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Wednesday, November 25, 2020

Industry: PLI to help EV ecosystem; tax breaks for hybrids key

Manufacturers feel that government needs to help in lifting demand for full range of electrified vehicles including hybrids by way of tax incentives to attract investments for developing EV ecosystem in the country.

Written by Sandeep Singh | New Delhi | November 18, 2020 12:49:46 am
Unlike electronics manufacturing that has attracted investments following incentive announcement by government, automotive manufacturers feel that cars are discretionary purchase and battery manufacturing will involve some amount of commitment to scale.

Even as the automotive industry is buoyed by the extension of government’s production linked incentive (PLI) scheme for the automobile industry including for manufacturing of advance chemistry cells that could be critical for faster introduction of affordable electric vehicles in India, there is a sense within the industry that investments for local manufacturing won’t come unless there is a sustained high domestic demand for electric powertrain vehicles. Manufacturers feel that government needs to help in lifting demand for full range of electrified vehicles including hybrids by way of tax incentives to attract investments for developing EV ecosystem in the country.

“Investments in EV ecosystem will only be viable when there is sustained minimum demand volume and the key for that is to have a full range of electrified vehicles including strong hybrid, plug-in hybrids or EVs as they all have EV powertrain. We have been asking the government to kindly consider 28 per cent (zero cess) for strong hybrids and 18 per cent for small cars as that will help people accept hybrids,” said Vikram Gulati, country head and senior VP—external affairs, CSR and corporate governance at Toyota Kirloskar Motor.

He added that the Centre must look at the social benefits that could be derived out of it and also link the policy with the national objective of reducing import and consumption of fossil fuel and protecting the environment.

There are others who also feel that local manufacturing will hold key to affordable electric mobility in the country. “You can’t shift to electric mobility without local manufacturing because that becomes counterproductive and would lead to import substitution. What we need is import reduction and not import substitution,” said an official with another leading manufacturer. He added that tax policies need to be linked with broader objective of cutting fossil fuel consumption and should be simple and predictable so that OEMs work in same direction.

Unlike electronics manufacturing that has attracted investments following incentive announcement by government, automotive manufacturers feel that cars are discretionary purchase and battery manufacturing will involve some amount of commitment to scale, which is why demand has to be aggregated.

There is also a sense in the industry that the government won’t lose tax revenue if the taxes are brought down on hybrids as their numbers are very small right now. “It is practically a zero cost announcement for the government,” said Gulati. He added that as the number of hybrids selling in India is in double digits, even if the Centre announces a reduction in tax, the reduced tax structure will not impact revenue collection because of low numbers, and also the higher volume sale would make up for those losses. “But, for the government it can be a very impactful cost free policy integrator to attract investments,” he said.

Gulati, however, welcomed governments PLI announcements last week. There are others who praise government’s move to promote alternate chemistries and not stick to lithium ion for battery storage. “It is important not to tie yourself in any technology as the pace of technology evolution is very fast and disruptions can happen from any place and so how do you secure yourself,” said an official with a leading manufacturer.

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