India Pushing Auto Firms to Go Green

India’s most influential government think-tank has recommended lowering taxes and interest rates for loans on electric vehicles, while capping sales of conventional cars, signaling a dramatic shift in policy in one of the world’s fastest growing auto markets.

A draft of the 90-page blueprint, seen by Reuters, also suggests the government opens a battery plant by the end of 2018 and uses tax revenues from the sale of gasoline and diesel vehicles to set up charging stations for electric vehicles.

The recommendations in a draft report by Niti Aayog, the planning body headed by Prime Minister Narendra Modi, are aimed at electrifying all vehicles in the country by 2032 and will likely shape a new mobility policy, said government and industry sources.

The report’s focus solely on electric vehicles marks a shift from the current policy that incentivizes both hybrid vehicles - which combine fossil fuel and electric power - and electric cars, and is worrying some automakers.

“India’s potential to create a new mobility paradigm that is shared, electric and connected could have a significant impact domestically and globally,” said a draft version of the report, titled Transformative Mobility Solutions for India, which will be made public this week.

Officials acknowledge the blueprint faces challenges. High battery costs would push up car prices and a lack of charging stations and other infrastructure means car makers, who have been consulted on the proposals ahead of publication, would hesitate to make the necessary investment in the technology.

 Policy Shift

India, in 2015, launched a scheme called Faster Adoption and Manufacturing of Hybrid and Electric Vehicles under which it offered incentives for clean fuel technology cars to boost their sales to up to 7 million vehicles by 2020.

Despite incentives as high as 140,000 rupees (€2,500) on some cars, the scheme has made little progress with the sales of electric and hybrid cars making up only a fraction of the 3 million passenger vehicles sold in India in 2016.

The scheme, which expired on March 31, has now been extended by six months while future policy is worked out, two government officials said. Lack of clarity on policy risks delaying investment in the auto sector, one official added.

The new Niti Aayog report, co-produced with US consultancy Rocky Mountain Institute, outlines a 15-year plan, broken into three phases starting in 2017.

“Limit registration of conventional vehicles through public lotteries and complement that with preferential registration for electric vehicles, similar to that in China,” the report said, in one of its most radical proposals.