MUMBAI (NewsRise) -- The Indian government's decision to purchase 10,000 electric cars from Tata Motors and Mahindra and Mahindra underscores New Delhi's resolve to curb rising air pollution in its cities.
The south Asian country joins China, France, Norway and the U.K. in pushing automakers to be ready with electric vehicles over the next two decades. A shift to environment-friendly cars will also boost India's energy security as the country imports more than three-fourth of its crude oil requirements. With fuel consumption growing at a scorching pace, India is set to be the fastest-growing crude-consumer in the world by 2040.
Still, New Delhi's push for green cars stumbles upon two major hurdles: lack of enough charging points and the high cost of batteries.
Last Friday, Energy Efficiency Services Ltd., or EESL, a company under India's power ministry, awarded a contract worth 11.20 billion rupees ($171 million) to Tata Motors to supply 10,000 electric cars that will replace over the next four years the fleet of petrol and diesel vehicles used by bureaucrats.
As per the tendering norms, the order will be partly shared with Mahindra, which had emerged as the second-lowest bidder for the contract, billed as the world's single-largest electric-vehicle procurement initiative. Mahindra agreed to match the lowest price quoted by Tata to supply 500 sedans in the first phase and will provide 150 cars.
Mahindra's Managing Director Pawan Goenka said Thursday the company will, however, study the commercial viability before it pursues the second phase of the contract for 9,500 sedans at the price offered by Tata Motors.
"We would be looking hard at everything once we start making these vehicles and see whether we are able to justify making a bid for the phase two," Goenka said. It's "hard to comprehend" Tata's offer which was about 230,000 rupees less than that of Mahindra, he said.
The move to purchase the electric cars comes barely four months after the government laid out a 15-year plan to electrify all vehicles by offering incentives and restricting the registration of automobiles that depend on fossil fuels. In May, a report by the federal think tank Niti Aayog suggested reducing India's energy demand by 64% and carbon emissions by 37% by 2030.
The government is expected to shortly call bids for electric three-wheelers and electric buses.
With the government's accelerated push and a faster-than-expected global drift to electric vehicles, some of the biggest auto makers in India are beginning to step up developing green vehicles while seeking to address some of the infrastructure challenges.
Goenka said Mahindra is investing as much as 6 billion rupees to expand its electric vehicle manufacturing capacity tenfold to 5,000 units a month in about one and a half years. The company is also working on batteries that will offer longer driving range, he said.
Last week, in an interview with Nikkei Asian Review, Praveer Sinha, the chief executive of Tata Power Delhi Distribution, a unit of Tata Power, India's largest private power producer, said the company is planning to set up a network of 1,000 electric-vehicle charging terminals in the national capital in five years.
Tata Motors is working on an electric version of its Nano small car. It had earlier developed an electric version of its Tiago and Bolt hatchbacks, and is working toward developing full-electric buses as well.
Mahindra, one of the earliest entrants in the electric-vehicles business through the acquisition of India's Reva Electric Car, hasn't been able to fast track its sales due to the slow pace of building charging stations.
The latest tender from the government is expected to spur the growth of India's fledgling electric vehicle industry.
"Volumes will probably grow exponentially in the electric vehicle market," said Mahindra's Goenka. "Clearly, more and more players will be coming in."
--Santanu Choudhury and Dhanya Ann Thoppil