The message was one of solidarity.

Earlier this week, there were two no-nonsense press statements issued by Rajiv Bajaj and Venu Srinivasan on the same day. They were reacting to the Centre’s proposed move to have 100 per cent electrification for three-wheelers and sub-150 cc two-wheelers by 2023 and 2025 respectively.

The Managing Director of Bajaj Auto and the Chairman of TVS Motor represent companies that are fierce rivals in the market. Yet, there was consensus on this latest notification that it was unrealistic and fraught with risks for the industry.

Both Srinivasan and Bajaj made no bones about the fact that this goalpost was impractical especially in a country which is grappling with power shortages in many parts. Both CEOs welcomed the shift to electric but warned that this was not the way to go about it in an ad hoc manner.

What was even more interesting was that the Society of Indian Automobile Manufacturers (SIAM) had also made it clear in its own statement issued a day earlier that this latest move on electrification was really a tall order. Market leader Hero MotoCorp reacted later and pretty much stayed on the same page as its predecessors as did Honda Motorcycle and Scooter India.

Bizarre goals

The notification on electrification is of course bizarre but not entirely unsurprising considering that there have been similar goals outlined in the not-so-distant past. The think-tanks in the Government had proclaimed earlier of striving for 100 per cent electric in the automotive ecosystem by 2030.

Even while stakeholders in the auto industry baulked and privately admitted that this was near impossible, the target was quietly rolled back to 40-odd per cent. Even that seems unrealistic especially when China, which is leading the rest of the world in e-mobility, has not aimed for such a lofty figure.

Disruption seems to have become a fashionable word today but this needs to be backed by sound logic and a realistic assessment of ground realties. Can charging infrastructure and power supply be actually conceived for every nook and corner of India? Can bikes on hilly terrain access power points at the drop of a hat?

It is a classic case of putting the cart before the horse. Nobody is arguing that electric is not a noble ambition but it is equally important to acknowledge that the auto industry already has its hands full with the transition to Bharat Stage VI emission norms.

There is tremendous work happening across the plants of vehicle manufacturers and ancillary suppliers where a lot of careful planning needs to go into framing the timetable of phasing out the current BS IV products and bringing in the new BS VI range. Additionally, there are concerns about availability of fuel especially when this has been an issue in previous emission transition efforts.

Severe slowdown

More importantly, the industry is facing one of its most severe slowdowns in recent times when customers are just not buying any products. One of the key reasons is the tight liquidity crunch in the market thanks to NBFCs putting the squeeze on lending. Urban demand is slowing down while rural India is grappling with a host of challenges on access to funds, waster scarcity and so on.

What is even more disturbing is that nobody has a clue when things will actually begin looking up. In this backdrop, it is very likely that the latest notification on the electrification goals for two and three-wheelers must have literally been the last straw for the industry.

It is welcome to see stakeholders speak in one voice and pretty much convey the message that they are not going to play ball this time. Not too long ago, it was okay for a politician to speak of bulldozing the industry while stakeholders merely heard him out. Clearly, this is not the case any longer and industry has decided that enough is enough.

Market realities

There are hardcore realities to reckon with while framing such ambitious goals. As already mentioned earlier, the top priority for everyone across the automotive ecosystem is meeting the BS VI deadline. There is just no way they can afford to be saddled with BS IV stocks on April 1, 2020 since it would be just worthless junk by the end of the day.

The market is not in the greatest of shape and it would be naive to assume that it will start picking up pace during the BS VI era. Manufacturers, in reality, are reconciling themselves to the fact that demand will be tepid considering that products will be a lot more expensive.

After all, technology does not come cheap and all costs incurred can only be recovered from the customer. It would be foolhardy to assume that companies are going to subsidise their products and absorb losses. This is hardcore business and not some charity ball where people can queue up for big bargains.

The silver lining in the cloud is that once the BS VI shock has been absorbed, customers will gradually get used to the new regime. It will also be the best piece of news to the environment especially in those metros, which head the worst list of polluters. The auto industry knows this only too well even if it means that sales could be impacted in the early phase.

What’s the hurry?

Why then this rush for electric is the million dollar question? Don’t the policy makers in New Delhi realise that this is easier said than done? Let the industry settle down to a routine first in the BS VI era. After all, it is important during this time to study customer reactions, fine-tune products, plan for greater localisation, keener price strategies and so on. None of this can be done overnight, it is hard work which will go on for a long while.

On the other hand, going by the notification on electric, three-wheelers will only have breathing time of two years in the BS VI ecosystem before they go though another churn. Two-wheelers, which take up a lion’s share of the annual production of 21 million-plus units, will also need to be converted two years later in order to meet the 2025 deadline.

This is truly bizarre in terms of policy planning and small wonder then that the likes of Srinivasan and Bajaj were prompted to react in the way they did. What the think-tanks in government need to do is to seek industry’s views and then work in tandem towards a solution.

It is just not the manufacturers who will face the heat in this quick-fire transition to electric. Suppliers specialising in making parts for internal combustion engines have to reboot their skills for electric now.

This is clearly impossible given the levels of competencies coupled with the reality that a whole lot of them will be out of business in the bargain. Jobs will be lost because the manpower requirements for electric will be a lot more different and highly skilled people will not be easy to find either.

Dealers will also be under pressure because the conventional model of retailing could change with electric. Perhaps there will be no need for large showrooms and bikes/scooters could even be displayed at malls. Parts could be ordered online and the idea of the traditional aftermarket, as it exists today, may just go out of the window.

World over, auto-makers are finding it a huge challenge to move to electric. Some of the biggest names in the business are struggling to find talent and are looking for alliances in order to share investments and cut back on risks. How on earth can Indian companies be different and create new benchmarks in time? Hopefully, this idea will be buried as was the overambitious vision in going 100 per cent electric by 2030.

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