Electric hopes

Policy clarity needed for electric cars

Announcements within a day of each other by Ola Electric and Mahindra & Mahindra (M&M) that they would launch electric vehicles (EVs) by 2024 have certainly upped the game in this greenfield arena of the automobile market. Ola’s plans are characteristically ambitious. Founder Bhavish Aggarwal has declared that his offer will be the first electric car to give a range of up to 500 km and, with an all-glass roof and aerodynamic body, it will be the sportiest car ever built in India. M&M has not been far behind. After exiting the e-four-wheeler market in 2019, it announced the impending launch of five e-sport utility vehicles (SUVs) between 2024 and 2026. It is easy to see why manufacturers will be enthusiastic about entering the EV market. It has been projected as the next big thing in the automobile industry by almost all analysts. The NITI Aayog, for instance, has pegged EV penetration at 70 per cent for commercial cars, 30 per cent for private cars, 40 per cent for buses, and as much as 80 per cent for two- and three-wheelers.

Much of this optimism of planners and manufacturers is predicated on generous subsidy schemes from the Centre — the Faster Adoption and Manufacturing of Hybrid and Electric vehicles (FAME I and II) plus those offered by some state governments. The FAME schemes have undoubtedly played a key role in expanding the market for e-two-wheelers by allowing manufacturers to offer discounts of up to 40 per cent on their products. As part of its shift to prioritising clean mobility, the government has also introduced production-linked incentive schemes for battery storage manufacturing to encourage the domestic manufacture of batteries, and another to encourage high-value advanced automotive technology vehicles.

All of this hectic policy activity does not disguise the fact that e-mobility is still at a very nascent stage in India and the government urgently needs to address some basic issues for the business to acquire industry-wide critical mass. The first issue is the sustainability of these manufacturers once the FAME concessions, which essentially work towards creating demand, are withdrawn. To be sure, FAME does not cover passenger vehicles for personal use (only taxis) but the fact that manufacturers are lobbying hard for this indicates the importance of this subsidy in sustaining the market. This applies as much to the charging infrastructure, which is generally acknowledged to be woefully inadequate. The states that have expanded this infrastructure — Andhra Pradesh, Uttar Pradesh, Bihar, and Telangana — are, again, doing so on the back of generous local subsidies.

It is thus unclear what will happen once those sops are withdrawn. Finally, the lack of battery standards will limit the ambit of this market in two ways. First, if the Centre’s plans are to incentivise battery-swapping technologies, then the need for standards across products is vital. Second, this also becomes critical in the creation of a secondary or used-car market, which offers owners exit options for their e-vehicles beyond merely scrapping them. These issues are yet to be clarified. It is possible that the manufacturing surge may force the government to address them eventually. But as a policy aimed to promote clean energy, the issue is being addressed the wrong way round.