Government Aid to Entice Carmakers to Go Green

The worsening state of air quality in India has become a reason for concern for many, especially in the national capital. As a result, the government has been trying its utmost to put in place certain temporary schemes to help improve the condition of the air that we breathe. Schemes like the odd-even car plan, temporary banning of diesel engines above 2,000cc, and pushing forwards of the date of implementation of Bharat Stage VI emissions norms have all been ushered into play in rapid succession. Additionally, the government is also looking to entice carmakers into making more Eco-friendly and fuel efficient cars like fully electric vehicles (EVs) and plug-in hybrids, by offering great incentives.

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As a result, India is likely to see an influx of cheaper and more affordable EVs and hybrids over the next few years of which many are likely to be showcased at the upcoming Delhi Auto Expo 2016 which is set to begin on Wednesday. Indian carmakers like Tata and Mahindra have already been teasing their future green products and are likely to be joined by other international firms likes Toyota. India is one of the fastest growing auto markets in the world but the high cost of important cars and parts into the country has not allowed hybrid technology to grow substantially. In the current market, EVs and hybrid cars together comprise just a tiny sliver of the auto industry. Nevertheless, the entire country finally seems to have woken up to try and fix the pollution problem.

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The government aid for green cars could be up to the tune of $2,000 per vehicle which could potentially help boost green vehicles to nearly a third of a 5 million car market by 2020, says IHS Automotive. In the current market, diesel technology has taken the industry by storm as it offers superior mileage without the loss in performance. What further ads to the appeal of these new and improved diesel models is the relatively low cost of diesel as a fuel.

"It is not enough to just introduce new technology in India, you have to make it relevant for the market and the buyers," said C.V. Raman, head of engineering at Maruti Suzuki India Ltd, India's top-selling carmaker. The high cost of importing parts to assemble fully hybrid vehicles in India remains a big stumbling block but the government's incentive schemes should help carmakers at least consider semi-hybrid technologies as a plausible long term solution.

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The government introduced the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Cars) scheme last year that offers concessions of up to Rs 1.38 lakh on the sale of such vehicles. The scheme was initially presented before the New Delhi court with plans to offer it for 2 years but is likely to be extended till 2020.

However despite such provisions, many car companies are yet to be convinced of the demand that such cars will generate. Hence, the upcoming Auto Expo is expected to be filled with thirsty SUVs as the segment is currently seeing a huge boom. Of the big name manufacturers, Toyota is one of the few who is expected to increase its hybrid offerings in India with plans to launch hybrid versions of future models as well as current models.

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"Our strategy is to go for hybridisation," said Naomi Ishii, head of Toyota's India unit as mentioned in a report by Reuters. Although a specific timeline has not yet been revealed, the Japanese carmaker has stated that it will first bring hybrid technology for more premium models before entering the mass segment because of the high import costs of various required components. Indian carmakers Maruti Suzuki and Mahindra have already introduced mild-hybrid systems on their vehicles which are far less expensive than full hybrid tech and still help improve fuel efficiency and reduce emissions.

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