Electric cars may become cheaper by up to Rs 1 lakh with manufacturers expected to pass on to the consumers the benefits of the Rs 95-crore incentive package extended by the Government to the industry. This subsidy will be applicable till 2011-12, after which it will be merged with the National Electric Vehicle (EV) Policy that is currently being formulated.

The decline in prices follows a 20 per cent incentive offered to EV makers by the Ministry of New and Renewable Energy (MNRE) on the ex-factory prices of all electric vehicles, subject to a maximum limit. The industry expects demand for EVs to now double, from the current annual sales of about 86,000 units. Two-wheeler makers have also been given a subsidy ceiling of Rs 4,000 for low-speed vehicles and Rs 5,000 for high-speed vehicles.

Earlier, such sops were restricted to institutional sales for R&D purposes. However, based on industry feedback, this has now been expanded for the individual sales as well, said a senior MNRE official. The incentives come with a rider — these would be available only to those manufacturers who have a 30 per cent indigenous content, a sizable operation in retail and after-sales and a multi-point check system for accounting actual sales. At present, most manufacturers import critical components like the battery and electric motor.

The main beneficiary, however, is expected to be two-wheeler manufacturers, which have a larger consumer base. There are four-lakh electric two-wheelers on the road, with around 85,000 units being added annually. At present, the large electric two-wheeler makers include Hero Electric, Yo Bikes, Avon and BSA, though most are making losses.

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In contrast, the electric car market has only one player at the moment — Mahindra Reva EV Ltd — with total sales of 3,700 units since launch in July 2001, of which 50 per cent was in the domestic market. The current ex-factory price of the REVAi is between Rs 3.5 and Rs 4 lakh.

Mr R. Chandramouli, COO of Mahindra-Reva, said, “We expect multi-fold sales growth and will pass on the entire benefit to the customers.”

Others players such as car market leader Maruti Suzuki and General Motors have also been working on such technology and may now be eager to enter the segment.

Mr S. Gill, Director, Society of Manufacturers of Electric Vehicles (SMEV) and CEO, Hero Electric, said, “We expect the subsidy to be passed on to the customers. We hope the volumes would double with the lower prices and we should be able to make more money on the higher volumes. Most of this would come next year, we don’t expect changed this fiscal.”

In March, Mr Carlos Ghosn, Chief Executive Officer of Renault and Nissan, during an exclusive interaction with journalists of The Hindu group, spoke of incentivising electric cars in India. “…We will not launch the car in any market where there is no incentive for the consumer. Because the consumer is never going to buy a car which is more expensive because it emits less. I would like my neighbour to buy a car with no emission. But I am going to buy a car which is a good bargain….,” he said.

The Heavy Industries Ministry is also expected to seek a Cabinet approval by year-end on an inter-ministerial council for electric vehicles. This would work on taking the incentive schemes for EVs further, while working on R&D as well.

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