Indian EV Subsidy Reform Hits Counter Industry

- Nov 26, 2019-

According to foreign media reports, Indian electric vehicle manufacturers say that subsidies designed to boost the electric vehicle industry and encourage local electric vehicle production may backfire in the short term.

As India is the world ’s most polluted country and is highly dependent on imported oil, the Indian government has made the transition to electrification a priority and has set a number of goals, such as proposing all cars on sale by 2030 Both will be electric cars.

In order to boost the electric vehicle industry and achieve the above-mentioned electrification goals, in March this year, the Indian government announced a three-year, $ 1.5 billion subsidy plan, which is more than ten times the previous amount; the Indian government announced in July , Reducing sales taxes on electric vehicles and chargers by 5% from 12% and 18%, respectively.

However, at present, India's electric car market share is less than 0.1%, and the sales of electric scooters and motorcycles are also sluggish.

SohinderGill, chief executive officer of India's HeroElectric, said electric vehicles have performed even worse since the subsidy reform program was announced. HeroElectric is currently an independent subsidiary of HeroMotocorp, India's largest scooter and motorcycle manufacturer.

MrGill said, “The new subsidy policy for the electric vehicle industry has not played a catalytic role, but has brought the market down in a very cruel way; we have suffered a major blow this year. In the past few months, the electric vehicle industry has had Deteriorating trend. "

India's new electric vehicle subsidy program has put forward a requirement that about half of the components of electric vehicles must be produced locally. Although most electric car companies believe that the regulation is beneficial in the long run, sudden reforms have caused some unnecessary short-term pain.

TarunMehta, head of Herotherm's electric scooter startup AtherEnergy, said the company had to stop selling in April and May and refit nearly 1,000 vehicles with locally produced wheels and other components. "The government has quite clearly introduced a new subsidy program that disrupted our established models for more than two months."

At the same time, other areas of the Indian automotive industry are also facing severe challenges. Not long ago, India was expected to become the world's third largest car market, but in May and June, Indian car sales fell by about a quarter year-on-year.

Maruti Suzuki said its sales plummeted about 36% in July. Automakers have cut production and warned that if the situation does not improve, they will face massive layoffs.

Some insiders said that the strict electric vehicle targets set by the Indian government are equivalent to forcing major automakers such as Maruti Suzuki, Mahindra and Tata Motors to increase their investment in new energy vehicles. But the decline in traditional car sales has raised concerns that the Indian auto industry is experiencing a cyclical slowdown or a permanent change. If the market shifts to electric cars, some automakers will find it difficult to recover from this change come.