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China’s pride. India’s envy.

China is setting its sights on enormous opportunities for the export of EVs. Indian leadership doesn’t seem to be fired equally with an urge to leapfrog into the EV technology and fight for space for global leadership.

A friend from Japan pointed to widespread interest in Japan switching to hybrid and electric vehicles [EVs]. In Japan it has also affected the price of petrol: there has been a sharp fall from around 160 yen/litre (around Rs 100/litre) a few months ago to 110 yen/litre (around Rs 70/litre).

With the plans of several countries switching to EVs, there will be a fall in demand for petrol and diesel impacting the massive infrastructure created over time through retail outlets!

EV is attracting attention. Norway is way ahead with nearly half the vehicles sold in 2018 as EVs. Other European countries like Iceland, Sweden, Finland, and Holland also record increasing sales of EVs. But these are countries with small populations and their switch may not make much of an impact on emissions across the globe.

The most dramatic impact seems to emerge from China, which was estimated to account for more than half the global production of EVs in 2018. Chinese metros, affected most by vehicle pollution, are driven even more by its ambition to emerge a dominant player in the auto sector. In the new millennium, in line with its emergence as the second largest economy, the country has also become a large producer and consumer of automobiles. However, it is no patch on the technological prowess of the global engineering giants of Germany, Japan, and the US. The strategy of the Chinese government appears to focus on EVs to emerge the leader in this field.

Apart from its large, captive local custom, China is also setting its sights on opportunities for the export of EVs.

HUGE SUBSIDIES

The Chinese government is delineating clear policies backed by generous funding and hefty subsidies. There are a carrot and stick approach of incentives to switch to EVs and penalties for buying conventional gasoline vehicles. An estimate puts the incentives at $ 56 billion between 2016 and 2020 and the penalty at $ 10,000. Along with these were the systematic plan to set up battery recharging facilities; already 300,000 of these are estimated to be in place across China. Shenzhen in south China, considered among the major technology hubs of China, is showcased as a haven for EVs.

At Shenzhen, the entire fleet of buses runs on batteries and there are 1200 electric taxis. There is a subsidy of 20 per cent on the price of $ 29,000. The switch to electric cars appears mandatory. Impressed by the size of the market and the government’s policy backup, Tesla’s Elon Musk is setting up a manufacturing plant in Shanghai. With the ultimate capacity of a million cars, Tesla’s Model 3 will be produced in Shanghai for the Chinese market.

A GOOD SHARE OF EVS

During 2018 China’s production of vehicles was 23.5 million cars and 4.3 million commercial vehicles. Of these, 1.3 million were hybrid and full EVs. But the country has ambitious plans to switch entirely to EVs in five years. The developments in EVs in Japan, Europe, and the US will now gain momentum with the massive efforts of China to be in the vanguard.

This development will impact the century-plus-old automobile industry built on the internal combustion engine and powered by fossil fuels. Famous companies that have created custom across the globe would struggle to cope with this change. Quite many companies slow to adapt to change will fall by the wayside. There will be an attempt on the part of developed countries to export the fuel-driven passenger vehicles, old and new, to developing countries. For many developing countries there will also be the challenge of augmenting power generation capacity as also setting up the infrastructure for charging batteries.

One doesn’t witness comparable effort in India to switch to EVs. Policymakers in Delhi do not appear to be seized with the urgency of this momentous change. There have not been efforts to bring consensus among political parties on acceptable technology policies for the short and medium terms. Automobile manufacturers seem to be content demanding for tax concessions and to buy time for the switch over. Unlike China, the Indian leadership isn’t fired with an urge to leapfrog into the EV technology.

SHOULD INDIA FOLLOW THE CHINESE MODEL?

In fact, given its large market, India should catch up with the emerging new technologies. It has a well-established automobile industry with a skilled workforce equipped with the needed sophistication. However, there is a significant difference: China with its system of governance can commit billions of dollars on technology that will give her tremendous clout in global markets for automobiles over time. Importantly, China also has the resources needed for long term haul. The communist system of governance lends for firm decisions. India doesn’t have such a facility. China has committed an expenditure including massive subsidization of around Rs 4 lakh crore over the five years, 2016-20. In the Indian democratic system, a commitment of such large sums for possible long term benefits would be difficult.

INDIA’S FOCUS ON THE SERVICES SECTOR

R Seshasayee, who headed with distinction the manufacturing giant Ashok Leyland and also large companies in the IT and banking sectors, suggests focussing on leveraging the strengths of India in the services sector. Pointing to the massive success of India in the digital and information technology areas, he believes strongly that the country should focus on these areas. He also points to the difficulty in building consensus among political parties to invest large amounts on technologies and creating infrastructure in sectors that would face intense competition from countries leading in the automobile technology for decades as also from China with her vast resources.

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