India might put a brake on EV push as its auto sector takes a hit

Indian government scraps plan to abruptly ban the sales of gasoline cars, a major contributor to its GDP and jobs.

Source: Unsplash.

Taking cognizance of the biggest slowdown the Indian auto industry has seen in the last 18 years, India is mulling to go slow with its ambitious plan of completely switching to electric two- and three-wheelers starting 2023.

Top honchos from India’s automakers such as Maruti chairman R C Bhargava, Hero Moto Corp chairman Pawan Munjal, Mahindra automotive president Rajan Wadhera, among others met finance minister Nirmala Sitharaman to register their protest on Wednesday.

Bhargava told the finance minister that India’s push for electric vehicles (EVs) had created a perception that affordable EVs will soon be available in the market, making buyers hold back on their petrol and diesel car purchases. According to the auto industry body Society of Indian Automobile Manufacturers (SIAM), this year recorded a 31% drop in sales compared to last year, while 15,000 contractual workers lost their jobs over the last three months.

Government sources told a local media that the departments which were working to promote electric vehicles have been asked to put on hold several initiatives of discouraging the sale of petrol and diesel vehicles. The move to increase registration charges for petrol and diesel vehicles has also been suspended.

Last month in her maiden budget, Sitharaman had announced tax rebate to the tune of USD 2,100 (Rs. 150,000) on the interest paid on loans to buy EVs. India reduced the tax by more than half from 12% to 5% on EV purchases. To put it in context, purchase of petrol or diesel vehicles elicit the tax ranging from anywhere between 29% to 45%.

To reduce its crude oil import—third largest in the world—India unfurled the second phase of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME 2) scheme, with an outlay of USD 140 billion.

In a similar move, to create the ecosystem for EVs in India, the government proposed a plan to become a global manufacturing hub for Lithium-ion batteries and EV components, attracting interest from US-based car maker Tesla as well as two Chinese companies.

As India sees its worst slump in the auto sector leading to job cuts, the government is looking at gradual adoption of EVs rather than an aggressive push.