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Reviving the automobile sector

  • IASbaba
  • May 20, 2020
  • 0
UPSC Articles
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ECONOMY/ GOVERNANCE/ ENVIRONMENT

Topic: General Studies 2 &3:

  • Indian Economy and issues relating to planning, mobilization, of resources 
  • Government policies and interventions for development in various sectors

Reviving the automobile sector

Context: In the post-Covid world, electric vehicles will be key not only to breathing new life into the automotive sector but also to decarbonising it

Did You Know?

  • By 2050, every second car produced globally would be electrically powered. 
  • Research by Deloitte Global Automotive shows that over 50% of the consumers are still unclear about the safety of the battery and the availability of adequate charging stations leading to slower adoption of E-vehicles

Problems of Indian Automobile Sector 

  1. In pre-COVID times
    • Declining consumer demand
    • Difficulty in transitioning into BS-VI technology
    • Extinguishing inventories of left-over BS-IV vehicles
    • Credit crunch in the NBFC sector
  2. In Post-COVID times
    • Challenges of dealing with a completely new environment – rising protectionism and decline in international trade
    • Decreased purchasing power of consumers
    • Disruption in manufacturing capabilities
    • Issues with inventory management and labour shortages
    • Need for emergency response mechanisms in the backdrop of disrupted global supply chain

India and E-Vehicles

  • Strong growth: The EV industry in India managed to post a decent 20% increase in sales in FY20 compared to FY19
  • Policy Push by government for e-vehicles: The GST council reduced the rates from 12% to 5% for vehicles, and from 18% to 5% for vehicle chargers. 
  • Push by State governments to adopt e-vehicles For ex: Kerala government has instructed all its departments to purchase only e-vehicles from the next financial year.
  • Dedicated schemes like FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) have incentivised local manufacturing and the growth of domestic technology.

Electric Vehicles – Prospects in Post-COVID times

  • Personal mobility is going to pick up again post-Covid, as people would avoid mass transport thus giving boost to e-vehicles
  • Driver of growth: In Post-COVID times, fastest growth for automotive sector would come from the e-rickshaws segment that plugs last-mile connectivity.
  • India’s Demographic advantage: Surveys point that younger consumers, particularly females, are more willing to invest in EVs than older generation. 
  • Environmental friendly: Increased environmental awareness among public, especially after COVID crisis, could lead to increased adoption for e-vehicles

Way Ahead

  • There should be a further policy push for a visible shift towards increased EV adoption
  • Banks should devise innovative credit schemes to push for such a shift.
  • The government should focus on augmenting the charging infrastructure 
  • Governments should also have in place a scrappage policy that drives new-vehicle sale.
  • Existing automobile companies should make e-vehicles more affordable and maintenance easier, with quick availability of parts (no dependence on import)

Conclusion

  • EVs are the only way to decarbonise the transport sector and achieve India’s ambitious target of complete green mobility by 2030.

Connecting the dots:

  • EV Batteries – dependence on China for supply of Lithium
  • Challenges with regard to air transport in Post-COVID times

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