India is one of the fastest growing economies in the world, and it is not expected to slow down any time soon. Current forecasts suggest the country’s GDP will grow by 7.5% between 2019 and 2020, with the automotive industry proving a strong economic engine. This may be best expressed by the fact that it currently accounts for 50% of the GDP contributed by manufacturing in India.
This growth is overlaid with a number of challenges, some of which are immediately apparent. Pollution, traffic congestion and infrastructure limitations underpin some of the issues facing both industry and consumer in India. In 2018, the World Health Organization (WHO) found that 14 of the 20 most polluted cities in the world are in India. Gridlocked roads can lead to stationary traffic for hours. An ageing fleet and less stringent emissions standards have created dangerous living conditions for many urbanites.
To understand how these challenges affect one of the country’s most long-standing domestic manufacturers, M:bility visited Tata Motors to speak with its Chief Executive, Guenter Butschek. An industry veteran and Daimler executive for more than two decades, he has held the top job at Tata Motors since 2016. “India’s air pollution is extremely serious,” he said, highlighting the sky-high levels of fine particulate matter (PM 2.5) in some of India’s major cities. In Delhi, a reading of 119 was registered between May and June of 2018. “Any reading higher than 70 is considered to bring a halt to any kind of outdoor activity,” explained Butschek. “Can you even imagine going running, taking one deep breath after another?”
Much like other markets where urban pollution is spiralling, the answer is deemed to come with a charging cable, and has prompted Tata Motors to promote an electric vehicle (EV) offensive. It is a bold statement for an emerging market in which new vehicles remain relatively low-tech in comparison to markets such as Europe, the US and Japan. The expression ‘get it right in India and you are fit for the rest of the world’ may be no more true than in the case of EVs. To deploy a business model in India that is yet to flourish even in the most developed markets is no mean feat.
In 2015, the Indian government launched the FAME scheme (Faster Adoption & Manufacturing of Hybrid and Electric Vehicles) to incentivise the purchase of electrified two- and three-wheelers, passenger cars and commercial vehicles. Then in 2016, it laid out ambitious plans to go all electric by 2030, signalling a desire to dramatically cut back on fossil fuel use and reverse damaging levels of pollution. Scepticism across the board saw this strategy amended to just 30% of vehicles within the same timeframe. Local media reported that the government had ‘finally woken up’.
Early initiatives appeared promising. Tata Motors, also known as TaMo, entered a bidding war with domestic competitor Mahindra over a contract to supply EVs to government officials. In November 2017, TaMo announced it had bagged a contract to supply up to 10,000 EVs to the Energy Efficiency Services (EESL), along with Mahindra. “As of now, we will be selling 6,500 to 7,000 units and if the other company (Mahindra) opts out, we will lap up the rest of the order as well,” noted Tata’s Butschek at the time.
The contract outlined that such EVs must have a range of 130km (80 miles) on a full charge, the ability to fully recharge in six hours and a ‘fast charge’ option of 90 minutes. The vehicles were to be supplied in phases of 500 vehicles at a time, with the first delivery deadline set for 30 November 2017. In June 2018, it was reported that many government officials had refused to use the vehicles, alleging that real-world driving range was closer to 80km on a single charge. Only 150 or so EVs had been procured by this point, according to the state body, which cited teething pains related to charging infrastructure and user scepticism of the technology. Tata strongly refuted these claims, noting: “We have not heard range as a major concern.”
Previously in March 2018, the Union Minister of State Power and New & Renewable Energy had launched the National E-Mobility Programme, which aims to stimulate the ‘entire e-mobility ecosystem’. Automakers, charging infrastructure companies, fleet operators, service providers and various other players would now be taken into account, and would be supported by continued procurement of EVs from the EESL agency. More recently, the current administration has held strong on its intentions to transition India toward EVs. In January, import duties were cut to just 10% for ‘unassembled’ EVs brought into the country, with potential job creation and stimulation of the EV market deemed attractive. Complete EVs will see a 25% import duty by comparison. Amid the backdrop of looming national elections, in February 2019 the government presented an interim budget for the 2019-2020 financial year. Speaking at the announcement, Piyush Goyal, Interim Finance Minister, spoke of how India will “lead the world in the transport revolution through electric vehicles.”
The second phase of the FAME programme—dubbed FAME 2—was expected to bring further subsidies for EVs and also, to a lesser degree, for charging infrastructure. However, plans were quashed after a seemingly last-minute about-turn. “FAME 1 was purely focussed on the OEMs, with clear subsidies provided for mild hybrid solutions up to EVs. The new scheme was close to approval with the same approach, but all of a sudden the government stopped it,” Butschek explained.
