India File

Why two-wheeler makers are unhappy

Murali Gopalan | Updated on July 15, 2019 Published on July 15, 2019

At its recent meeting with top industry CEOs from TVS Motor, Bajaj Auto and Honda Motorcycle & Scooter India, among others, NITI Aayog cited the case of China as a successful business model for electric while insisting that the internal combustion engine (ICE) had to be banned. It’s this view that has angered manufacturers, especially when they are working around the clock to meet the Bharat Stage VI emissions deadline which becomes mandatory from April 2020.

Rajiv Bajaj, Managing Director of Bajaj Auto, wonders why there is such a hurry to bring in electric, especially when Indian ICE two-wheelers have set the benchmark globally for emissions and mileage. From this point of view, banning an industry exports over three million vehicles annually does not make any sense. Bajaj does not see any logic in citing the China example.

When China went in for electric, this was restricted to four four big cities unlike the 100 per cent coverage that India is speaking of by 2025. India, on the other hand, is “taking one swallow and making a summer out of it”.

The massive roads were more than adequate to have separate lanes for electric mobility. India, in contrast, does not offer this kind of luxury.

Venu Srinivasan, Chairman of TVS Motor Company, reiterates that it is not as if two-wheelers alone are the main polluters given that power plants, refineries, road construction activity and crop burning emit a lot more.

He points out that since most power in India is generated from coal, carbon emission will not reduce with electric vehicles. Srinivasan has also cautioned that any “drastic shift” to electric will increase India’s dependence on China. The industry is of the view that lithium-ion batteries are the “only right option” compared with Chinese use of lead acid batteries.

Flood of cheap imports

It is not as if manufacturers are opposed to the idea of electric but the truth is that a lot of hard facts need to be factored in first. For instance, the present battery cost of $250/kWh would not make it viable for the end-user and would have to come down to $100/kWh. Additionally, if battery makers are assured of two million units annually from two-wheeler companies, their investments would be justified. If this is not in place, the Government may have to cough up huge subsidies to the tune of ₹1 lakh/vehicle; on an estimated 25 million two-wheelers in 2025, it would be ₹250,000 crore.

If NITI Aayog has its way, however, and the deadline is made mandatory, it would be catastrophic for the industry and its supporting ecosystem comprising employees, dealers, vendors and customers.

Two-wheelers under 150cc account for over 85 per cent of sales, which means nearly 17 million units as of today (on overall industry sales of 21 million units). Employees assembling the present ICE vehicles would therefore become redundant. Likewise, suppliers of engines and its related parts will have no relevance in an era of electric. Dealers will realise that large showrooms are perhaps not needed to retail electric bikes/scooters. And, finally, customers may not be inclined to buy the more expensive electric option which, going by the present range available from start-ups, will be comfortably over ₹1 lakh.

What could happen with rising costs is that there will be a flood of cheap Chinese electric two-wheelers into the market except that it is a moot point if the customer will choose to buy them. His other option will be to buy the more expensive offerings from Indian companies. Bajaj says the customer will eventually “sit tight” on his BS IV two-wheeler which means that even the BS VI option, on which the industry is spending big bucks, will be royally ignored. The other downside is that exports of ICE products will be hit in the process.


Published on July 15, 2019
This article is closed for comments.
Please Email the Editor