Auto parts makers wary of India’s electric vehicle push
NEW DELHI: The union government’s push for electric vehicles has made automobile parts makers, especially engine manufacturers, wary of putting in more money into their businesses with a majority of them contending that the move will alter their businesses drastically.
Auto Component Manufacturers Association of India (ACMA), a lobby group that represents auto parts makers, is conducting a study to assess the impact of such a transition on the industry. A report containing the outcome of the study will be submitted to the government in a month for further deliberations, a person with direct knowledge of the matter said, requesting anonymity.
Internal combustion engines (ICE), which are used in most cars, have more than 2,000 moving parts, while an electric vehicle has about 20, resulting in fewer breakdowns.
Among parts that will see demand dry up once electric vehicles dominate in India, are engines, transmission, aluminium castings and cylinder blocks. These will give way to an electric motor run by batteries.
Half of the $45 billion in annual revenue generated by component industry in India comes from vendors associated with the manufacturing of combustion engines and power trains.
“The government and the industry should work together to for technology agnostic roadmap for electric mobility with a timeline so that the industry is not caught unawares,” said Vinnie Mehta, director-general, ACMA.
Some of the component makers have already decided against making further investments in building capacity, two people from the industry said on condition of anonymity. The immediate trigger for this was the substantial increase in prices of hybrid vehicles after the introduction of the Goods and Services Tax (GST) that hurt sales and the long-term interest of the vendors. Taxes and cess on hybrid vehicles have risen from 28% to 43%. The automobile industry functions on a long-term investment cycles.
Currently, electric vehicle sales are low in India, rising 37.5% to 22,000 units in the year ended 31 March 2016 from 16,000 in the previous year. Only 2,000 of these were cars and other four-wheelers, according to automobile lobby group Society of Manufacturers of Electric Vehicles.
However, RC Bhargava, chairman of Maruti Suzuki India Ltd, believes that demand for ICES will continue and that should comfort component makers. “The movement towards electric vehicles will be gradual and the government has not yet set any time line. So, automotive component manufacturers should not be apprehensive.”
“I think it will take another 20-25 years for electric vehicles to flourish in India. During any disruption, the industry has to face some inconvenience but that should not stop them from making investments,” said Arvind Kapur, MD and CEO, Rico Auto.