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Rediff.com  » Business » Gadkari wants e-cars by 2030, but...

Gadkari wants e-cars by 2030, but...

September 09, 2017 15:10 IST

Customers won't shift to electric cars until there is countrywide infrastructure for charging stations, which should be as spread out as petrol pumps now.
Two, the price of the lithium ion battery, which constitutes 30 to 40 per cent of the cost of an electric car, has to fall substantially, so that the vehicle is as affordable as a gasoline one.
Surajeet Das Gupta reports.

Union Transport Minister Nitin Gadkari's ultimatum to the auto industry to shift to non-polluting alternatives ('whether they like it or not') or get 'bulldozed' has raised concerns among car makers on the feasibility of the government's plan to have all new cars powered by the electric engine by 2030.

Gadkari made it clear that he would go after diesel vehicles, warning the industry not to complain of unsold inventory later.

To achieve the target, the industry says manufacturers have to sell 10 to 15 million electric cars in 2030, which is eight to 10 times the sales of such vehicles in the world in 2015.

And the target for 2030 would amount to more than 10 per cent of the world production of electric vehicles as endorsed in the Paris climate talks.

 

Currently India sells only 22,000 electric vehicles a year.

The target looks ambitious.

China, the largest electric vehicle market in the world (it sold about 500,000 last year), has set a modest target of producing 7 million such vehicles by 2025.

However, R C Bhargava, chairman, Maruti Suzuki, while concurring with the view that the target is ambitious, says: "What Mr Gadkari wanted to convey to the industry is the determination of the government to push the policy through."

Bhargava pointed out that the industry knew two years ago the need to go for BS (Bharat Stage)-VI and though the time might be short, it was doable.

Pawan Goenka, managing director, Mahindra & Mahindra, says while he is in sync with what the minister said, the target looks "aspirational".

"It is very unlikely that we will be able to sell 14 to 15 million vehicles, but what matters is that we are moving towards that direction," Goenka says.

Gadkari's strong nudge to the industry is not unusual.

China, for instance, has told both large local and foreign car companies that by next year eight per cent of their sales in the domestic market have to be electric cars, going up to 20 per cent by 2020.

But the major impediments to this are two: Customers will not shift to electric cars until there is countrywide infrastructure for charging stations, which should be as spread out as petrol pumps now.

Two, the price of the lithium ion battery, which constitutes 30 to 40 per cent of the cost of the car, has to fall substantially, so that the vehicle is as affordable as a gasoline one.

And also the overall cost of running the vehicle should not be any different.

With only 25 charging stations in the country and another 400 (mostly in the National Capital Region) for which permission has been granted by the government, the infrastructure is woefully inadequate.

While the government has prodded public sector companies like Power Grid Corporation, National Thermal Power Corporation, and Bharat Heavy Electricals to chip in, it is more as a pilot project.

The infrastructure does not come cheap -- it costs Rs 3 lakh to Rs 4 lakh (Rs 300,000 to Rs 400,000) to set up a slow-charging station and Rs 20 lakh (Rs 2 million) to build a fast-charger.

The question is: Who will put in this money, and even if one does, will there be returns on the investment?

The government is supporting the programme through Rs 50 to Rs 60 per subsidy, but the money is not enough to sustain large volumes.

Goenka says he expects the government to help the industry in two ways: Take the initiative in building the infrastructure as well as be a big buyer of such vehicles.

The government has taken baby steps on this.

State-owned Energy Efficiency Services recently floated tenders to set up 4,000 charging stations as well buy 10,000 electric sedans for use by the government.

Gadkari has announced that a comprehensive electric vehicles policy will be announced sometime in December.

The other key element is the price of the battery and the challenge becomes bigger because 75 per cent of the cars sold in India are less than four metres in length and priced below Rs 5 lakh (Rs 500,000).

However, an imported battery, which runs for 140 km with the AC on, costs around Rs 3 lakh (Rs 300,000), making electric small cars uneconomical.

But this problem is soluble.

With growing volumes globally, prices of batteries are falling by 15 to 20 per cent annually and will continue to drop.

And with companies like Suzuki deciding to set up a plant to manufacture them, it could go down by half.

The government has again pushed the public sector to move in.

So BHEL has tied up with the Indian Space Research Organisation to manufacture lithium batteries.

However, most in the industry agree that the Chinese model of pushing electric vehicles by doling out huge subsidies to car-makers is not sustainable.

Bhargava points out that the government cannot go on giving support, especially with volumes going up.

The Chinese government earlier offered 60 per cent of the cost of the car as subsidy and spent more than $1 billion per annum.

In India, however, the government offers around 25 per cent subsidy, of up to Rs 1.2 lakh (Rs 120,000), apart from the benefits of the goods and services tax, to electric vehicle-makers.

It has earmarked Rs 175 crore (Rs 1.75 billion) in 2017-2018, up from Rs 75 crore (Rs 750 million) in 2015, for support to the industry.

But the subsidy model is not sustainable and even China is realising it is too expensive. It has now cut it down to just 20 per cent with the intention of phasing it out by 2020.

It has also decided to support only a few big manufacturers so that it can have global players rather than the 200-odd EV players in the market by a process of weeding out the smaller ones.

The auto industry has questioned the government policy flip flops, especially its decision to move from BS-IV emission norms to BS-VI by 2020, two years ahead of the earlier schedule without an intermediate stage.

This, they say, will increase the prices of vehicles substantially.

Industry experts say while this will impact diesel vehicles quite badly, the increase in cost for petrol would be nominal, which seems to be in consonance with Gadkari's position.

They estimate that in the case of diesel the impact could be as high as Rs 1 lakh (Rs 100,000), virtually killing small cars powered by these engines.

But the impact on petrol is not that serious, at around Rs 6,000 to Rs 7,000 a car.

The bigger challenge will be to have the requisite fuel required for BS-VI available through oil companies across the country.

Oil companies point out that they have to spend more than Rs 28,000 crore (Rs 280 billion) to upgrade their refineries and expect prices of fuel to go up.

Automotive component makers body Automotive Component Manufacturers Association said India's move towards electric vehicles must be evolutionary rather than disruptive in order to enable local industry develop the best technologies for the future.

Photograph: Neil Hall/Reuters

Surajeet Das Gupta
Source: