India’s Mahindra calls for urgent shift to electric vehicles
Cleaner technology needed to solve world’s worst air pollution and reduce oil dependence
India needs radical measures to accelerate a shift to electric vehicles but the transition will cause significant economic pain, said Anand Mahindra, whose $20bn Mahindra Group is one of the country’s largest automobile manufacturers.
Mr Mahindra, whose group established a footing in the budding electric vehicle industry with its 2010 acquisition of Reva and a 2018 partnership with Ford, waded into a debate over how aggressively prime minister Narendra Modi’s government should pursue the switch.
“This transition is going to cause a huge amount of economic disruption in the value chain,” Mr Mahindra said in an interview. “There has been huge collateral damage when disruption occurs. But that has never been the reason not to look for disruption.”
Authorities have previously suggested that all vehicle sales should be electric by 2030. But in recent draft documents, seen by the Financial Times, the government’s in-house think-tank proposed accelerating that deadline, requiring that all three-wheeled vehicles — namely India’s ubiquitous rickshaw taxis — sold after 2023 be electric, with scooters and other light two-wheelers making the shift by 2025.
Mr Mahindra said the government had to be flexible about its targets. India’s electric-vehicle sales are currently negligible, representing less than 1 per cent of the automobile market. Electric cars make up 2 per cent of the Chinese market and almost 40 per cent in Norway.
“An industry which has huge investments in the current ecosystem and value chain will naturally have some inertia,” Mr Mahindra said. “If the government doesn’t signal that this is the direction we want you to go in, and we need you to move very quickly, then that sense of urgency will not be there.”
Analysts at brokerage Kotak Institutional Equities, however, expect less than 30 per cent of India’s automobiles to be electric by 2030.
Sales of fuel-guzzling vehicles are still the crux of Mahindra’s business, which ranges from farm equipment and holiday resorts to non-bank finance. Mahindra is the world’s largest tractor vendor by volume. Its automobile division, meanwhile, sold about 10,000 electric vehicles in the year ended in March, compared with about 600,000 conventional vehicles.
The company has developed a range of electric vehicles including two rickshaws, the Treo and eAlfa Mini, which it is seeking to establish as next-generation fleet vehicles. It also last year entered an agreement with Ford to develop more electric vehicles.
India’s government is urgently promoting electric vehicles, with a view to cutting down choking urban air pollution — the world’s worst, according to the World Health Organization, and reducing the country’s dependence on imported oil.
The government has proposed a range of measures to accelerate growth. On Friday finance minister Nirmala Sitharaman proposed cutting sales tax on electric vehicles to 5 per cent from 12 per cent in India’s annual budget. “We aim to leapfrog and envision India as a global hub of manufacturing of electric vehicles,” she said.
In March the government announced $1.5bn in electric vehicle subsidies for the next three years, more than 10 times the previous amount.
Authorities have allocated the bulk of those resources towards two- and three-wheeled vehicles, as cars are still out of reach to most Indians. Two-wheelers account for 80 per cent of the entire automobile market, according to industry group SIAM.
Mr Mahindra said his group’s early investments in electric vehicles would pay off, despite the upheaval.
“When we bought Reva, we were laughed at. [People] said, ‘What are you doing? Is it making money still?’ No, but is it heading in that direction? Yes,” he said. “We saw that future coming.”
Source: ft
