EVs seek charge from government

Electric vehicle (EV) manufacturers in India are a troubled lot. The promise of EV sales, mostly scooters, which had smartly taken off in 2008, has dropped drastically this year. Faced with a lack of EV industry-beneficial incentives from the government like reduced duties, R&D support and assistance in setting up charging stations, leading players Reva Electric Car Company, Hero Electric, BSA Motors and Electrotherm India, among others, are finding it difficult to grow their sales. What's more, the economic slowdown and a number of other factors are making it tough for this sector to exist unaided. No wonder the industry, which seems to be waging a lone battle to create awareness and woo customers, is seeking sops from the government.

Not everything is bad news though. A recent estimate by industry association Society of Manufacturers of Electric Vehicles (SMEV) forecasts that EV sales will grow substantially by 45 percent in 2009-10 at 1,60,000 units as compared to 1,10,000 units sold in 2008-09. This is despite the fact that the two-wheeler EV industry (which comprises an overwhelming 98 percent of the EV segment) is at present struggling to maintain double-digit growth.

EV manufacturing — how big can it be?

Experts believe growth can only come with active support from the government to help make it as competitive as it is in countries with EVs, mainly China. Other than that, general opinion is that the EV segment is just about opening up in India.

According to R Chandramouli, president, sales & marketing, Reva Electric Car Company, “Although India does not have a heritage of automotive manufacturing like the USA and Europe, EVs are different to conventional cars in some critical respects. Firstly, there are 80 percent fewer parts in an EV and secondly, the critical components such as batteries, battery management systems and chargers are not a core competency for traditional OEMs. So the automotive playing field is level. This plays to India’s strengths as it has a strong R&D capacity with a large pool of engineers, software professionals, physicists, chemists and other technical personnel, giving a boost to its credentials as a hub for technology, electronics and manufacturing.”

He adds, “Consumer awareness and interest in EVs is increasing and we will reach a tipping point within the next two years as new products are introduced. Further on, the traditional global OEMs are forecasting that 20 percent of all new cars will be electric by 2020.”

Sohinder Gill, director, corporate affairs – SMEV and CEO, Hero Electric, a subsidiary of the Hero Group, says: “At present in the two-wheeler EV category, there are at least eight players planning to set up shop. Additionally, there are close to 50 traders who bring in two-wheeler EVs from China. There is certainly huge scope here, not to miss the low running costs compared to regular two-wheelers. As per industry estimates, assuming a 60km ride every day, an EV user can end up saving Rs 12,000 a year, including the replacement cost of the batteries.”

Experts also believe that if the key issues concerning the EV segment are taken care of, this growth can be easily achieved. According to Dilip Chenoy, director-general, Society of Indian Automobile Manufacturers (SIAM), “The major concerns revolve around the lack of State government support in providing subsidies or rebates. Also, the regulatory norm is such that high duties are levied on batteries or other parts, if imported, and act as a deterrent. As such, there needs to be support from the Centre to encourage R&D in these lines.”

Chandramouli says, “While the government should be recognised for the steps it has taken so far, the truth is much more is required. Subsidies and incentives should be provided to the end users (general consumers or corporates) of EVs to encourage early market adoption. Despite the reductions in excise duties offered by the last Union Budget, its impact on electric and hybrid vehicle manufacturers is not significant as their business models currently work towards the import of components or technology. Also, there is a need for a uniform policy across all States. Currently some exempt road tax and some have Value Added Tax at four percent.”

The Budget also does not mention infrastructure support needed for EVs such as city-wide charging point infrastructure. Electric vehicles have a shorter range than comparable petrol/diesel vehicles and in EV-friendly cities like London charge points are increasingly being provided in places like hospitals, shopping centres as well as within private housing.

If India's EV policy is compared with those of other governments, then there is a clear gap. In addition to the 180 percent difference in tax in Denmark, Norway has exempted EVs from all taxes and EV drivers have access to bus lanes (which reduces commuting time by 50 percent). France and Italy offer purchase subsidies of 5,000 euro and in the UK EVs are exempt from annual road tax and can park and charge for free.

Finally, many countries are committed to funding charging infrastructure projects, which is the first step in the creation of a grid which will enable motorists to charge their vehicles wherever they park and to enable management off the power grid. Gill adds, “There are a number of stumbling blocks. The duty structure needs to be revised in order to encourage indigenisation. The State governments need to offer more subsidies. At present, only Delhi offers buyers a 15 percent rebate on the price of an electric vehicle. The biggest drawback is the lack of charging stations. An investment of at least Rs 2 lakh is required to set up a charging station. Lack of charging stations makes EV purchases a deterrent.” As a result of all these impediments, electric vehicle manufacturers have not achieved much success in getting office-going commuters to turn EV buyers, the bulk of whom are housewives, college students and retired men.

Experts believe that there is a need for clear and consistent signals and longer-term policies from the government to highlight the need to move rapidly to a low carbon economy. Electric vehicles are the only solution available towards achieving the desired emission reductions. With this as the focus, India needs to develop sustainable electricity sources while creating jobs and refloating the economy.

Gill reiterates, “There is a need for support from central and local governments and the big corporations for incorporating a charging infrastructure as a part of urban planning. The government should create an integrated transport and energy policy, starting with purchase subsidies nationally that will reduce EV prices, reduce excise duties on import of EV components and technology and offer subsidies to EV buyers across the country.”

In fact, the EV makers now want the government to re-introduce excise duties waived off last year, which resulted in a peculiar problem. While excise duties were nil, import duty for components remained at 10 percent, resulting in CENVAT and in turn increased vehicle prices. The industry now wants the government to impose a two percent excise duty to enable it to get a refund of the duty it pays on components such as batteries and motor. But more than that, the industry needs a clear consensus on providing a suitable EV aftersales infrastructure.

With a new Budget to be announced soon and petrol/diesel prices on their way up, EV makers are keeping their fingers crossed, hoping the finance minister gives them the green light.