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
- 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
- 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
- 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)
- 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