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After ‘bulldozing’ at SIAM, some food for thought

Murali Gopalan | Updated on March 10, 2018

Are we ready?: Indian automotive industry has enough on its plate already without the added concern of electric mobility   -  Kamal Narang

Nitin Gadkari may have made his point, but there are bigger issues at stake

At one level, you cannot help but feel sorry for automakers in India.

For sometime now, they have been part of a dizzy roller-coaster ride that began in 2015 with the ban of 2,000cc diesel cars in Delhi for eight months. Then came shockers like demonetisation late last year, which completely derailed the growth story and, more recently, flip-flops on cess levels, which were part of the revolutionary Goods and Services Tax.

In addition, the industry now has less than 1,000 days left to prepare for the new Bharat Stage VI emissions regime while keeping its fingers crossed about timely fuel availability. In this grim backdrop, it was quite remarkable to hear what Nitin Gadkari, Minister of Road Transport & Highways, said at the recent convention of the Society of Indian Automobile Manufacturers (SIAM).

He made it amply clear that the industry would be ‘bulldozed’ if it did not switch over to clean vehicles. At a time when some direction on the challenges ahead would have been welcome, this seemed more of a diktat that left people present at the event stunned and bemused.

Hurdles to overcome

There has, of course, been a lot of debate since then on what Gadkari said and if the tone adopted should have been less belligerent and so on. However, there are bigger issues in his speech that call for introspection beginning with the need to embrace e-mobility. India has already articulated its intent to go completely electric in its auto space by 2030, an objective that is well meaning but not easy to achieve given the current pace of progress. This is a tall order, which will require installation of charging infrastructure across every nook and corner of the country.

For the moment, the bigger priority is moving to BS VI, which by itself is not going to be a walk in the park especially when it means bypassing BS V. There are going to be huge investments involved in upgrading technology and what automakers will welcome at this point in time is constant assurance from the Centre that things are on track.

After all, there have been a fair number of disruptions lately, which have caused a lot of discomfort coupled with the fact that economic growth has also been tapering off lately. At this critical juncture, what manufacturers will seek is some consistency in policy since this is integral to their product planning. Ad hoc decisions like the recent instance on cess levels, changed barely within two months of launching GST, are unwelcome detours.

There are no ways about the fact that the automotive industry is the key backbone of manufacturing and plays a big role in employment generation. Given that companies already have their hands full with BS VI and fresh investments on capacity are unlikely in the short-term, no new jobs are going to be created in a hurry.

Sure, there are a bunch of new entrants such as PSA of France, China’s SAIC and Kia Motors of South Korea but this is not going to dramatically alter the landscape. By 2020, India will emerge the third largest automobile producing nation in the world after China and the US but bigger challenges will remain.

Electric mobility

It is now all too clear that electric mobility has caught the world’s fancy in a big way as was evident at the ongoing Frankfurt Motor Show. Diesel has lost its lustre in Europe largely due to the 2015 Volkswagen emmsions scandal with some countries keen on jumping on to the electric bandwagon.

Yet, even rich nations like Germany are beginning to realise that they just cannot afford to extend subsidies for life and this should be a matter of concern to India. Perhaps, the Centre wants to create yet another phase of disruption where even a far-fetched target of going 100 per cent electric by 2030 will at least prompt companies to step on the gas.

However, to dismiss petrol and diesel as being irrelevant in this massive transition to e-mobility would be rather naive especially when thousands of crores of rupees are going to be spent in the BS VI drive. After all, the idea is to have cleaner auto fuels in place by 2020, which will put the Indian auto industry on the world map.

Having BS VI-compliant petrol and diesel will be an important landmark that just cannot afford to be cast aside in the quest to go electric a decade later. Each of these fuel options will play its part in the clean air drive and need to coexist within the automotive ecosystem.

More problems to address

Beyond this, there are other issues to ponder over in the drive towards e-mobility since this could have big implications for ancillary suppliers in terms of number of parts manufactured. The bigger threat is from cheap imports that will make local industry unviable. In addition, there is no telling if this will impact job creation at a time when automation is already making significant strides.

The Indian automotive industry is at a critical phase of its growth cycle where it needs a clear roadmap and an assurance that things will be on course. The current decision making process is complicated enough with a host of ministries involved right from heavy industries and roads to petroleum, environment and finance. In addition, new entities like NITI Aayog are also having their say on the transformation journey.

With so many heads involved, the industry cannot hope for some unanimity in thinking unless there is some kind of a single window mechanism where issues can be addressed quickly. For a potential automotive superpower, it is far more important to have the back-end in place instead of reaching for the stars.

Published on September 14, 2017

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