Electric vehicle makers seek 25% govt subsidy

Electric vehicle makers seek 25% govt subsidy
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First Published: Mon, May 04 2009. 12 46 AM IST

Helping hand: Electric scooters on display at a showroom in Faridabad. The ministry of new and renewable energy is planning to help the electric vehicle industry set up manufacturing facilities. Rajku
Helping hand: Electric scooters on display at a showroom in Faridabad. The ministry of new and renewable energy is planning to help the electric vehicle industry set up manufacturing facilities. Rajku
Updated: Mon, May 04 2009. 05 17 PM IST
New Delhi: After getting off to a promising start, electric vehicle makers are finding it increasingly difficult to expand sales in a slowing economy and have approached the government for a helping hand.
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Sales of electric vehicles, primarily scooters, which had been growing at a healthy clip last year, have stagnated in recent months. In the absence of incentives from the government, such as a reduction in duties and help in setting up charging stations, companies such as Hero Electric, Electrotherm India Ltd and Reva Electric Car Co. are finding it difficult to boost sales.
Cuts in petrol prices announced in December and February have also acted as a dampener by narrowing the incentive in shifting to electric vehicles.
“This (industry) has to be seeded by the government by incentivizing people to buy our products,” says Sohinder Gill, chief executive of Hero Electric, the Hero Group arm that sells electric two-wheelers.
He points to the $7,500 (around Rs3.76 lakh) rebate announced recently by the US government for buyers of electric cars. The UK government has made a similar announcement with the aim of moving customers away from fossil fuel-run vehicles.
Here, the domestic industry has asked the government to “give at least 25% subsidy on purchase of all electric vehicles for two-three years so as to seed the market and to ensure that the concept sinks in (in) the minds of the consumer.”
Helping hand: Electric scooters on display at a showroom in Faridabad. The ministry of new and renewable energy is planning to help the electric vehicle industry set up manufacturing facilities. Rajkumar / Mint
There are as yet no official figures on the number of electric vehicles sold in the country as the industry has begun to organize itself recently. In September, the Society of Manufacturers of Electric Vehicles was incorporated, and it estimates two-wheeler makers and importers sold about 100,000 units last year. This is about one-tenth of the total scooters sold.
Electric car maker Reva sold 600 cars last fiscal. Reva’s sales were little changed, but the company hopes to receive a boost from exports this year. Reva, which has been selling cars in India for the last seven years, has been unable to gain traction due to their high cost. The average cost of its cars is Rs4 lakh and Girish M. Rakhe, president of Reva, estimates that the company has to pay Rs35,000-40,000 extra in excise. This needs to be corrected, he says.
Another stumbling block has been the lack of charging stations in cities. It costs about Rs50,000 to set one up; Rs2 lakh if realty costs are included. As a result, electric vehicle makers have so far only been able to target college students and housewives. They have, as yet, not been able to make a dent among office-going commuters.
Value added tax (VAT) is another point of contention. The industry has asked this to be reduced to 4% from 12.5%. In states such as Madhya Pradesh, Kerala, Gujarat and West Bengal where VAT rates have been brought down to 4% sales have increased substantially, said Gill.
Delhi has also subsidized sales by giving buyers a 15% rebate on the price of the vehicle. The vast majority of the electric scooters sold in India last year were imported. The industry contends that low volumes and the present duty structure make manufacturing unviable. Imported completely built-up units are charged 14.7% whereas the duty for parts is 24.2%.
In the months to come, the industry could get some relief. An official at the ministry of new and renewable energy, who declined to be named, said it was planning to help the industry set up manufacturing facilities. A policy will be announced after the elections, he said, declining more details.
samar.s@livemint.com
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First Published: Mon, May 04 2009. 12 46 AM IST