A NITI Aayog report seeking to promote small cars and hybrids to reduce vehicular pollution has again brought the spotlight on India’s divided automobile industry.
Tata Motors Passenger Vehicles Ltd has objected to the report prepared by a government panel under NITI Aayog to promote small cars under the upcoming fuel efficiency norms, and increase the adoption of multiple-fuel vehicles and hybrids, alongside electric vehicles (EVs).
However, Toyota Kirloskar Motor Ltd, the Indian joint venture of Japan’s Toyota Corp., praised the plan for a phased electrification approach and the inclusion of biofuel powertrains as zero-emission vehicles, according to a letter reviewed by Mint.
The contrasting views mirror differences within the industry over whether to offer other cleaner or lower-emission vehicles parity with EVs, and if small cars should receive concessions under the corporate average fuel efficiency (CAFE 3) norms. While Maruti Suzuki India Ltd and Toyota seek support for a wider range of vehicles, including small cars, Tata Motors and Mahindra and Mahindra Ltd, which have invested heavily in EVs, have opposed it.
The panel, set up by think tank Niti Aayog, comprised representatives from the ministries of road transport and highways, heavy industries, petroleum and natural gas, power, railways, and shipping, along with think tanks and industry representation from the Society of Indian Automobile Manufacturers (Siam). Executives from Maruti Suzuki, Tata Motors and Mahindra and Mahindra Ltd were among industry members.
What NITI Aayog suggests
Its 10 February report, titled ‘Scenarios Towards Viksit Bharat and Net Zero’, made several recommendations to the government.
“CAFE should incentivize the adoption of light-weight, fuel-efficient, smaller entry-level cars as is increasingly the case in leading global markets, while also accounting for the lifecycle emissions benefits and carbon sequestration potential associated with sustainable biofuels," the report said.
Smaller cars are an opportunity for India because they are more affordable, especially for first-time buyers upgrading from two-wheelers, and are fuel-efficient compared to larger cars, it said.
“The opportunity lies in deliberately promoting smaller, affordable cars for these first-time buyers, which can provide significant co-benefits in terms of higher fuel efficiency, lower emissions, and reduced pressure on traffic and parking."
CAFE norms are essentially a ceiling on a carmaker’s total fleet emissions, nudging them to manufacture vehicles with better fuel efficiency and use cleaner powertrains such as hybrids, electric, and even flex-fuel.
Maruti Suzuki has sought concessions for vehicles less than 4 metres in length and with an engine capacity of up to 1200 cc under the CAFE 3 norms. However, Tata Motors and Mahindra opposed the move.
The NITI Aayog report also suggested that a phase-wise approach to achieving higher cleaner-fuel vehicle penetration should include lower-emission technologies such as CNG, hybrids, and electric vehicles.
Tata’s 'perspective differs’
Tata Motors, the country’s third-largest carmaker, said its views were not appropriately incorporated.
“Although Tata Motors is cited as a contributing expert, our engagement was limited to a single meeting. Further, the report was finalized without sharing any draft with us,” a company spokesperson told Mint in an emailed response. “Our perspective differs on some of the conclusions and recommendations made in the report and the reflection of our inputs in it.”
While the company did not specify the reasons, two executives aware of the developments said the company has objections to some of the recommendations, including promoting small cars in upcoming fuel-efficiency norms and a phase-wise approach to electrification using hybrid vehicles.
Tata Motors was not aware of the commentary on small cars, which would be included in the report, said one of the two executives quoted above. "The calls for lightweighting, and promotion of small cars has emerged as one of the major contentions as that was not properly discussed with all the members who have been named in preparation of the report.”
The second executive said more panel members are expected to raise their objections with Niti Aayog. Mint could not independently verify the names of these members.
Toyota backs ‘wider definition’
However, Toyota Kirloskar said it “wholeheartedly welcomes the recommendations of various sectoral insight reports”.
“The wider and more holistic definition of ZEV adopted by NITI Aayog promotes all green energy pathways and vehicle technologies,” the company’s country head Vikram Gulati wrote in a letter to NITI Aayog member Rajeev Gauba. NITI’s approach of leveraging biofuels in existing fossil-fuel vehicles could pave the way for decarbonisation using ethanol and compressed biogas (CBG) in the near-term, and hydrogen in the longer run, he said.
Similarly, the Indian Sugar and Bio-energy Manufacturers Association (Isma) has written to Gauba on 26 February appreciating the approach towards biofuels mentioned by the government’s think tank. The inclusion of biofuels as a means of decarbonising India’s road transport recognised India’s strengths, Isma director general Deepak Ballani said.
Both Toyota and Isma appreciated that NITI Aayog had not taken an EV-only approach, and instead identified biofuels, hybrid vehicles, and other technologies as means to decarbonise roads.
Queries emailed to Niti Aayog, Maruti Suzuki, and Mahindra remained unanswered. Toyota did not immediately respond to queries.
Japanese-owned Maruti Suzuki and Toyota have been lobbying for lower taxes, direct subsidies and the waiver of state and central fees such as registration charges. A draft of the Delhi Electric Vehicles Policy 2.0 also proposed waiver of road tax and registration fees on electric cars and hybrid cars priced up to ₹20 lakh ex-showroom.
However, Tata Motors and Mahindra have also opposed incentives for hybrids, arguing that they would hurt EV adoption.
“Incentives are most effective when they help emerging technologies reach scale and maturity—particularly those that contribute meaningfully to long-term sustainability goals of zero emissions, such as EVs,” Shailesh Chandra, managing director of Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, had earlier said in a response to Mint’s queries.
However, Maruti Suzuki has repeatedly called for an approach that takes a multi-fuel pathway rather than backing a single technology.
Rahul Bharti, senior executive officer, corporate affairs at India’s largest carmaker, cited that EV penetration in India is currently less than 3%, while even the US and Europe are at 8% and 12%, respectively.
“While all efforts are to maximize this 3%, we cannot say we will do nothing about the balance 97%,” Bharti earlier told Mint. The purpose and effect of strong hybrids electric vehicles (SHEV) is to replace pure diesel or petrol vehicles because they increase energy efficiency by 36-44% and reduce CO2 by 25-31% over petrol vehicles, he said. SHEV combine an internal combustion engine (ICE) and an electric motor.
“Data shows wherever SHEV incentives have been given, EV sales have not reduced but increased,” he said. “We want both EV and SHEV sales to grow.”