Do EVs hold the power to revive auto sector in 2020?

5 Feb 2020

The Union budget 2020 was a big disappointment to the auto sector which had expected a revival from the finance ministry in the form of introduction of a lucrative scrappage policy, or other benefits to the ailing sector which has seen its one of the worst slowdowns in the year 2019.

The slowdown had been so bad that many foreign brands have wrapped up the production in India due to low sales volume. The low level of the economy in 2019 was one of the key factors for the slow down in the auto sector.

However, there is one silver lining in the cloud for the auto sector and that is government’s focus on the e-vehicle technology. While this is not as popular currently to make e-vehicles viable for everyone, however, Car companies are betting high on this technology and are hoping that this may pull them out of the slowdown they are facing.

So let’s learn more about e-vehicles and their importance for the auto sector where it stands today.

The need for Electric Vehicles

Auto sector in India usually comprised of Petrol- and Diesel-powered vehicles. The other fuel options including CNG and electricity sold in very limited numbers. While the petrol engines usually run cleaner as compared to the Diesel ones, people opt for the later due to the low running cost and the high torquey nature. But considering the increasing levels of pollution in the country, the National Green Tribunal (NGT) has issued a warning. New emission norms known as Bharat Stage VI will be implemented throughout the country on 1st April.

Considering the high level of costs required to update and engine to meet the cleaner upcoming emission norms, the manufacturers are now moving away from Diesel engines. Maruti Suzuki the largest manufacture of passenger cars in India with a market share of around 52% has discontinued the production of Diesel engines for all its models.

Considering all this, there has been a gradual shift towards alternative power sources for vehicles, which has slightly boosted up the demand for Battery powered electric vehicles in India. They run cleaner and are very economic to run. The only factor which affects the sale of EVs is the high cost. Considering the fact that most of the components used in an EV like Lithium batteries are usually imported, and the high level of custom duties which are imposed on the imports the costs of electric vehicles in India is usually on a higher side.

Government promoting Electric Vehicles

The government in the Budget 2020 has lowered the custom duties on the import of components of Lithium batteries and motors, with the aim of starting and boosting the production of them in India. This will lead to the costs of Electric Vehicles reducing, which will surely lead to an increase in demand.

Various Indian manufacturers like Tata Motors and Mahindra and Mahindra have already started production of electric models. They have either used their current model sand upgraded to an electric setup like Tata or have launched a whole new lineup of electric vehicles. The government has also planned to provide subsidies on electric vehicles with an aim to boost the sales.

Despite all the measures taken by the government for the revival of the auto sector, the automobile companies are still facing lot of challenges. The local production has helped the manufacturers to regulate the cost on Electric Vehicles, which has in turn started generating demand in the market.

The recent slowdown in the Chinese and other Asian markets due to the threat of Corona virus will also impact the auto sector up to some extent. Chinese manufacturers have started entering the Indian market. The recently launched Morris Garages is one such manufacturer, who is on the verge of introducing electric vehicles in the market.

The rationalization of the custom duties on import of components and raw materials will surely help the manufacturers to pass on the benefit to the consumers by regulating the costs. It is expected that this will in turn help in increasing the demand which will surely help in the much-needed revival of the auto sector in India.

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