Clean Tech

The charge of thee-brigade

M Ramesh | Updated on July 16, 2019 Published on July 16, 2019

Now that the government has its ‘foot on the pedal’ for electric vehicles, e-mobility could well follow the same trajectory as solar, says M Ramesh

P Bala, who promoted an electric two-wheeler company in 2008 and regretted it for a decade, describes the government’s move towards electric vehicles or EVs graphically: they have put the foot on the pedal.

Last year, Bala sold 80 per cent stake in his company, Ampere Vehicles, to the Mumbai-based Greaves Cotton, which mainly manufactures diesel engines for three-wheelers, and it is possible that if the government had put its foot on the pedal a few years earlier than now, he may not have felt the need for the deal. However, as an early bird on the EV tree, Bala is happy that the era of electric vehicles has decisively begun.

The recent Budget has a lot to say about EV — duty exemptions for imported lithium-ion batteries, move towards reduction of GST on EVs from 12 to 5 per cent, ₹1.5 lakh tax deduction for interest paid on loans borrowed for buying electric vehicles and investment-linked incentives for manufacturing the vehicles (under Section 35AD of the Income Tax Act.)

The ₹10,000-crore FAME-II programme, which seeks to foster faster adoption of e-mobility, has been well-funded.

More than the freebies, the biggest unfolding has been the creation of buzz around electric vehicles. First, NITI Aayog talked about two-wheelers going fully electric by 2025, three-wheelers a couple of years earlier — something that seems to have kicked up some consternation in a section of the industry.

Then the Economic Survey had substantial discussions on the subject, calling for the creation of a network of charging stations. Then came the Finance Minister’s Budget speech, with a lengthy discourse on electric vehicles. Earlier, the government said it would waive registration charge for electric vehicles. All these demonstrate the seriousness of the government and creation of the right atmosphere is half the battle won. “Awareness is certainly increasing; people are looking at electric vehicles with more interest,” says Pramod Chabria, Director at the Hyderabad-based RAP Motors, which makes electric three-wheelers.

Chabria’s company is a case in point. Today, it has capacity to produce 500 vehicles a month and the company is investing to double the capacity because the demand is good. The reason for the good demand is the competitive price — the vehicles cost ₹99,500 without counting in taxes and battery costs, or around ₹1.40 lakh, counting in both, still lower than the price at which a regular e-autorickshaw sells.

However, electric passenger cars still sell in low hundreds annually in India. As for commercial vehicles, they are still way behind in adoption of electric, though some States have bought electric buses using subsidy from FAME.

The automotive industry divides into three distinct categories — large commercial vehicles (trucks, buses and off-highway vehicles such as those used in mines), passenger vehicles (cars and SUVs) and all the rest, comprising mainly two-wheelers and three-wheelers. When it comes to electric mobility, you have to add two more segments at the bottom end — e-bikes and micro-transportation vehicles such as segways. These segments need differentiated attention, which is missing now. The lower end of the spectrum is already experiencing a demand pull. One only needs to see e-rickshaws in cities like Delhi, which don’t even need lithium-ion batteries — they run well enough on the conventional lead-acid batteries. These need a different policy push. The GST reduction will help a lot, but since tax incentives are applicable only for registered vehicles, a big chunk of this segment gets excluded.

Again, where FAME subsidies are involved, they are more a problem than help. Customers pay net of subsidies leaving the vehicle manufacturers to collect the subsidy from the government. Unlike the conventional automotive industry, the e-vehicles industry is mostly smaller-scale. When there is delay in disbursement of subsidy, the company’s working capital goes for a toss, says Chabria.

As for the passenger car segment, the adoption will inevitably be slow. Even after the tax breaks, electric passenger cars are more expensive, charging time is still high (90 minutes for 80 per cent charge for Tata Tigor EV) and range anxiety is not quite gone (Tata Tigor claims range of 142 km, but in practice, it is around 100 km.) In the foreseeable future, the demand for electric passenger cars will come from fleet operators.

Some in the industry feel that it might be wise to put the entire weight behind two and three-wheelers, small commercial vehicles, micro-mobility vehicles and buses for e-mobility. Today, the government’s accent seems to be on cars. Narasimhan Santhanam, who runs Energy Alternatives India, a consultancy, feels the Budget provisions benefit car buyers the most, while not being enough to tip a decision in favour of a purchase. “That’s a bit funny, as it is the two-wheelers that the government wants to focus on,” he says. Separate lanes for e-bikes and micro-mobility could be provided while building Smart Cities; and in today’s age of GPS-based tracking, smart-card based hiring of these vehicles for point-to-point travel is feasible. For buses, NITI Aayog has proposed an overhead electric network on select routes. As for cars and goods carrying vehicles, let them chug along improving their performance until they are ready for fuel-cells, which are really the future of transportation.

Valley of death

More importantly, electric vehicles need to cross the ‘valley of death’, which refers to the resistance from the entrenched incumbents to a change that has disruptive potential. New, disruptive technologies have to cross this valley to be successful — most fall into it and die.

Conventional vehicle manufacturers make their money more in the after-market, selling components. A conventional vehicle has about 2,500 moving parts, an electric vehicle has about 25. The electric vehicle is lighter as the weight of the battery is less than the weight of the engine it replaces, and consequently, the tyres are under less stress. Therefore, the after-market for components for electric vehicles is a fraction of that of the conventional vehicle — and the industry is not going to like it.

Another concern is the loss of jobs — the conventional automotive sector is a big employment provider, whereas e-mobility will need far fewer people. The industry will fight the change. Already, NITI Aayog’s call for a ban on fresh sales of conventional two-wheelers and three-wheelers from 2025 and 2023 has ruffled feathers but the strong signal has made such vehicles’ journey across the valley of death a little safer. The think tank believes that six years is good enough time for a painless transition to electric vehicles, but the industry disagrees.

The current phase of the EV industry reminds one of where solar was around six years ago — expensive, challenging, and for a niche market. But the sector has enjoyed super growth, thanks to sustained backing of the government. Now that the government has its ‘foot on the pedal’ for EV, e-mobility could well follow the same trajectory as solar.

Published on July 16, 2019
This article is closed for comments.
Please Email the Editor