Business Today

Hail the Hybrid

Green vehicles have failed to make much headway in India so far, but hybrid ones seem better poised to do so than the purely electric.
By Chanchal Pal Chauhan   Delhi     Print Edition: June 5, 2016
Hail the Hybrid
(Photo: Raj Verma)

Despite interventions by the judiciary, and stringent yardsticks for vehicle tail-end emissions laid down by the government, air pollution in India's urban areas remains alarmingly high. Delhi has the dubious distinction of being the most polluted city in the world. Vehicle makers have added turbochargers and other devices to their engines, in a bid to decrease emissions and increase fuel efficiency, but these too have had limited success.

A much discussed alternative to fossil fuel vehicles, electric cars (which have zero emission), has also proved a damp squib so far. The best known brand, Mahindra's Reva, has been selling only about 1,000 units a year, though it has been around for more than two decades. Battery operated two-wheelers have fared just as badly, selling just 20,000 units in 2015/16 against petrol ones selling over 15 million.

In these circumstances, can hybrid vehicles make a difference? Hybrids combine the conventional internal combustion engine with an electric propulsion system, so as to make optimal use of both the fossil fuel employed as well as the rechargeable battery, providing higher mileage and also keeping emissions low. They can also run entirely on electric power for short stretches of 15-20 km. The global leader in hybrids is Toyota, with its Prius brand accounting for over half the hybrids sold worldwide so far.

Toyota introduced Prius in India in 2012, but at the steep price of around Rs 38-39 lakh, its market is limited. Its executive sedan Camry, however, launched in August 2013 and priced at around Rs 31 lakh, available in both fossil fuel and hybrid varieties, has had significant success, with the latter spectacularly outselling the former. Of the 1,027 Camrys sold in 2015, 881 were hybrids (Rapid Success).

While Camry is a full scale hybrid, Maruti Suzuki has also introduced partially hybrid (or micro hybrid) versions of two of its brands - the Ciaz sedan and the Ertiga MPV, which provide limited electric power and shut off the ignition automatically every time the engine is idling. Priced at around Rs 8-10 lakh, their sales too are encouraging - around 100,000 units since their launch in September last year. Mahindra had launched a micro hybrid version of its Scorpio SUV in 2008, but did not market it aggressively.

"Hybrids offer the best transport solution and will play a far greater role in coming years," says Akito Tachibana, Managing Director, Toyota India. The company will soon launch another hybrid in the luxury segment, which could provide stiff competition to the likes of Audi and Mercedes, which have only petrol and diesel versions. A number of other well known brands are also likely to see hybrid counterparts in India in 2016 - Honda's Accord, Hyundai's Sonata and Volkswagen's Passat GTE. "Hybrid cars are attractive to both the new generation people who care about their carbon footprint, as well as those who are mileage conscious," says R.S. Kalsi, Executive Director for Marketing and Sales, Maruti Suzuki. Giving 28.09 km per litre, the hybrid Ciaz and Ertiga are the country's most fuel efficient cars.

Tata Motors, the country's largest auto company by revenue and the biggest bus manufacturer in the world, adopted green technologies in the bus and truck segments years ago. "We have gone for hybridisation of trucks, though the cost of batteries is quite a challenge," says Tim Leverton, Research and Development Head, Tata Motors. "But customers are attracted by the better mileage these vehicles provide. In buses, we have gone the electric route to provide cleaner technologies in urban areas."

Ultimately, experts maintain, vehicles will run on hydrogen, which has zero emission, with a fuel cell combining it with other atoms through a chemical reaction to provide propulsion power. A number of global auto majors have built hydrogen fuel cell vehicles, but only Toyota's Mirai brand and Hyundai's ix35 are sold commercially, since the technology is still prohibitively expensive. "Hybrid is the best interim solution till hydrogen fuel cells become economically viable," says Toyota's Tachibana.

Renewed Interest

Electric cars may not have taken off in India, but they remain a growing alternative in many other countries. In Japan, for instance, a recent survey by auto major Nissan showed that the number of car battery charging stations outstripped the number of gas stations - 40,000 against 35,000. There has also been a renewed surge of interest since Tesla announced its Model 3 electric sedan in end- March, though the launch is still two years away. Around 400,000 people have already booked deliveries with a refundable deposit of $1,000, of whom 50 are Indians, including Paytm founder Vijay Shekhar Sharma and entrepreneur Vishal Gondal. Priced at an affordable $35,000 (around Rs 24 lakh), the Model 3 will be able to travel 320 km on a single charge.

Apart from Tesla, General Motors and Nissan are also working on long-range electric cars, which are also likely to be in the $30,000-35,000 range. A welcome development is the fall in global battery prices last year by a whopping 35 per cent. Experts predict that in the next six to seven years, long range electric cars may cost as little as $22,000, which even without any kind of subsidy, is on par with vehicles using petrol or diesel.

Will this global buzz rub off on the indigenous Reva? The brand, started by Stanford alumnus Chetan Maini in 1994 - long before green vehicles became trendy - was acquired by Mahindra in 2010. But in spite of its modest cost of around Rs 5 lakh, in spite of a new model, e2o, being launched in 2013, its sales continue to sputter along. At the Auto Expo in January this year, Mahindra also showcased an electric version of its Verito sedan, which it has since begun selling overseas, but will launch in India later this year. "We're working on various new solutions and expanding our portfolio," says Pawan Goenka, Chairman, Mahindra Reva. "We're developing new power trains to make electric cars an attractive proposition in metros."

