Japanese car maker Honda Motor Co. Ltd plans to set up a lithium-ion battery manufacturing unit in India as it seeks to tap the emerging, potentially lucrative electric vehicle opportunity in the country.
Honda Cars India Ltd, the Indian unit, will next identify the type of electric vehicles the company would want to make locally, a person with direct knowledge of the development said on condition of anonymity.
These initiatives were discussed at a Honda India board meeting recently and a decision is imminent, the person said, declining to disclose the investment that the project would entail. The parent firm is also actively involved in devising Honda’s electric vehicle strategy for the Indian market.
The National Democratic Alliance wants only electric vehicles to ply on India’s roads by 2030 as part of its commitment to reduce greenhouse gas emissions under the global agreement on climate change, and to reduce spending on oil imports, which, according to one estimate, could double to an annual $300 billion by that year.
According to an announcement made by Honda, by 2030, electric cars will comprise 65% of the company’s overall sales. Of that, 15% will be pure electric while the rest will be hybrid, plug-in hybrid and fuel-cell-powered vehicles.
Currently, the Indian unit is Honda’s fourth largest after those in the US, China, and Japan, in terms of contribution to the group’s overall vehicle sales.
In July, Honda Motor decided to form a joint venture with Hitachi Automotive Systems Ltd to develop motors for electric vehicles. Hitachi will own a 51% stake in the joint venture company while Honda will own 49%.
“Recently, on the global front, Honda has tied up with Hitachi for electric motors and we will derive benefits from all those developments. Our India strategy has to align with Honda’s global strategy. We have been working on the electric vehicle strategy for quite some time now,” said Jnaneswar Sen, senior vice-president, Honda Cars India.
Sen refused to divulge any details about the company’s plan for electric vehicles in India. According to an industry executive who declined to be named, work has already started on the project at the research and development level. Honda’s first electric car in India may be a product based on the Brio hatchback platform, this executive said.
At the recent Tokyo Motor Show, the Japanese company showcased two electric vehicles, one each in the commuter and sports segments. It is also preparing an electric vehicle for China, to be launched next year, another one for Europe, to be launched in 2019, and one for Japan in 2020. “To participate in the EV market in India, we will have to be relevant to the market and that is why we are preparing a strategy to participate properly. We are studying the Indian laws, customer psyche along with Honda’s global strategy,” said Sen.
In February, Suzuki Motor Corp. and Toyota Motor Corp. came together to make small electric cars in India. Apart from that, Suzuki has also decided to set up a lithium-ion battery manufacturing plant with Toshiba Corp. and Denso Corp. in Gujarat.
Honda India has dropped plans to adopt hybrid vehicle technology after prices of these models rose under the goods and services tax (GST) regime implemented on 1 July. Hybrid cars attract 43% duty under GST, while electric vehicles are being taxed at 12%.
“We had started on the hybrid direction, and last October, we launched the Accord hybrid. Prices have gone up sharply after the GST implementation, hence demand has dried up. So it is back to the drawing board for us because the technology costs money, and the customer does not want to pay once the prices increased substantially,” said Sen.
Honda is the second car maker to scrap plans to sell hybrids in India after the increase in tax. Earlier this year, Toyota too stopped selling the hybrid variant of its Camry premium sedan.