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Government’s insistence on 100% electric vehicle switchover shocks auto industry

The industry has been religiously working on electric vehicles since 2010. If the government is ambitious about e-vehicle development, the sector wants to toe the line

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The government’s stance on sustainable mobility further hardened, when transport minister Nitin Gadkari recently warned original equipment manufacturers (OEM) that don’t reorient themselves and continue to sell internal combustion engine (ICE) vehicles “of being bulldozed”. Although his intention may have been to simply coerce the industry into focusing on electric powertrains, many global automakers feel the constant rumblings are forcing them to rethink their expansion plans for India.

Says Vishnu Mathur, director general of Society of Indian Automobile Manufacturers Association, “The industry has been religiously working on electric vehicles since 2010. If the government is ambitious about e-vehicle development, we want to toe the line. But before any policy, the opinion of all industry stakeholders should be taken into consideration. What the industry wants is for the government to lay down a clear roadmap for a partial or complete electric powertrain conversion.”

An auto industry veteran, with a divergent viewpoint, says, “The auto industry is headed for a combative phase as many players want to stick to their own plans dictated by headquarters. The government wants to drive its own agenda based on superficial research and analysis. At present, the agenda is driven by the government, or should I say a few people in the government. They will continue to make facile bombastic statements (such as 100 per cent e-vehicle switchover), unless logically and assertively challenged by the industry association. Although it is not a very happy situation right now, I believe this friction will bring clarity, then cooperation, collaboration and finally a long phase of peace and progress.”

Carmakers In A Tizzy

Although no carmaker has openly criticised the government for its exaggerated mission, most are unanimous in their view that the government has to put in place a clear policy as well as the infrastructure to enable auto manufacturers to make the proposed switch to electric vehicles.

Toyota Kirloskar Motor vice-chairman and whole-time director Shekar Viswanathan says, “With the introduction of more hybrids, emissions will gradually come down, and when people get used to the concept, building the charging infrastructure will enable more electric vehicle (EV)adoption. In the meantime, bringing in a policy to phase out BS-I, BS-II and BS-III vehicles will go a long way in promoting EVs and reducing pollution. We are committed to making continuous efforts in upgrading our technology and from a mobility perspective in India, we view hybridisation as one of the best ways going forward.”

Adding to it, Mercedes-Benz India managing director and CEO Roland Folger says, “The transition to EV has to be homogenous, comprising a mix of different powertrains, which we are witnessing at the global level. There has to be a coexistence of ICE, PIH and EVs. In this entire approach to drastically reduce environmental pollution, one aspect is most viable and can bring fast result — switch to BS VI by 2020.”

While it is imperative for the government to create a conducive policy framework for EVs, it is equally important for OEMs to think differently and work closely with suppliers, feels Sumit Sawhney, MD & CEO of Renault India. “We don’t have battery manufacturing infrastructure in India, hence public-private partnership is required to build that,” he adds.

“Given the automotive industry is capital intensive and products take about five years to develop, it is important that the industry is given clarity and stability of policies so we can develop our product plans suitably,” says Anurag Mehrotra, MD & CEO, Ford India.

“Audi globally plans to launch three new electric models by 2020, after which the brand will gradually electrify models in each of its core series. We definitely believe that Audi India has a future in the EV segment and can have the product ready to be rolled out in the Indian market, if infrastructure is conducive,”  affirms Rahil Ansari, Head, Audi India.

The Affected Parties

It is not just the vehicle makers, many affiliated industries such as the auto component industry, which is pivotal to any plans laid out by the government for the automobile industry, are also facing the heat.

Rattan Kapur, former president of Automotive Component Manufacturers Association (ACMA), says “Nearly 50 per cent of our industry has made investments in components for ICE models such as crankshaft, pistons, connecting rods, flywheels, valves, injectors, etc. But if the government is adamant on stopping ICE vehicle production, half of our industry players will be compelled to wind up operations. To avert that misfortune, may be the government should give a relaxation and we can have a 30-40 per cent EV fleet by 2030, 70 per cent in the next five years, and 100 per cent by 2040.”

Ironically, Sohinder Gill, CEO of Hero Eco and director of corporate affairs at Society of Manufacturers of Electric Vehicles, doesn’t buy the concept of all-electric vehicle market in India. He says, “As soon as the crude oil consumption goes low, the taxes on GDP will drop by at least 2 per cent. And when the kitty that runs into lakhs of crores of rupees dries up, the government will be forced to offset losses by jacking up electricity rates. So even though electric vehicles should get a boost, a 100 per cent electric car market doesn’t look implementable.”

