Budget 2015-16: Manufacturers demand incentives for green vehicles

  • Feb 24, 2015
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Electric vehicles and even hybrid vehicles provide an eco-friendly alternative mode of transport but also come at high cost. Auto makers feel that the demand for electric vehicles will only pick up provided the government supports the industry with incentives in the Budget

Mahindra e2o

Electric and hybrid vehicles may provide an alternative mode of transport which is environment friendly too, but the demand for such vehicles is far from what manufacturers hope they should be.

Firstly, they are expensive compared to same spec conventional vehicles and demand a premium on the sticker price. Secondly, the infrastructure for electric vehicles has a long way to go since these require charging, at regular intervals.

Auto makers feel the electric vehicle industry will only pick up provided concessions are granted by the government in the form of tax incentives and infrastructure development, particularly a network of charging stations, just like conventional fuel stations.

According to reports, the Finance Ministry is likely to allocate Rs 800 crore in the Union Budget to promote manufacture and sale of electric and hybrid vehicles. What will be of particular interest is to bring down the cost of purchasing a new electric vehicle to the consumer, and how much subsidy the government will be willing to provide.

The high costs of electric vehicles and lack of infrastructure has neither enthused the Indian consumer nor manufacturers. Electric vehicle makers feel government support in the Budget is necessary to give a boost to the sector, and the National Electric Mobility Mission Plan 2020 must be implemented at the earliest.

Sohinder Gill, CEO, Hero Electric

“We expect the forthcoming budget to create a favourable and stable policy environment to revive the industry and help in promoting the growth of the e-vehicle industry Budget 2015 is the last hope of pulling the sick industry out of the ICU and if NEMMP is not implemented immediately, the industry is likely to collapse totally making it almost impossible to resurrect it,” Hero Electric CEO Sohinder Gill said.

“We expect government to come up with demand-side policy measures to provide a stimulus to the automobile sector. Concessional duties for greener cars and special custom duty concessions on plug-in hybrids would further help towards realization of NEMMP 2020 objectives,” said Tomas Ernberg, MD, Volvo Auto India.

Electric vehicles, particularly in the electric two wheeler sector had seen over 25 players a few years ago. But now, only 4-5 players are left in the industry.

Although the NEMMP 2020 was announced in 2013 by the Manmohan Singh government, the delay in taking concrete action has hampered growth of the electric vehicle industry in India. Under the NEMPP 2020, the government is to provide support in the range of Rs 13,000-14,000 crore over a period of 5-6 years with sales projection of 6-7 million new units of the full range of electric vehicles.

"We are expecting some sort of allocation in the Budget that'll help in making the electric vehicles more affordable for consumers as the current cost is very high," said Pravin Shah, Chief Executive, Automotive Division, Mahindra and Mahindra.

Mahindra Reva e2o

Mahindra Reva sells its small electric car e20 in select cities in the country but the high cost has been a hindrance.

"Creation of infrastructure, such as charging stations, reducing import duties on components till the time homegrown technology is developed and providing R&D incentives are important," Shah added.

Subsidies and additional benefits from the government shall work wonders here for this particular segment.

Then there are the hybrid vehicles which have also yet to see respectable sales numbers. Models like the Prius and Camry Hybrid from Toyota’s stable and the recently launched BMW ActiveHybrid 7 are among the very few sold in the Indian market.

The reasons for customers shying away from these are attributed to the extremely high price tags they carry against the much competitive and efficient diesel counterparts. Government support could bring up the sales of these models at the same time contributing to to reducing environmental pollution.

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