(Bloomberg) -- Mahindra & Mahindra Ltd., India’s only manufacturer of electric passenger cars, said costs to produce the vehicles need to come down by about 20 percent to make prices attractive as the government looks to encourage adoption with favorable tax treatment.
The government needs to support research and development activities of suppliers to localize component manufacturing, Mahindra’s Managing Director Pawan Goenka said at a press conference in Mumbai Wednesday. The automaker imports almost half of the materials it uses in electric vehicles making them costlier, he said.
The company, which bought an electric-car maker seven years ago, is underlining the need to bring down manufacturing costs for such vehicles days after the government said it will charge a lower levy under a new goods and services tax. Prime Minister Narendra Modi has asked a group of senior ministers to lead an initiative to ensure that by 2030 almost all vehicles in India are powered by electricity as a way to curb oil imports and pollution.
“There is a viability gap,” said Goenka. “If the cost of production is lower, I see 8 percent to 10 percent penetration by electric vehicles in the country in the next four to five years, this would mean 300,000 electric vehicles coming out in an year.”
Battery prices are expected to decline by as much as 25 percent in the next three years as volumes increase, Goenka said. Batteries account for about one-third the total cost of an electric vehicle.
Mahindra Electric Mobility Ltd., a subsidiary of the automaker, aims to expand its capacity to make electric vehicles almost 10-fold to 5,000 units a month in two to three years, Goenka said without elaborating on the type of vehicles that will be produced. The company, which sells about 100 electric vehicles a year, plans to introduce a 32-seat electric bus and three-wheeled electric rickshaws in 18 months, he said.