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Industry Watch

The future of transportation on cusp of a change

Shweta Kothari, New Delhi, January 2016 

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Trends in the Indian automobile sector point to a change which was far from coming a few decades ago. While auto giants like the Toyota, Honda and the TATAS brace the onset in the market demand, the road ahead is challenging and the Government can play a vital role in the process of transition. A Bureaucracy Today report.

 
 
Hybrid and electric vehicles (HEVs) were a thing of the future until the last decade, but are now making fast inroads into the mainstream. So much so that as of 2013, the hybrid vehicle market share accounted for more than 30% of the new standard passenger car share in the world. Realizing this potential of hybrid and electric vehicles, the Government of India unveiled the“National Electric Mobility Mission Plan” in 2013 in an effort to address national energy security, mitigate the adverse impact of vehicular pollution and boost the growth of domestic manufacturing capabilities. According to data accessed by Bureaucracy Today, the Government envisaged selling 6-7 million units of the new hybrid and electric vehicle by 2020. This in turn will save 2.2-2.25 million tonnes of fuel and reduce vehicular emission by 1.5% as of 2020.
 
FAME POLICY
Two years down, the idea finally took shape in 2015 when the Narendra Modi-led Government launched “Faster Adopting and Manufacturing of Hybrid & Electric Vehicles” or the FAME Scheme. Under the FAME policy, the Government has decided to pump in    Rs 800 crore and will offer an incentive of up to Rs 1.38 lakhs on every electric and hybrid vehicle. The Ministry of Heavy Industries is conducting road shows across the country. The first road show was flagged off in Delhi in November 2015 from the ramparts of the Red Fort and witnessed the participation of auto giants like the Maruti, Toyota, BMW and the TATAS.  Efforts are also afoot to persuade State Governments to lower the VAT tax on HEVs.
According to Anant Geete, Minister of Heavy Industries and Public Enterprises, “About    Rs 14,000 crore needs to be spent on hybrid and electric vehicles which will in turn save fuel worth Rs 60,000 crores if the stipulated amount is spent. We have requested State and Central Governments to use HEVs for official purposes.” 
 
SPURT IN HEV DEMAND 
So what led to this sudden spurt in the demand for HEVs? Other than the alternative fuel theory, a plethora of reasons can be attributed to the jump start in the growth of hybrid and electric vehicles. The greater fuel economy of HEVs has an implication on reducing petroleum consumption and air residuals. Also significant is the reduced noise pollution as a result of substantial use of the electric motor which is another important reason why people prefer HEVs. 
Globally, hybrid and electric vehicles are seeing traction across various countries. As per official records, Japan is the world’s largest hybrid vehicle’s market with an estimate of four million hybrid vehicles sold by December 2014, followed by the United States with over 3.5 million sales. 
 
INDIAN OVERHAUL 
 
India is not far behind in the struggle to adopt clean technology. Auto manufacturers seem to be excited to exploit the opportunity and are contemplating a big ticket investment in the hybrid car market. Toyota launched a hybrid Camry in May 2015. Sources tell Bureaucracy Today that Toyota will soon launch its hybrid Corolla in the Indian market. Similarly, the TATAS too are gearing up to expand their hybrid portfolio with the launch of hybrid Manza in 2016, while Maruti too broke into the segment with its hybrid cars and Ertiga this year. BMW is not far behind with the launch of the i6 and is contemplating launching i3 in the Indian space.
 
As per industry sources, even Mahindra Reva’s pure electric is receiving over 300-400 orders per month. TS Jai Shankar, Deputy MD, Toyota Motors, tells Bureaucracy Today, “The hybrid is slowly picking up. We are happy the way Camry is performing.” 
 
Seven months after launching the FAME scheme, the Government is finally happy that the scheme is grabbing enough attention. Ambuj Sharma, Secretary, Ministry of Heavy Industries and Public Enterprises, says, “We are seeing a very good traction. The FAME road shows have been able to grab a good number of eyeballs.”
 
CHALLENGES AHEAD
 
Like any other technology, the Hybrid comes with its own set of challenges. The one currently making headlines in the US at this point is dealing with the problem of low sound emitted by electric and hybrid cars. The fear of collision has led road safety authorities to formalize a new set of rules to warn pedestrians and cyclists. As per the estimates of the National Highway Traffic Safety Administration, the odds of a hybrid vehicle being involved in a crash are 19% higher than a classic vehicle.  The move is all set to cost USD 23 million to automakers in the US. 
 
In the Indian context, the lack of adequate infrastructure is a major roadblock in the success of HEVs. The dearth of good roads, the shortage of enough charging plug-in points for electric vehicles and inadequate after purchase support have hindered the growth of HEVs. One of the major impediments, however, is the variety of models. Many hybrid vehicles are yet to be launched in India. As the Secretary, Heavy Industries, rightly puts it, “We should have more models; more range of vehicles, because every customer is a different customer. His needs are different. So when he goes into a petrol or diesel model, he has 20 different selections but only a few in the electric and hybrid varieties.” 
 
The premium pricing of HEVs is another detrimental factor for the faster adoption of hybrid and electric vehicles in India. However, Government subsidy and a 10% reduction in excise duty could sweeten the deal for buyers. So while the initial cost of purchasing an HEV is higher for the consumer, the money can be easily recovered by savings on fuel, with the added benefit of reduced pollution. 
 
 
CONSCIOUS ENDEAVOUR 
 
While the HEV phenomenon is picking up simultaneously, both globally and in India, the international market is far ahead in terms of sales, technology and the variety of vehicles. India is imbibing the concept slowly but gradually. In such a scenario, Government schemes can play a crucial role in pushing the use and awareness of HEVs. It is the conscious endeavour of every consumer to meet his/her commitment to sustainability and reduction in carbon footprint. 
 
 
 

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