The market has the potential to attract $14 Billion in investments over five years. Attractive incentives up for grabs for carmakers and suppliers over a five-year period to drive large investment in the sector.
There is perhaps no better time for the Indian government to renew their plans and push forward to attract global corporate players into India’s EV eco-system brimming as it is with promise and potential for unprecedented growth.
For India, specifically, this is the right time for the authorities to push aggressively forward with plans to introduce electric vehicles. As the economy surges ahead there are bright chances of this having a profound bearing on health, environment, oil imports and savings on foreign exchange.
The government has long been conducting assessments on the structured introduction for global EV players and, according to reports from Reuters, India is reportedly prepared to launch a massive boost in forms of incentives to companies making EV’s as part of its broad auto sector scheme which has the potential to attract $14 bn in investments over five years.
The Spectre of Pricing
There has always been the spectre of price hanging over the heads of EV sales in India. EV pricing points to the luxury end of the automobile market given that the average price of all cars (50%) is around $8,000. Bloomberg NEF had estimated that it would take more than a decade for EVs to achieve price parity with petrol vehicles in India. This weak demand, coupled with a lack of solid incentives, had resulted in keeping investors at bay.
India desperately needs to reduce its dependence on fuel and, at the same time, address its problem with pollution, for which Modi has made an international commitment.
While tabling the 2021-2022 Union Budget, Finance Minister Nirmala Sitharaman has announced that the government would lean more towards a policy that would support fuel-efficient, environment-friendly vehicles that would reduce pollution and the oil import bill.
Companies will receive 4-7% government cashback on the eligible sale and export value of vehicles and components, but for EVs and their components, there is an additional 2% as a "growth incentive" to promote electric mobility, according to the draft policy document.
The draft policy reportedly also states that automotive component manufacturers in India must be ready to pivot their product offerings to cater for the shift towards EVs.
Walking the Whole Nine Yards
As per studies conducted by the government, it has been noted that current players have been constrained in their ability to invest and undertake the necessary risks required to achieve rapid growth. This is why to benefit from the government’s current push forward in the EV sector automakers must meet certain conditions that include a minimum global revenue of $1.4 billion. For auto parts makers it is $69 million. The companies must grow by at least 8% each year to qualify for the incentives, which are also linked to the distance between the factory and point of sale.
Elon Musk has recently announced plans of bringing the famed Tesla model into India. In January this year, Tesla formally registered its company "Tesla Motors India and Energy Private Limited'' with the Registrar of Companies (RoC) in Bangalore. Musk and India are no strangers to each other in what has been a courtship that has largely gone unreported till prime minister Modi paid a visit to the company’s factory in California during his famed visit to the United States. The optics of this visit was not lost to the industry and consumers. Musk reaffirmed his interest in India when he tweeted a World Economic Forum article in 2017 which underscored the government's commitment to have only electric cars sold in the country by 2030.
Musk’s recent tilt towards India can be just the tonic that the EV industry needs to power its engines. But the government is also ensuring that the EV ecosystem is one that benefits all which is why Ford, Volkswagen and India's Tata Motors and Mahindra have all agreed to join the party.
Credit: indiaglobalbusiness