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What does Elon Musk have in common with Maruti Suzuki Chairman? Both want govt incentives for EVs

The government may want 100 per cent electric mobility in the country by 2030 but that will remain a pipedream unless electric vehicles (EVs) become more affordable. And, as the country's largest carmaker has just pointed out, prices will only come down on the back of serious government incentives.

twitter-logo BusinessToday.in        Last Updated: December 22, 2017  | 19:22 IST
What does Elon Musk have in common with Maruti Suzuki Chairman? Both want govt incentives for EVs

The government may want 100 per cent electric mobility in the country by 2030 but that will remain a pipedream unless electric vehicles (EVs) become more affordable. And, as the country's largest carmaker has just pointed out, prices will only come down on the back of serious government incentives.

Announcing plans to launch the company's first EV in India by 2020, Maruti Suzuki India (MSI) Chairman RC Bhargava said, "My gut feeling is that yes, some kind of intervention would be required but I don't know to what extent". He added that EVs will not be cheaper than existing petrol and diesel cars for a long time.

Take the electric Tata Tigor, or e-Tigors, which won Tata Motors the tender for 10,000 EVs floated by state-run Energy Efficiency Services Ltd (EESL) in September this year. While the price of the petrol variant of the compact sedan starts at Rs 4.7 lakh, the e-Tigors costs Rs 11.35 lakh. Tata Motors had reportedly won the tender by offering to provide e-Tigors to EESL for Rs 11.2 lakh, inclusive of GST and a five-year warranty, which was 25 per cent below the current retail price of a similar EV.

The same story is repeated in the case of the e-Verito, 150 units of which Mahindra is supplying to EESL after agreeing to match the winning bid price. While the base petrol variant is priced at Rs 5.30 lakh, the base model of e-Verito will set you back by Rs 9.5 lakh. "We are renegotiating contracts with our suppliers for higher volumes in order to reduce cost. In phase 1, we will be losing money, but we will try to align our costs in the phase 2," Managing Director Pawan Goenka told the Hindu Business Line.

In an attempt to reduce EV costs, M&M and MSI are both trying to locally manufacture components as far as possible. At present, all critical components used in electric vehicles are imported, which results in the prohibitive costs of EVs. While M&M's Make in India reportedly include manufacturing electric motor, electric power train and assembling the batteries in India, but MSI has gone a step further by setting up the country's first facility manufacturing lithium-ion batteries, which are used to power EVs. Given that batteries alone typically comprise 50 per cent of an EV's total cost, this is a significant move. The plant is expected to commence production by the end of the decade, around the same time as its EV launch.
 
In MSI's assessment, EVs are unlikely to gain traction anytime soon. "Assuming an annual growth rate of 8 per cent between now and 2030, 71 million cars will be sold, of which only 14.4 million will be electric," said Bhargava. In other words, conventional cars will continue to be four times that of EVs. Without large volumes, EV prices cannot be brought down significantly.

And that is where the government comes in. "Aggregation of demand on a large scale is important. It's important that government drives it by focusing on government vehicles and public vehicles," said Niti Aayog CEO Amitabh Kant at an event organised by Assocham, adding that "We would like to support electric vehicles by providing vast range of initiatives such as lower road taxes."

In a whitepaper submitted to the government, Society of Indian Automobile Manufacturers (Siam), the apex body of automobile industry, is not only seeking a 5 per cent goods and services tax against the current 12 per cent but also several other sops like waiver on road tax and toll charges, income-tax benefits, free parking and a 50 per cent reduction in power tariff for charging these vehicles.

Another significant government incentive was announced in the beginning of the year, where it promised to foot up to 60 per cent of R&D cost for developing indigenous low-cost electric technology, including lithium battery technology, charging infrastructure and drive cycle and traffic pattern.

In the meantime, several global players in the EV world are also queuing up for government incentives. In July this year, Mercedes Benz Managing Director of India, Roland Folger, had reportedly urged the Indian government to offer incentives for EV manufacturing. A month earlier, Elon Musk had tweeted that Tesla is "in discussions with the government of India requesting temporary relief on import penalties/restrictions until a local factory is built". Then, in September, came news reports that Tesla has initiated talks with the government to enter India+ through the single-brand retail route, which includes mandatory sourcing of up to 30 per cent of the value of goods sold in the country. A formal government response is awaited.

There is no denying that EVs are the future. But how fast that future arrives will depend on government action here on. A formal Electric Vehicle Policy, long in the pipeline, would be a start.  
With PTI inputs

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