On 15 May, a sea of black suits parted to let Tarun Mehta reach the stage. Mehta, the wunderkind of electric mobility, is the co-founder of Ather Energy, a manufacturer of high-end electric scooters. He’s dressed in blue jeans, a burst of colour among the monochrome suits. Sitting squarely in the middle, Mehta’s found his pulpit at an industry conference of auto manufacturers and component makers being held in Delhi. His message, to an ageing auto industry turning electric, is one of agility in the face of dramatic change:

“The current tech for an EV (electric vehicle) will be obsolete in the next 18 months. That’s how quickly it’s changing. Think modular. Don’t marry long-term investment with only one kind of technology,” he says.

The audience of suits shake their heads and mumble in unison, “This is not how things work in the auto industry.”

It is a fortuitous snapshot of a 67-year-old auto industry in complete flux. An industry that is tottering in the face of an 18-year low in sales across categories of private and commercial vehicles. Domestic car sales were down by almost 26% in May 2018. But this unprecedented slowdown is merely the backdrop to a much larger battle.

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On one end, new blood in the EV sector threatens to wipe out the ageing internal combustion engine (IC-engine). On the other, trigger-happy, impatient government machinery has put forth stringent policy mandates to hasten the auto industry’s introduction of EVs into the mass market.

None of this augurs well for OEMs (original equipment manufacturers) and component manufacturers (colloquially called tier-1, tier-2 and tier-3 companies). These businesses have already committed huge investments towards upgrading their IC-engines to match Bharat Stage VI (BS VI) emission norms, which India drafted in 2016. For instance, Maruti Suzuki has invested a whopping Rs 9,000 crore ($1.3 billion) in a new Gujarat-based manufacturing plant. The sudden leapfrog from BS VI emission norms to electric would mean a complete overhaul of a product line already reeling from slowing demand. 

“Not just Maruti, but the associated component manufacturers would have made significant investments to service Maruti’s volume. If production numbers reduce, this would adversely impact these tier-1 and tier-2 companies,” says a consultant for the automotive industry. He wished not to be identified since he consults with several auto manufacturers.

Rapid policy diktats have only muddied the waters. The second phase of the FAME (Faster Adoption and Manufacturing of Electric (& Hybrid) Vehicles) scheme was meant to help make the auto industry’s switch to electric less painful. Indeed, it was welcomed for its generous Rs 9,000 crore ($1.3 billion) subsidy layout (Rs 1,000 crore of which was for setting up charging infrastructure).

AUTHOR

Olina Banerji

Based in Delhi, Olina writes about mega-trends in urban mobility, education, skilling and the environment, with a focus on how institutions and innovations can help cities grow sustainably. She is a graduate of the London School of Economics, and has worked previously with India Today and global non-profit Ashoka.

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