After speculations for years on the launch of Tesla in India, Elon Musk finally came through on his tweet in October last year. In January Tesla registered its Indian arm in Bengaluru, under the name Tesla India Motors and Energy Pvt Ltd, putting auto-enthusiasts, India’s Elon Musk fans, the government and the media in a frenzy. Union Transport Minister Nitin Gadkari had initially stated in December 2020 that Tesla will start operations first with sales and then maybe look at assembly and manufacturing based on the response to the cars. However, upon registration of Tesla Motors in India, Gadkari was quick to announce that India is willing to offer incentives to the car manufacturer so that “their cost of production would be less than that in China.”
Even though the launch of Tesla and the GoI’s subsequent move to offer incentives to the car manufacturer is a move in the right direction, questions about India’s capacity to support the Tesla project, and to convince consumers to shift from purchasing conventional vehicles to electric vehicles (EV) are matters of concern.
Even if Tesla were to consider that Gadkari would be able to deliver on his offer to guarantee lower production costs than China, there remain other factors on the demand and supply sides that may not seem appealing to Tesla. According to Reuters, in 2020, electric vehicles accounted for just 5,000 out of a total 24 lakh cars sold in India. In comparison, China sold 12.5 lakh electric vehicles, of the total sale of 2 crore cars, accounting for a third of Tesla’s sales across the world. Even as the world goes through an electric vehicle revolution, there still remain challenges that need to be tackled if the project of electrification of vehicles is to be successful in India.
Tackling most of these challenges would mean requirements from the government to play a more proactive role in pushing the project to a wider market. Policies that introduced tougher emission rules for carmakers were introduced last year, but in its efforts to tighten fuel efficiency rules, the government is also set to introduce a new set of policies by April 2022. According to industry executives, this may compel some automakers to add electric or hybrid vehicles to their portfolios, but the COVID-19 pandemic has slowed this process down. The production side of the policy is showing potential with stringent regulations, incentives to cut down barriers to entry and innovative schemes for public transport electrification, but there is still a lack of access to the market for consumers.
Around the world, the electric vehicle revolution has been made possible by focusing on the consumer. According to the ICCT (International Council On Clean Transportation) report, nearly 50% of the world’s electric vehicle sales are concentrated in 25 global cities, called the EV capitals of the world. “They all have comprehensive policy packages that include mandates in addition to financial incentives for consumers, funding for infrastructure development, and consumer-awareness initiatives,” says the report.
When it comes to financial incentives, the GoI already provides several incentives that include “funding through the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, reductions in goods and services tax (GST) rates on EVs and charging, and discounts on third-party insurance.” State governments are also jumping on the bandwagon to sweeten these deals with waivers for registration fees for EVs alongside steep hikes in fees for conventional vehicles. On the infrastructural development aspect, schemes such as the National Mission on Transformative Mobility and Energy Storage, aim to localize the entire EV value chain in a phased manufacturing program for battery manufacturing at a “giga-scale”. The goal is to have a large-scale integrated cell manufacturing capacity in India by the fiscal year 2021–22. Similarly, as stated by the report, “guidelines and standards for charging stations have been published, as have amendments to model documents that assist states and local bodies in urban areas with incorporating adequate charging infrastructure into buildings and urban master plans.”
However, even after the introduction of multiple incentives like these which are aimed at consumer concerns about cost-convenience of EV’s, charging and range (distance covered by EV’s) anxiety of consumers, there is a lack of awareness about the availability of these schemes. The Delhi Government recently adopted the self-proclaimed title of “Electric Vehicle Capital” for Delhi upon passing a bill that mandated the replacement of nearly 2000 state vehicles with EV’s. While this was a much-needed mandate, consumers still lack clarity on the benefits of switching to electric vehicles.
India is the 5th largest auto market in the world and is expected to grow by 11.3% from 2020-2027. Consumer awareness is then by no means a small-scale project, even though car ownership in comparison to countries like China is not that high. Cost-consciousness is high amongst consumers, and the luxury segment accounts for only 1% of the passenger vehicle market. Unless the government makes an effort to inform consumers about the schemes and facilities available for EV’s in India, it is going to be difficult to convince the consumers to shift from conventional vehicles to EV’s. The key lies in supporting and marketing manufacturers like Tata, Maruti Suzuki and Mahindra which offer EV’s at a price range that is much more affordable than what Tesla is speculated to offer. Apart from this, showcasing working infrastructural models that offer flawless support when it comes to charging stations, and the availability of these across cities can go a long way in lessening consumer anxiety. If stringent regulations are imposed on the purchase (and not just production) of conventional vehicles, consumers will explore alternatives and consider studying the incentives offered for EV’s by the government. Without these much-needed changes, it would be difficult for the government to attract players like Tesla that could spearhead the electrification of vehicles in India.
Picture Credits: The New Indian Express
Author’s Bio: Rohan Pai is a Politics, Philosophy and Economics major at Ashoka University. In his free time, you’ll find him singing for a band, producing music and video content.
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