Note to readers: Hello world is a program developers run to check if a newly installed programming language is working alright. Startups and tech companies are continuously launching new software to run the real world. This column will attempt to be the "Hello World" for the real world.
Many years ago Victor Hugo said that no army can stop an idea whose time has come. In 21st century India, there are many such ideas driven by technological progress and the growing needs of a country that needs to solve problems at scale. Top among them is the idea that cars and two wheelers can run on electricity instead of fossil fuels.
Clearly, this is not an India-only idea. Global manufacturers, led by Tesla, and several others such as Hyundai, Toyota and Volkswagen, have started selling electric cars. In the two-wheeler segment, traditional players like Honda as well as several upstarts have started selling globally.
In India, startups like Ather Energy and Ola Electric have picked up the baton. Decades-old manufacturers like Bajaj and Hero have also been making electric two-wheelers. Same goes for four-wheelers. The market is huge.
Going by the state of the market in 2020, India is the fifth-largest auto market in the world with nearly 3.49 million vehicles sold that year. India has a sizeable manufacturing base. More than 26 million vehicles were made in India. The country also exported 4.77 million vehicles in 2020 — three out of four were two-wheelers.
By 2032, the government has said that all vehicles sold in the country should be electric. The market for electric vehicles will see an average annual growth of 26%, according to Fitch Solutions. A growing middle class, rising fuel prices and incentives from the government will fuel this trend.
Given the size of the prize, everyone wants to sell in India and a debate is taking shape. On one side, there are global manufacturers like Hyundai and Tesla that want India to lower import duties on electric vehicles. On the other, are homegrown companies like Ola who want the country to have the confidence to build indigenously.
On Tuesday, Bhavish Aggarwal, the co-founder of Ola Electric, tweeted in response to a call by Hyundai managing director S.S. Kim to lower import duty saying: “Strongly disagree with both. Let’s have confidence in our ability to build indigenously and also attract global OEMs to build in India, not just import. We won’t be the first country to do so!”
If you go by a parallel that played out in the smartphone industry, this is the right approach. By giving production-linked incentives to India, it was able to attract global manufacturers to the country. To take advantage of these incentives, Xiaomi, for instance, brought partners like Foxconn to make products in India, and we now have a growing smartphone manufacturing ecosystem that has created tens of thousands of jobs.
There is scope to follow a similar playbook in India when it comes to manufacturing EVs. Instead of lowering import duties, it should double down on production-linked incentives. In the union budget, the government has earmarked Rs 57,042 crore for the automobiles and auto components sector in production-linked incentives. It is also setting up incubators for electric vehicle startups in India.More than the immediate boost that these efforts will have on the automotive sector, it will have a lasting impact on the country’s manufacturing know-how. As I wrote in my book Xiaomi: How a Startup Disrupted the Market and Created a Cult Following, much of China’s early success in manufacturing came because global manufacturers — from Nike to Motorola and Nokia — started manufacturing in China. Decades later, as the Chinese middle class grew and started buying smartphones, Chinese brands like Xiaomi and Huawei were ready to meet that demand. India has that opportunity with electric vehicles now.