2 min read.Updated: 29 Jul 2021, 01:32 AM ISTLivemint
Ola’s founder has opposed Tesla’s call for India to lower EV import barriers. Local production is what he wants. We do, too. But that needs the catalyst of exposure to top-level competition
That a market open to competition from all sources tends to reward both consumers and producers better than a barred one should have been almost axiomatic by now, thanks to three decades of liberalization and our experience thereof. Even the so-called Bombay Club of industrialists, which had briefly grumbled about exposure to foreign rivalry back in 1991, largely came around to view it as a win-win. Today, our startup boom and herd of unicorns testify not just to the roused spirit of enterprise in India, but also confidence in outdoing others in domains that span the globe. So it strikes curiosity when entrepreneurs of the internet age express qualms over dropping import barriers. On Tuesday, Ola Cabs’ founder and chief executive Bhavish Aggarwal opposed a suggestion made by Tesla that we let electric vehicles (EVs) be shipped in with an import-duty charge of just 40% on its landed value, a proposal that was seconded by Hyundai Motor India, the country’s second-largest carmaker, which said it would help our EV market grow. “Strongly disagree with both," said Ola’s founder on Twitter. “Let’s have confidence in our ability to build indigenously and also attract global OEMs to build in India, not just import."
As of now, we levy an import tariff of 100% on ready-to-drive cars valued over $40,000, 60% on the rest, and 100% on ready-to-use scooters. While Tesla made a pro-climate pitch, with its chief Elon Musk pointing out that we had the world’s highest duties on cars among large countries, its interest in a special drop for EVs is clear. Since demand here for its expensive electric cars is hard to forecast, it would suit it well to test-launch a model or two via shipments before setting up a local assembly line. As it reportedly argued, a barrier of 40% will still serve as an incentive for it to crank out its vehicles locally (should its trial entry go well, presumably). Aggarwal’s ‘Make in India’ emphasis chimes loudly with Ola’s electric scooter venture, for which it has a 10-million-unit facility coming up in Tamil Nadu. As he said, he aims to export these two-wheeled EVs to the UK, EU, Latin America and other destinations. If this is his plan, then Ola’s products need to be globally competitive from the very get go, achieved best not behind tariff walls of self-reliance, but by testing its edge on value-for-money over all other contestants in a well contested arena. Given that Ola is out to play a volume game, its economies of scale should keep costs sufficiently low to compete with EV imports from China (or elsewhere) with 40% extra slapped on at ports. If not, its learnings should push it to strive in that direction.
Regardless of specific cases, an import duty drop could boost the competitive intensity of our EV market in general, lending it the frisson needed to emerge swiftly, as companies jostle to beat fossil fuel-guzzlers as much as one another, a process likely to drive efficiency among our local manufacturers. Right now, private modes of conveyance that burn hydrocarbon fuels like petrol and diesel are cheaper. This must change. To hasten switch-overs, the Centre has set up policy props for EVs. Yet, how well EVs mitigate climate change will depend on how carbon-free our electricity supply is. It may take a decade’s shift towards clean power generation before EVs on our streets make a difference beyond reducing fumes. By then, EVs need to account for a sizeable share of all wheels on tarmac. Let rip-roaring rivalry play the catalyst.