In his strongest comments yet against the government's plan to push India's automobile industry to adopt electronic vehicles (EVs), Rajiv Bajaj, MD of Bajaj Auto, said the transition to EVs has to be in a phased manner and that a complete ban on internal combustion engines is not a solution.
Appreciating the government's push in the EV space, Bajaj said this should help generate consumer interest and demand for EVs at a time when the auto industry is undergoing a difficult phase.
Here are the edited excerpts of his interview with CNBC-TV18:
Q: How do you see all these incentives which are aimed towards promoting electric vehicles? How do you see these provisions?
A: Personably, in principle, my stand has always been that I am not in favour of incentives because I feel that any technology or any product has to be sustainable. However, I take the point that in some cases one need some support for liftoff, I understand that. However, I am always cautious because I have learned to experience that one must not be too easily seduced by these incentives because incentives that come today can go just as easily tomorrow. So, from the point of view of the manufacturer or the entrepreneur, I would say you must still be firmly fixated on delivering a sustainable solution. Having said that in terms of urban pollution, electric vehicles are increasingly becoming an attractive option and it’s a good idea in that sense for the government to enable all of us to move in that direction.
Q: To what extent do you feel that removal of import duty on lithium‐ion batteries, exemption of certain EV components from custom duty, 1.5 lakh tax reduction on EV loans and reduction in GST reduce the cost of a two-wheeler electric vehicle?
A: These are very significant reductions. I have not done the exact math but if you compare just GST 28 versus 5 percent for IC engines and EVs respectively, I mean 23 percent reduction is a whopping sum. The Faster Adoption and Manufacturing of Electric Vehicles (FAME) benefit of Rs 10,000 per kw is a large sum of money and some of the reductions in the import duties will also help. So, I would say the government has really put its best foot forward in offering a very significant package to those who are interested in putting out good quality electric vehicles because we must make the point that these are all benefits that are available, particularly the FAME benefit, to those who are going to make electric vehicles that meet certain quality standards, certain minimum standards in terms of various performance parameters, which is a good thing because I do not think we want our country and our roads to become a dumping ground for cheap imports.
Q: Very often it is said by two-wheeler manufacturers and OEMs that we should not be putting the cart before the horse. Do you think that the FAME-II scheme that has been envisaged for electric vehicles till 2022 coupled with all these incentives that are there in the budget, will this generate enough consumer interest and consumer demand for electric vehicles?
A: The answer is in two parts. One, if this doesn’t generate enough interest I don’t know what will because I cannot imagine any government in the world being able to afford a greater subsidy or incentive than this in terms of rupees per vehicle. I think they have been quite generous with this and now it is up to the manufacturers to respond by leveraging this to put products into the market place. So from this point of view, it’s a positive development.
However, you spoke of 2022 or has been announced 2023 and 2025 essentially there is a draft notification that suggests that perhaps all three-wheeler and most two-wheeler should become electric and that is to be achieved also by banning internal combustion (IC) engine scooters, motorcycles and three-wheeler and that I am completely, 110 percent opposed to because I do not believe that these two things should be coupled in this manner that in order to encourage or promote one thing you have to artificially bury another thing which is world-class. This I don’t get it at all.
Q: As NITI Aayog and Society of Indian Automobile Manufacturers (SIAM) are working out this transition plan, what according to you would be the best way forward?
A: That is not for me to say as an individual because this is something that SIAM will first deliberate internally. I can tell you, every member of SIAM is developing electric vehicles and I am sure that all of us will be in the market with our own electric vehicles in the very near future by which I mean next 12 months or less. So SIAM is all for electric vehicles, SIAM is all for supporting the incentives or all the subsidies that are associated with them. You will not hear and you would not have heard a single word of protest or resistance from SIAM because we are all breathing the same air and we have the same interest at heart. Therefore, keeping that in mind, SIAM will come up with what it believes is the most logical and reasoned way forward in doing all this and then we will submit our suggestion because that’s the most we can do to NITI Aayog for their consideration.
Q: Do you feel it should be a phased transition?
A: I would say, by definition, it has to be phased because when you are making 25 million two-wheelers and three-wheeler, it is not a switch that you can switch on or off overnight. This is not a
chai ka stall that you can open and shut overnight.
There is a huge supply chain involved and therefore one has to be very pragmatic. If I may say so, a good piece of advice comes from Bill Gates who says that most people overestimate what they can achieve in one year and underestimate what they can achieve in ten years. So I think right now from what I have understood of what the government wants to do; I think, if I may say so, they are guilty of overestimating what can be done in the immediate future and they are underestimating what can be done in, somewhat more, medium-term future like ten years. I think we need to be a little more pragmatic about this.
Q: What about Bajaj Auto’s own plans to launch electric vehicles (EVs)? You said that most original equipment manufacturer (OEMs) would come up with their own launches, electric vehicles in the next 12 months. What about the kind of investments that Bajaj Auto is making EVs and what about the first launch?
A: I have said this consistently, I believe for the last three or four years that we have been doing our own work both in the two-wheeler space and in the three-wheeler space, both are important for us. I could say the three-wheeler a little more because we have very large stakes there being the world’s largest three-wheeler manufacturer, but the two-wheeler space is also obviously very important to us especially the motorcycle space.
I have always believed that just before the BS-VI norms come into play in April 2020, it would be a good time for electric vehicles to make their way to market because people will be very sensitive to the subject of environment and green at that time and also current vehicles will get much more expensive with technology that enable them to comply with BS-VI norms. So I have always believed that would be a good time just before April 2020. Frankly, we are working towards that but sometime before them, we should be in the market with our offerings.
Q: Ahead of the BS-VI implementation in the months ahead we can expect electric vehicles from Bajaj Auto both in the two and three-wheeler space?
Q: Final question would be about the overall state of the industry, we have seen two-wheeler sales declining 5.9 percent in the month of June for Bajaj Auto. The sales have been positive overall but domestic sales have seen 2 percent negative growth. How do you see this industry going forward and what would your own strategy be to deal with the slowdown?
A: First of all one should not judge anything by a month, if you look at Bajaj Auto’s performance; in the last financial year we were way ahead of the industry in domestic market and even if you look at it for the first quarter of this year April-June, I don’t have the numbers at the back of my hand, but I know we have demonstrated growth in motorcycles and again growth that is ahead of industry and we have been giving share. So Bajaj Auto continues to do well. I believe this is due to a very smart strategy that we put in place around this time last year and that is going to get even better in my view because we already have 2 new smart products in the market place now – the new Platina H and the CT110 and we have another mid-segment product due next month.So, from Bajaj Auto’s point of view, I am not concerned at all. I think we will continue to do well but yes, all said and done we are currently part of an industry that is experiencing great difficulty in terms of demand. Nobody knows exactly why. Everybody knows what the half a dozen factors maybe but nobody knows exactly what has what weightage, nobody knows how this can be resolved, by when things will settle and we all know that we are also concerned with what will happen when the next step of BS-VI comes into place and prices go up even further because we have seen only 6 months back when insurance cost went up or recently when anti-lock braking system (ABS), combined braking system (CBS) came into play what happened. So, I think very volatile, very uncertain, very difficult times where one has to just stay the course and wait it out.