In what could give the Indian electric vehicles industry a major boost, the ministry of new and renewable energy (MNRE) yesterday announced a 20-per cent financial incentive on the ex-factory prices of electric cars and scooters sold in the country.

With the incentive, manufacturers would be able to lower the prices of their vehicles to bring them closer to the price of petroleum-fuelled vehicles.

Under the new scheme, electric vehicle manufacturers would receive financial incentives of up to 20 per cent on the ex- factory price for each electric vehicle sold in India.

The scheme however caps the amount of the incentive at Rs4,000 for low-speed electric two-wheelers, Rs5,000 for high-speed electric two-wheelers and Rs1 lakh for an electric car.

Thus the Reva electric car manufactured in Bangalore by Mahindra Reva Electric Company, which carries a price tag of Rs3.31 to Rs4.28 lakh across models, will now become cheaper by Rs66,000 to Rs 85,000.

According to Sohinder Singh Gill, director, Society of Manufacturers of Electric Vehicles (SMEV), and chief executive officer Hero Electric, though there were moments of despair and dejection when it took longer than what the society thought, they were glad when minister for non-renewable energy Farooq Abdullah finally cleared the scheme.

He added the incentive scheme could act like a life-saving drug for the EV industry, which has been stagnating since the last one year and it would be particularly beneficial for the electric two-wheeler and small car category.

According to Gill, the scheme laid down stringent criteria like a minimum of 30 per cent indigenous content to ensure that only genuine manufacturers availed the benefits. Additionally, the manufacturers would need to operate a sizable operation in retail and after-sales service outlets as also a multi-point check system for accounting the real retail sale.

The scheme would be operational for the remaining part of the current fiscal 2010-11 and also continue into the next fiscal.

V U Giri, secretary general, SMEV said the scheme would definitely provide the much needed impetus to the industry.

Electric vehicle use is being encouraged in many countries across the world most notably in countries like China where incentives have proved effective in stimulating a massive demand for the vehicles.

The Delhi government also operated an incentive scheme that has led to healthy growth in volumes with more than 40,000 electric scooters on the capital's roads.
Hero Electric is the market leader in the segment and hopes the incentives would enable it double its sales.

The scheme's main beneficiaies are expected to be two-wheeler manufacturers, which have a larger consumer base. According to industry experts there are currently 4-lakh electric two-wheelers on the road, with annual additions of 85,000 units. Besides Hero Electric the other big players in the market include Yo Bikes, Avon and BSA, though most of them are in the red.

The sole electric car maker in India, Mahindra Reva, has total sales of 3,700 units since launch in July 2001, of which 50 per cent are in the domestic market. The company's electric offering, the REVAi is currently available at ex-factory between Rs3.5 and Rs4 lakh.

According to R Chandramouli, COO of Mahindra-Reva, the company expected multi-fold sales growth and would pass on the entire benefit to the customers.

Other players including car market leader, Maruti Suzuki and General Motors have also been working on electric vehicle technology.