The e-Vehicle Revolution

Established under the Ministry of Power in 2010, Energy Efficiency Services (EESL) — a joint venture between NTPC, Power Finance Corporation, Rural Electrification Corporation, and Powergrid — is taking rapid strides to facilitate the growth of the country’s energy efficiency market. Apart from inviting tenders for up to 10,000 four-wheeler EVs for the national capital region, EESL has also invited tenders for nearly 4,000 passenger EV charging stations in Delhi and NCR. In order to expedite the shift to EVs, the government is also considering offering an array of financial incentives to make operational costs of EVs lower than petrol cars in the next five years.

EESL MD Saurabh Kumar says, “The vehicles will be for the central government (civil) employees for official usage. We should be dispatching 500 units in the first batch and are confident of supplying the entire fleet of 10,000 units by March’18. We want to tap the 5 lakh vehicles used by government officials for official use.”

In a related development, the Vikram Sarabhai Space Center under the Indian Space Research Organisation (ISRO) has developed a ground breaking technology to manufacture high-powered batteries for e-automobiles. Media reports claim that the government has urged ISRO to licence this technology to OEMs, battery makers, PSUs, and other private players for mass production of lithium-ion batteries for automobiles.

Disruptions galore

Even though the e-vehicle industry is yet to gain traction, a number of visionary entrepreneurs are prepping to cause great disruptions.

One of the ground-breaking disruptions in the automotive industry would be carried out by an NRI technocrat who has no prior experience in the automotive industry. A mechanical engineer by profession, he will float an entity that will make vehicles that are integrated with rechargeable battery technology. It will reformat the way vehicles are made i.e., inside-out rather than outside-in right now.

Another major disruptor SUN Mobility, a joint venture between Maini brothers’ Virya Mobility 5.0 and Sun Group’s investment arm SUN New Energy systems, has developed an open-architecture ecosystem around its proprietary smart batteries and a network of quick inter-changeable battery stations powered by renewable energy.

The Supporters

If there are naysayers, there are also those who are embracing the e-vehicle drive with open arms.

Maruti Suzuki chairman R.C. Bhargava says, “The Indian auto industry also subscribes to the same notion of the government on propagating e-mobility. Although we support the government’s intent, I feel customers will decide the ideal technology of the future. In order to make a product acceptable to customers, the price and the ability to use an e- car almost in the same manner and convenience vis-à-vis petrol-driven vehicles are imperative. Then only it can become a mass product. EVs are the long-term future for India and our industry is getting ready to start the development.”

Says Daniele Lorenzetti, chief technology officer of Apollo Tyres, “Making tyres for EVs is just an evolution of the existing tyre technology, and not a disruption as such.”

Business Outlook

According to a report by NITI Aayog, India can reduce energy demand by 64 per cent and carbon emissions by 37 per cent with the help of connected, shared and electric passenger mobility across the country. It is also widely believed that the government of India is gearing up to float a tender for up to 50,000 electric three-wheelers by December 2017. The move is part of a bigger initiative aimed at putting more than 1 million electric three-wheelers and 10,000 electrically-powered city buses on the country’s roads by mid 2019.

But can we imagine a 100 per cent electric fleet by 2030 in India? Views of industry consultants differ. As per Rajat Dhawan, senior partner of Mckinsey and Co., “The pace and extent of migration from ICE to EV powertrains would happen such that the three-legged stool of regulatory intent, customer value delivery, and supply-side readiness is not imbalanced. Otherwise, the stool will fall through. The regulatory intent right now is for rapid pace of transition. But protecting the customer value equation will need the battery technology to evolve much more to overcome its cost and range deficiencies. And then supply of EV components, new EV product models, manufacturing plants and charging infrastructure will have to keep pace. Keeping all this in mind, even a 1-in-3 transition to BEV (battery electric vehicle) in the next 10 years is going to be aggressive.”  

Status and achievements of the first phase of FAME India scheme:

1. Total Sales of XEV (plug-in vehicles) : 1,56,373 in the period from April 2015 to March 2017

2. 65% mild hybrid four-wheelers

3. 30% electric two-wheelers

4. 5% four-wheelers including strong hybrid and full electric

New Models:

1. Full Electric Launches: 4W- very limited ; 2W: about 30

2. Hybrid: Mild: 2; Strong 1

3. Charging Infrastructure: Only in private sector

Some proposals are under consideration that are also in the private sector:

1. Saved fuel: 1.59 crore-plus litres

2. Fuel saving per day: 38,005 ltr

3. CO2 reduction per day: 95,453kg

4. CO2 reduction: 4 crore-plus kg

5. Total incentive amount:  Rs 191 crore

Charging Infrastructure Initiatives:

1. Government working on setting up 50 fast/slow charging stations in 20 cities by end of 2020 with Rs 100 crore in investment

2. Standardisation of charging infrastructure as Bharat Charger.

3. Several charging pilot projects approved from DHI under FAME scheme (Rajasthan REIL and Lithium urban, etc.)

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