Government's stand on EVs does not cut ICE with TVS and Bajaj

Following last Friday's meeting between government think-tank NITI Aayog and heads of Indian two-wheeler companies, wherein the government has asked OEMs to present an EV-driven roadmap with 2 weeks, it is learnt that at least two captains of industry present at the closed-door meeting have urged a cautionary approach to electric mobility. India, which saw sales of over 21 million two-wheeler in FY2019, could both lose its global standing as well as get swamped by Chinese EVs and EV parts.

Last week's meeting was attended by industry leaders including Venu Srinivasan, chairman, TVS Motor Co; Rajiv Bajaj, MD, Bajaj Auto; Minoru Kato, president and CEO, Honda Motorcycle & Scooter India; Vishnu Mathur, director-general, SIAM; and Vinnie Mehta, director-general, ACMA, among others. NITI Aayog was represented by vice-chairman Rajiv Kumar and CEO Amitabh Kant. There was also the secretary of Department of Heavy Industries in attendance.  Also present were a clutch of EV manufacturers like Ather Energy and Revolt Intellicorp.

More time needed to plug in efficiently
As per a report in the Hindu BusinessLine, TVS Motor Company chairman Venu Srinivasan has called for some more time to study vehicle electrification per se and plan a transition from fossil-fuelled two-wheelers to electric scooters and motorcycles.

Pointing out that the Indian auto industry is mindful of the rising levels of air pollution in India and are taking steps like the ongoing technological upgrade to BS VI emission norms, Srinivasan said that vehicles are not the main polluters. In fact, power plants, refineries, the construction industry and crop burning are bigger contributors to pollution.   

“Given that most of our power is generated from coal, the pithead-to-wheel carbon emission will not improve with electric vehicles,” Srinivasan told BusinessLine. Furthermore, he cautioned that mass vehicle electrification would mean a shift from the current dependence on oil imports to dependence on expensive, imported lithium cobalt and other rare element-based motors and batteries. "In fact, we are replacing one problem with a bigger problem; going from the frying pan to the fire,” said Srinivasan.

“For now, we need more time to study this subject and plan a transition. We have to deeply study the carbon emissions equation, impact on investment and employment and foreign trade balance as our export competitiveness will be eroded,” said Srinivasan.

Make or break lies with the EV battery
With the EV battery accounting for the bulk of the cost of an EV, it is critical that there be a sharp focus on EV battery manufacturing and localisation. While Mahindra Electric has set up an EV powertrain and battery plant in Bangalore (and a new one is coming up in Pune), India currently relies on imported EV batteries and parts, which only serve to increase costs.

Europe's first gigafactories for lithium-ion battery cells are to come up in Sweden and Germany, a move which is designed to ensure ample EV battery capacity and affordability for the end-consumer. These gigafactories are what India needs.

Therefore, the absence of an EV battery maker at the government-India Auto Inc seemed surprising,

Rajiv Bajaj, managing director of the Pune-based Bajaj Auto, pointed out that the NITI Aayog meeting did not have any EV battery manufacturer in attendance. This was critical considering a global battery manufacturer (like Denso or Panasonic) would have been able to put forth the need for global-scale battery plants to "significantly lower battery costs."

It is understood that in the meeting NITI Aayog, while citing China's EV program as a successful model, reiterated its stand that time is up for the internal combustion engine (ICE) in the Indian scheme of things.

“What revolution? What ban? Doubtless electric has great merit but keep in mind that the progressive ban by China on ICE vehicles made it possible for the Indian two- and three-wheeler industry to exploit large global markets,” Bajaj told BusinessLine.

According to Rajiv Bajaj, at a time when Indian two-wheelers have set the global benchmark for reduced emissions and high mileage, there should not be any urgency to undertake a speedy and complete shift to electric mobility. “Why ban an industry which is world-class? If we are employing one million people and exporting over three million vehicles, what are we talking about?” queried Bajaj.

Industry not anti-EV but can consumers afford EVs?
Making it amply clear that Indian OEMs are not against electric mobility, Rajiv Bajaj said by the same yardstick, there is no reason for NITI Aayog to be anti-ICE either.

Reiterating that he is for vehicle electrification and its accompanying fiscal sops, the current battery cost of S250/kWh will make an EV an expensive proposition for the end user.

For electric scooters and motorcycles to be affordable, EV battery costs would have to come down by around 6o percent to $100/kWh. Also, he said, if EV battery manufacturers were assured of demand for 2 million units per annum by two-wheeler makers,  there would be “enough volumes to justify investments.”

If the government decides to go all out and subsidise EVs to make them as affordable as IC-engined vehicles by facilitating a Rs 100,000 subsidy per vehicle, on an estimated 25 million two-wheelers in 2025, the amount would translate into a humungous Rs 250,000 crore.

India Auto Inc has a grip on BS VI, whither EVs?
As is known, Indian automakers and their suppliers are currently actively engaged in the technology shift to BS VI emission norms. Having invested crores of rupees in the upgrade, across products, plants and people, India Auto Inc now has triumphed over the challenge in a record period of just about three years, something which even Europe and the US took over 9 years to achieve.

According to Rajiv Bajaj, the ongoing work on the BS IV to BS VI upgrade by April 2020 is an evolution where the "degree of certainty is very high”. In comparison, EVs account for a minuscule part of the market right now and consumer acceptance too is laggardly. EV charging infrastructure across the country is far from being consumer friendly.

“We are talking about taking it to 100 percent when barely 0.01 percent has been implemented so far,” said Bajaj.

High risk of cheap Chinese products swamping India
Despite India Auto Inc's reservations, if the government still decides to power ahead with its 2025 electric mobility plan, it is likely the country could be swamped with cheap Chinese-made products.

Clearly, this is not the last word on the eco-friendly motoring debate. Stay tuned for more updates.