The turnaround came in September 2018 following the MOVE Summit held in New Delhi—a “high calibre event” according to Butschek.
“We all expected that the government would announce FAME 2, but Prime Minister Modi said he had certain question marks over what had been discussed so far, and would like to refine his opinion in order to really accelerate the adaptation to electrification. Afterwards, we learned that FAME 2 will not just incentivise vehicles, but also infrastructure and the localisation of EV-specific components, such as batteries,” he continued. “Today, the battery is the single largest cost proposition of an EV, and we either have to source it from South Korea or China. To really accelerate developments, much can be done with the money that goes into import duties from batteries, as part of a concerted effort between the government and the industry.”
Playing a greater part
Speaking to M:bility from the tranquil Tata Motors Lake House, a picturesque site populated by lush greenery, exotic birds and water features, Butschek explained how Tata Motors aims to lead the EV revolution in India. A far cry from the hustle and bustle of the industrial belt in which it sits, the location is a stark reminder of what is at risk from rising pollution. Beyond the lake, towering skyscrapers are obscured by a thick haze of smog, but just a couple of hours outside of the city, the air turns from a murky grey to bright blue. If ever there was motivation to go EV, it is hidden in the smog of the industrial hotbeds of India’s megacities.
Vehicle purchase incentives alone will not be enough, and reliable and well-placed charging infrastructure could prove the most persuasive in luring fleets and consumers to EVs. Traditionally, an automaker would not have to provide fuel for its customers—be it gasoline or diesel—but could automakers become closely involved, and invested, in the development of infrastructure in order to facilitate India’s electric dream?
“Not necessarily the automaker, but you at least need to join hands with a larger set of players in order to build the ecosystem,” affirmed Butschek. “Yes, you need to think much broader, but you do not necessarily need to be the one who provides all of the services required in this ecosystem.” In Tata Motors’ case, the company plans to leverage its ties with other companies within the Tata Group, such as Tata Power. The company has already established charging stations in Mumbai, Delhi and Hyderabad in commercial, office and public locations, with thousands more planned. There was no debate as to whether Tata Power would build charging stations, continued Butschek. “It immediately came to mind. Just blankly producing electric vehicles and expecting that somebody else will develop the infrastructure is a thought process we stopped relatively early in our considerations. We need to bring momentum through discussion with the government.”
The expression ‘get it right in India and you are fit for the rest of the world’ may be no more true than in the case of EVs
Tata Motors is not the only player pushing EV alternatives for the domestic market. Alongside Mahindra are Maruti Suzuki, Toyota, Volvo Cars, Hyundai and Kia, all with solutions in the works. Butschek recognised that it will take a collective effort of the incumbent automotive industry, state and new players to meet long-term targets. “This is a race where no single front-runner can win. It needs to be inclusive, and there needs to be a clear message and direction coming from the government—all the way to players that we might not even have on our ‘players map’ today,” he said. New service offerings could be required in order to differentiate Tata Motors from its competition, he noted.
Catering to Indian needs
The signs are encouraging, and it is clear that a focus is also on creating an attractive product, and not only on pumping out EVs to meet the quota. At Tata Motors’ Pune plant, a stone’s throw from the Lake House, engineers have modified advanced testing chambers to refine the NVH qualities of its electric powertrains. A test track outside the passenger vehicle production line also subjects new models to extreme road conditions, closely mimicking Indian highways.
But however well engineered, an EV will only be as attractive as its supporting charging network. This is expected to remain a sticking point for years to come despite government support. The move to become a cashless society does bode well for the tap-and-go nature of EV charging, however, and if stations can be strategically located off-street and away from key congestion areas, India’s EV dream may eventually become a reality.
There remains the challenge of finding space to deploy dedicated charging ranks, however. In crowded megacities such as Mumbai, Pune and New Delhi, space is at a premium as streets struggle to contain the effects of rapid urbanisation. Then there is consumer spending power, which remains extremely low for many residents in even the most affluent cities. Next door to one of Mumbai’s business districts sits one of the largest hand clothes washing operations in India. Sandwiched between slums, it illustrates the vast gap between the rich and the poor, and that the price must be right for any hope of achieving an e-mobility ecosystem.
This article appeared in the Q2 2019 issue of M:bility | Magazine. Follow this link to download the full issue.