Indian automobile industry is facing a concrete dilemma these days. Amidst the government’s constant push towards electric vehicles in the country, automobile OEMs are being challenged to make a transition to EVs under a strict timeline. Meanwhile, vehicle sales in the country are slumping to an all-time low, partly due to these efforts that undermine the prevalent IC engine vehicles. Prime Minister Narendra Modi, however, now assures that both of these can co-exist and flourish in India simultaneously.
According to PM Modi, the idea is to encourage investment and job creation in the sector in the future. For this, he assured that the country’s market is large enough to accommodate both types of vehicles and hence both will be backed equal by the government. Understandably, the industry has welcomed the assurance as it provides just the kind of silver lining it was seeking since long now.
Prime Minister Narendra Modi (Representative Image: Reuters)
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The two sides
India has aggressive plans to switch to an electric future for its transport needs, majorly citing the increasing air pollution levels across the country. Government’s recently passed incentives and subsidies around EVs come as the latest proof of that. In the Union Budget 2019, Nirmala Sitharaman announced up to Rs 1.5 lakh tax rebate on the interest on any loans taken for an EV. In addition, the tax on EVs had been reduced to 5% from the previous 12%.
Meanwhile, IC engine vehicles were largely ignored in the budget, despite the industry’s constant appeal to the government to cut down the GST applicable on vehicles in general. It was anticipated that the dying vehicle sales in the country will gain a much needed boost if the GST was reduced, ultimately bringing their prices down.
(Representative Image: BCCL)
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On the contrary, the government increased the Special Additional Excise Duty and Road and Infrastructure cess, each by Rs 1 per litre on petrol and diesel, further demotivating buyers of the IC engine vehicles. In addition, government think-tank Niti Aayog came up with a proposal to push for a complete electrification of three and two-wheelers in the country by 2023 and 2025 respectively, further stressing the makers to completely transform their manufacturing process under a dying ROI.
PM Modi’s assurance
The fact that the prime minister has provided the assurance for an automotive future with place for both EVs and IC engine vehicles is being hailed by the auto industry at large. Society of Indian Automobile Manufacturers (SIAM) President Rajan Wadhera mentioned that the assurance is completely in-line with SIAM’s recommendations, i.e. all relevant technologies should co-exist in India’s journey towards sustainable mobility. Wadhera further called for a long-term roadmap for all futuristic technologies.
Similarly, TVS Motor Company Chairman Venu Srinivasan said, “the recent clarification by the Prime Minister that ICE and electric vehicles will both be encouraged and grow is a strong step to encourage investment and employment in the automotive sector in India. This will provide reassurance to millions of people across the supply chain, ranging from component manufacturers to original equipment manufacturers (OEMs), dealers, mechanics and associated people across the country.”
(Representative Image: BCCL)
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As intended, such an approach will also maintain a regular flow of foreign investments into the industry. As Srinivasan mentions, “this clarification will provide the stability to ensure India continues to remain one of the leading investment destinations in the world.”
Toyota Kirloskar Motor Joint Managing Director N Raja says that the assurance may translate to an instant increase in sales. “Now with this clarity, people who were thinking of delaying purchases, what we called as fence-sitters, can come forward. It will help in improving the market,” he said.
(With inputs from PTI)