India May Soon Be Increasing EV Incentives In Grand Scheme

India has big plans in the works to incentivize electric vehicles, downplay hybrids, build batteries, and lay out infrastructure, according to a policy report.

The country’s most influential government think-tank is recommending lowering taxes and interest rates for loans on EVs and capping sales of conventional cars. It would also cut out incentives for hybrid vehicles.

Reuters has reviewed a 90-page draft document from Niti Aayog, the planning body headed by Prime Minister Narendra Modi, that could lead to a major shift in government policy affecting one of the world’s fastest growing auto markets. It’s expected to be issued to officials soon.

The draft policy document also directs that the national government open a battery plant by the end of 2018, and that more tax revenue generated from the sale of gasoline and diesel vehicles be directed to EV charging stations.

It will be part of a wider policy bringing new technology and mobility services to India’s crowded, polluted cities.

“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.”

India is studying options as it looks to cut oil imports in half by 2030, and as part of its commitment to reduce carbon emissions as a member of the Paris climate treaty. It also ties into policy directives issued in China last year to discourage fossil-fuel powered cars in its big cities.

The report recommends shifting away from the current policy that incentivizes both hybrid vehicles and EVs. Adopted in 2015, the program had been named Faster Adoption and Manufacturing of Hybrid and Electric Vehicles. It offered incentives for clean fuel technology cars to boost their sales to up to seven million vehicles by 2020.

Even with incentives up to 140,000 rupees ($2,175) on some cars, the incentive program has made little progress. Sales of EVs and hybrids have only made for making a small fraction of the three million passenger vehicles sold in India in 2016.

That program expired on March 31 but was extended another six months while the next policy is being worked out, two government officials said.

Mahindra & Mahindra is the only maker of electric vehicles in India. The Mahindra e20 small electric hatchback has been the top-selling electric vehicle in that country. Imports of the BMW i8 have done fairly well in India sales, as has the Volvo XC90 plug-in hybrid.

India’s top-selling carmaker Maruti Suzuki offers two Smart Hybrid vehicles, a technology that uses an Integrated Starter Generator and an advanced high capacity battery to supplement the engine’s power.

Also Toyota sells its Camry hybrid in the Indian market.

Indian government officials acknowledge the proposed plan faces big challenges. High battery costs are keeping prices high, and lack of charging infrastructure is also making automakers hesitant.

Lack of clarity on the new policy risks delaying investment in the auto sector, one government official said.

The Niti Aayog report, which was co-produced with U.S.-based Rocky Mountain Institute, outlines a 15-year plan. It’s laid out into three phases starting in 2017.

Some of the policies may be difficult to find support in the legislature and with automakers. For example, bids would have to be made at public lotteries for buying fossil-fuel powered vehicles.

“Limit registration of conventional vehicles through public lotteries and complement that with preferential registration for electric vehicles, similar to that in China,” the report said.

It also suggest bulk procurement of EVs, which indicates large government fleet vehicle purchases would be part of it.

Another part of the proposal has been crafted for two- and three-wheel EVs that could use swappable batteries to bring down costs. Battery swapping stations would start up in 2018.

Incentives would be issued for use of EVs as taxis and other fleet applications. Suggestions include lowering taxes and interest rates on loans, reducing electricity tariffs charged to fleet operators, and lowering import duties charged to automakers for these fleet vehicles.

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Puneet Gupta, South Asia manager at consultant IHS Markit, said the government would need to offer generous incentives to achieve its goal – and that hitting these targets is far off.

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

One of the sources who spoke to Reuters sees the suggested policy changes losing support in being implemented.

“If we accelerate electric vehicle growth it will be a disruption for the auto sector and would require investment, but if we’re not able to adapt quickly we risk being net importers of batteries. There has been resistance from car makers,” the source said

Reuters


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