Pawan Goenka, Chairman, Mahindra Reva (Photo: Vivan Mehra)

"We are expanding our portfolio and working towards making zero-emission electric cars an attractive proposition in metropolitan areas"

But much has to change for that to happen. "India lacks the basic infrastructure needed for electric vehicles, such as charging stations," says Sohinder Gill, Director for Corporate Affairs, Society of Manufacturers of Electric Vehicles (SMEV), the apex body of electric vehicle makers. Sales of electric two wheelers had touched 300,000 units in 2009-10, but have since nosedived for this very reason.

State Incentives

The pollution alarm has spurred the government to announce incentives to boost sales of electric and hybrid vehicles. For a number of years, excise duty on specified parts of hybrid and electric vehicles has been 12.5 per cent against the usual 24 per cent for large autos. In April 2015, the government also announced the Faster Adoption and Manufacturing of Hybrid and Electric vehicles (FAME) scheme, which earmarked Rs 795 crore ($11.7 million) to provide subsidy to buyers of green vehicles over the next two fiscal years. Battery operated two-wheelers are entitled to a subsidy varying between Rs 1,800 and Rs 29,000; electric and hybrid cars between Rs 17,000 and Rs 1.38 lakh. India has also joined the Electric Vehicle Initiative - a global forum focused on transiting to clean energy auto technologies - which is committed to providing incentives to buyers of green vehicles so as to achieve total sales of 6-7 million green vehicles by 2020.

But is it enough? Compared to the $25 billion investment in green vehicles made by China, it is a pittance. China provides a subsidy of $8,800 per car. The US too provides $7,500 and Japan up to $2,700. Again, more than subsidy, electric vehicles need charging stations for the market to grow. FAME has earmarked a mere Rs 30 crore for charging stations, while China is investing $5 billion (Rs 32, 500 crore) to set up 500,000 such stations. The US has assigned $400 million ( Rs 2,600 crore) to increase the number of such stations from 9,000 to 15,000. Other countries have other innovative incentives - Norway, for instance, exempts green vehicles from value added tax (VAT), waives congestion charges, allows them free parking and charging and use of bus lanes.

"Despite FAME, there has been no major shift towards green vehicles in India due to lack of effective workable technologies, high purchase cost of green vehicles and their low cruising speed," says Amit Kaushik, Country Head, Jato Dynamics, a global automotive trend forecasting firm. "There has to be a change in consumer behavior to drive growth for such vehicles. Consumers must want to save fuel. The government too must come out with better incentives."

No Choice

The problems notwithstanding, the shift towards green vehicles may well become inevitable in India. If the carrots do not work, there are sticks waiting. Last December, in order to curb emissions, the Supreme Court temporarily banned the registration of new diesel vehicles of more than 2,000 cc. The government has notified fuel efficiency norms, modelled on the global Corporate Average Fuel Economy (CAF??) standards, by which vehicles must have a minimum mileage of 18.2 km per litre, whatever the nature of the fuel. From April 2022, this could be raised to 22 km per litre. "We want to bring Indian standards on par with those of the developed world," says a senior government official involved in overseeing the automotive industry. Power minister Piyush Goyal has even maintained that India might set a deadline of 2030 for its automobile industry to go entirely green.

"Hybrids are the most practical green solution," says Rakesh Srivastava, Senior Vice-President, Marketing and Sales, Hyundai Motors India. Given that 80 per cent of India's oil is imported, lower fossil fuel would also result in foreign exchange savings of up to Rs 90,000 crore. "Hybrids not only lower the carbon footprint, but also bring tremendous benefits to the fuel economy," he adds. There is also the consideration that electric power is not really carbon neutral, considering most of it comes from thermal power plants, which are heavily polluting.

Again, hybrid engines take barely minutes to recharge - about as much time as conventional vehicles do to refuel - while electric ones take hours. "Hybrids are the green answer in a market like India's where customers want complete peace of mind while driving as well as vehicles of reasonable cost," says C.V. Raman, R&D Head, Maruti Suzuki. "As for the future, anything is possible. Electric vehicles may play better, or they might both be replaced by fuel cells or solar energy or something even more evolved."

Reality Check

In the decade between 2004 and 2014, hybrid cars sold 7.3 million units, while electric ones sold around 350,000. 'Plug in hybrids', which include a separate, smaller engine enabling the vehicle to move considerable distances purely on battery, sold 220,000 units. The figures are encouraging, but compared to the sale of conventional cars, they still constitute a very tiny fraction. Even in the US, Germany and Japan, green vehicles comprise barely 2 per cent of the total auto market. High costs and low speeds are a problem with electric vehicles in these countries too. In India, in 2015/16, green cars sold a mere 2,000 units against 278,000 ones using fossil fuels.

Akito Tachibana, Managing Director, Toyota Kirloskar Motor (Nilotpal Baruah)

"Hybrids offer the best transport solutions till other options like hydrogen fuel cells become economically viable"

Globally, the response to Tesla's Model 3, once it's launched, will be a key indicator of future. The company has itself a target of 500,000 units a year. Its own future too hinges greatly on this product, given that it posted a loss of $282 million in the first quarter of 2016.

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