The National Electric Mission Plan has recently been adopted in a bid to catalyze the growth of electric vehicles in the country. This article takes a look at the factors at play to energize the electric vehicles industry in India.
Electric vehicles have been present in Indian markets for almost a decade now. However, the uptake has been rather slow and consequently their role in transportation has been minimal till very recently.The recently launched National Electric Mission Plan hopes to accelerate the rollout of electric vehicles with a target of seven million electric vehicles on the roads by 2020. The government is also setting a Rs. 740 crore fund under the 12th Five Year Plan (2012-2017) for supporting R&D in the electric vehicles industry.
Electric vehicles are gaining popularity in the country, but most would agree that growth rate has been rather low. One of the major bottlenecks for the uptake of electric vehicles is the unreliable grid in the country. At a time when electricity supply is severely erratic and most find it difficult to power their homes, one cannot help but be cynical about the potential of electric cars in the country. Coupled with the complete lack of EV infrastructure in terms of charging stations, the landscape is a bit challenging and as such most vehicle owners continue to bear steep prices of diesel and petrol instead of converting their vehicles to electrically charged ones.
Interestingly enough, notwithstanding the electricity problems of the country, the industry last year saw a huge surge in sales after the MNRE announced subsidies on electric vehicles. The industry then consequently saw a dramatic collapse after its discontinuation. The MNRE had introduced a subsidy of Rs.5000 on electric bikes and Rs. 1 lakh for electric cars. After the scheme died in March 2012 and did not get subsequently revived, there has been a staggering drop in sales of electric vehicles by almost 75%. Expressing concern at the current state and the highlighting the need for a speedy implementation of the National Mission Plan of Electric Vehicles, Sohinder Gill, Director of Society of Manufacturers of Electric Vehicles and CEO of Hero Electric says, “It (NMPEV) is a great step but there is a time-lag between announcement and real execution of the policy which may run into some months. That could be a gap of 4- 6 months by the time the customer actually starts to get advantage out of it. This lag of 6-7 months is going to further cripple the industry. MNRE subsidies died in March, and since then all of the manufacturers and suppliers have gone down-hill.”
Ruing about the state of affairs, Gill adds, “The subsidies offered by the MNRE amount to Rs. 50-60 crores – this is a measly amount as compared to the Rs. 23,000 crores that the government has already committed to spending. There should not be any more delay in continuing the subsidies that the MNRE had started. It has been proved by numbers before how far this directly affects sales. When the subsidies had been initially announced, sales had doubled. It is a known secret that the EV policy will only come into effect by August 2013, by which time the harm will have been done. 6-7 players who had taken the initiative of establishing electric vehicles operations in the country are closing down. Even BSA, a Murugappa group initiative, is under severe strain”.
Speaking about the NEMP, Rahul Chopra of Novo Electric Vehicles also re-iterated the importance of subsidies. He says, “Being a manufacturer, I am looking at subsidies and rebates in taxes. Overall, through the policy interventions from the government, manufacturers like me need a level of assurance for delving into this unknown and risky world of electric vehicles”.
Cases from around the world have proved that electric vehicles only have a demand when their cost is lower than that of petrol and diesel cars. This proves to be an arduous task for manufacturers themselves – which is why the government needs to step in with tax relaxations and incentives to drive the industry forward.
Gill also says that around 250 dealers of electric vehicles have shut shop in the past year. Consequently attrition rates are high in the sectors with most of the man-power going back to the traditional automotive sector.
The MNRE scheme was a well-structured and well implemented plan and its discontinuation has clearly caused an upheaval in a rather fledgling market. One hopes that the vacuum created by the MNRE scheme ending gets resolved soon with a speedier implementation of the NEMP. At a time when the electric vehicle market is going through an extremely dynamic phase, with Mahindra Reva poised to launch a solar powered electric vehicle and Nissan’s all electric Leaf entering the market, India should not lag behind due to the policy paralysis and/or associated bottlenecks.
The author Anindita Chakraborty is part of the Sustainability Outlook team.