regarding the transition. As customers will have to buy EVs once the cars are ready, auto-makers must invest in R&D to make cars affordable and convenient for the buyers.
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