K Srinivasan
ON July 5 the Uttar Pradesh Government announced an incentive that split the automobile industry right down the middle. What the state Government did was waive the 8-10 per cent registration tax on hybrid cars. This led to a reduction in the on-road prices of these cars from Rs 1.5 lakh to up to Rs 4 lakh. In a follow-up meeting in Lucknow, eight companies participated – Tata Motors, Hyundai, Kia, Mahindra & Mahindra, Maruti Suzuki, Toyota, Honda, and Bajaj.
Tata Motors, Hyundai, Kia, and Mahindra & Mahindra vehemently opposed the UP Government’s diktat making it clear that the order would deeply impact the electric car segment. “You can’t confuse the country. From a tech perspective, incentivising hybrids is a regression for the country and makes us globally uncompetitive… Do you want the country to go slow on zero emissions tech? Is that the direction you want to set?” Shailesh Chandra, Tata Motors MD for passenger cars and EVs, told media weeks before, in a bid to try and stop the anticipated announcement.
The simple argument
His argument was simple. EVs are the ones that are globally exempt from all taxes because of their positive environmental impact. Hybrids are really a modified ICE (internal combustion engine) that may improve the mileage of a vehicle but do nothing much in terms of greening. “To meet net-zero emissions target for every company and the country, you have to have a razorsharp focus – which is a movement towards EVs,” said Chandra For the moment though, the UP Government has decided to stick with the order and said it had no plans to rescind the full waiver of registration fees on hybrid cars. Nonetheless, it has divided the automobile industry and once again brought to sharp focus the question: EVs or hybrids.
Goldman Sachs, in a recent perspective on the issues, was perceptive: “We believe there are three main factors blunting EV penetration. For one, we’re seeing rising concerns around EV capital costs due to lower prices being realised for used EVs. (Another) concern is around a shortage of rapidcharging stations. As EV penetration accelerates, rapid charging station infrastructure issues have emerged as a tangible problem. Several automakers have said that concerns about driving range and charging infrastructure are increasing. These issues may lead consumers to have second thoughts about buying an EV.’’
Galloping demand
While the EV numbers are decreasing, demand for hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs) is galloping. Consistently across markets all over the world, the growth of EVs and PHEVs has outpaced all other segments. It is the same case in India which has seen a dramatic surge in EV sales. With close to two lakh units having been sold so far in fiscal 2024, in percentage terms it’s a 10 per cent increase over the 2023 sales and ac counts for over two per cent of total sales. The Economic Times, quoting Counterpoint Research, said: ‘’India’s EV sales are expected to rise by 66 per cent in 2024, and their market share in the passenger car segment is projected to double from 2 per cent to 4 per cent in 2023. ‘’
At the moment though, both in terms of consumer volumes and Government influence, the hybrids are running away with the conversation. Surface Transport Minister Nitin Gadkari has repeatedly said that the 5 per cent GST on EVs and the 48 per cent on hybrids is a gross mismatch. He has gone as far as to state that it is unfair that hybrids, while not exactly as green as EVs, are still far better than the traditional ICE vehicles and deserve better tax breaks. Uttar Pradesh took the cue; it won’t be long before other states follow.
Poor charging infra
To my mind, though the real reason why even the millennial, who are so much into green energy, are reluctant to plump for EVs is the lack of a robust network of charging stations across the country. Unless the Tatas and their supporters in the passenger car industry can ensure that the national network of charging stations is as robust as petrol stations, they don’t stand a chance in the marketplace; that is unless they can produce vehicles at a lower cost and a spectacular mileage. Say, for example, under Rs 15 lakh with a mileage close to 800 km on one charge. At the moment, that would seem a pipedream.
