2017-09-18
Auto makers may go slow on electric vehicles

Indian automobile makers are unlikely to formulate a strategy for electric vehicles in a hurry although they realize that its adoption is inevitable amid a government push to switch to zero-emission technology by the beginning of the next decade.

While some are waiting for the government’s intent to be backed by a policy document, others are unlikely to introduce electric vehicle models till the ecosystem matures. Utility vehicle maker Mahindra and Mahindra Ltd is still the only auto firm going ahead with the launch of electric vehicle to capitalize on its first-mover advantage. Most launches in the initial phase will be focused on public transport segment, Pawan Goenka, managing director at the firm, said during the launch of firm’s first passenger e-rickshaw on 8 September in New Delhi.

India, the world’s fifth largest auto market, is poised to become the third largest by 2020 and the government has unveiled a vision to make the country an all-electric vehicle market by 2031 in a bid to reduce dependence on fossil fuel and achieve zero emission. Addressing auto industry executives on 7 September at its annual conference, Amitabh Kant, chief executive at government think-tank NITI Aayog, said owing to its low per capita ownership of automobiles, India is uniquely positioned to pursue a very different model of growth as it will not have “to struggle to retire the large fleet of traditional internal combustion engine (ICE) and replace them with electric vehicles.”

High cost of battery, which accounts for almost three-fourth of the cost of an electric vehicle, makes electric vehicle twice as expensive when compared to gasoline-run vehicles, and creation of an adequate infrastructure, among other factors such as acceptance of such vehicles, are some of the challenges that the electric-vehicle market faces.

India has close to 500 charging points and a city like Delhi alone will need 350,000 points to meet demand, Shivanshu Gupta, partner at consulting McKinsey and Co. said in a presentation during the annual conference of auto component manufacturers’ association on 8 September. “There has to be an economic case so that whoever makes an investment is able to recover it fast.”

But Kant is optimistic. “Several forecasts are predicting the price per unit of electric car will be equivalent to that of a gasoline car by 2025. That will be the tipping point,” he said.

“India is in the midst of biggest disruption, so it can’t be business as usual for industry and the government,” he said. 

While top officials at local arms of global firms conceded “it’s an idea whose time has come”, they are not buying into Kant’s optimism and are unlikely to get to the drawing board unless the vision and intent is backed by a policy framework and a long-term road map. 

“It’s a direction that is correct but the steps need to be clearly enunciated and worked along with industry,” said C.V. Raman, executive director, research and development at Maruti Suzuki India Ltd, pointing out that Maruti has done technology projects on electric vehicle and showcased products at Common Wealth Games in 2010. “Even Suzuki has the technology. But the point is whether it would make economic sense,” he said, adding if it’s based on imported technology, it won’t work. 

Others are more sceptical. “They are saying the price of the battery can be reduced by localizing it. Even in countries such as China and Japan where lithium-ion batteries are produced for many years, they haven’t been able to meet the reasonable price target so far,” said Yoichiro Ueno, president and chief executive at Honda Cars India Ltd. 

Minoru Kato, president and chief executive at Honda Motorcycle and Scooter India Pvt. Ltd, agreed. “Honda Japan has the EV technology know-how for 20 years,” he said. But still it hasn’t been able to come up with a model that can meet the price and performance parameters, he added

Source: Mint