India's green-car push puts hybrids in the back seat

File photo of Bollywood actor Shah Rukh Khan with an electric car at India's Auto Expo in New Delhi.
File photo of Bollywood actor Shah Rukh Khan with an electric car at India's Auto Expo in New Delhi.PHOTO: REUTERS

Think-tank recommends battery plant, incentives for electric cars

NEW DELHI • India's most influential government think-tank has recommended lowering taxes and interest rates for loans on electric cars, while capping sales of conventional ones, signalling a dramatic shift in policy in one of the world's fastest-growing car markets.

A draft of the 90-page blueprint, seen by Reuters, also suggests the opening of a battery plant by the end of next year and the use of tax revenues from the sale of petrol and diesel vehicles to set up charging stations for electric vehicles.

The recommendations in a draft report by Niti Aayog, the planning body headed by Prime Minister Narendra Modi, are aimed at electrifying all vehicles in the country by 2032 and will likely shape a new mobility policy, said government and industry sources.

That the report focuses solely on electric vehicles marks a shift from the current policy that incentivises both hybrid vehicles - which combine fossil fuel and electric power - and electric cars, and is worrying some carmakers.

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"India's potential to create a new mobility paradigm that is shared, electric and connected could have a significant impact domestically and globally," said a draft version of the report, titled Transformative Mobility Solutions for India, which will be made public this week.

India's plan to leapfrog hybrid technology comes after China announced aggressive measures last year to push sales of plug-in vehicles, including subsidies, research funding and rules designed to discourage fossil-fuel cars in big cities.

It would also mark a radical response by India as it looks to cut its oil import bill to half by 2030 and reduce emissions as part of its commitment to the Paris climate treaty.

Officials acknowledge the blueprint faces challenges.

High battery costs would push up car prices and a lack of charging stations and other infrastructure means carmakers, who have been consulted on the proposals ahead of publication, would hesitate to make the necessary investment in the technology.

"If we accelerate electric-vehicle growth, it will be a disruption for the motor-vehicle sector and would require investment, but if we're not able to adapt quickly we risk being net importers of batteries," said a government source involved in the plans. "There has been resistance from carmakers."

India's top-selling carmaker Maruti Suzuki has invested in so-called mild-hybrid technology, which makes less use of electric power than full hybrids, while Toyota Motor Corp sells its luxury hybrid Camry sedan in the country.

Mahindra & Mahindra is the only manufacturer of electric vehicles in India. Two years ago, the country launched a scheme called Faster Adoption and Manufacturing of Hybrid and Electric Vehicles, under which it offered incentives for clean-fuel-technology cars to boost their sales to up to seven million vehicles by 2020.

Despite incentives as high as 140,000 rupees (S$3,050) on some cars, the scheme has made little progress, with the sales of electric and hybrid cars making up only a fraction of the three million passenger vehicles sold in India last year.

The scheme, which expired on March 31, has now been extended by six months while a future policy is being worked out, two government officials said.

Lack of clarity on policy risks delaying investment in the motor-vehicle sector, one official added.

Mr Puneet Gupta, South Asia manager at consultant IHS Markit, said the government would need to lead the change with generous incentives to achieve its goal.

"This is one of the most radical changes the government is talking about," he said. "All cars being electric is a distant dream."

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 08, 2017, with the headline 'India's green-car push puts hybrids in the back seat'. Print Edition | Subscribe