In the last two years, India’s e-mobility sector has seen encouraging growth overall, thanks to the increased policy support by the central and state governments, announcements of schemes like the Production Linked Incentives for Advanced Cell Chemistry, and investments by the industry to build an enabling ecosystem in the country. As of January 2023, India has more than 20 lakh (2 million) electric vehicles on its roads. In 2022, the share of electric two wheelers against total two wheeler sales reached 4.05%.
As the current government prepares to announce its last budget before the general elections in 2024, the e-mobility industry has high hopes of the following supportive announcements:
Foreseeing a GST cut from 18% to 5%
The sector hopes for a GST cut from 18% to 5% on lithium-ion battery packs and cells. Given that batteries comprise 40% of an electric vehicle’s cost, this reduction in tax would help reduce the vehicle price for customers High upfront cost of EVs continues to be a key deterrent in their mass adoption, and the reduced prices from GST cuts can help increase sales. Precedent for this already exists, with the government reducing GST on electric vehicles from 12% to 5% and GST on chargers and charging stations from 18% to 5%.
Supporting Carbon Credits
Carbon trading is one of the essential elements of decarbonization. The sector is counting on the government to promote carbon credits by enacting regulations that encourage businesses to cut their carbon emissions. Firms that emit less than the government-imposed limit can trade or sell the extra credits to companies that must satisfy the limit under a cap-and-trade system. As a result, companies receive financial rewards for spending money on sustainable energy technology and lowering their carbon footprints. Companies who invest in renewable energy projects like solar or wind power will also receive carbon credits, which will help the electric vehicle sector as a whole thrive. By using these carbon credits to offset their own carbon emissions, businesses will be able to abide by legal requirements and meet their emission reduction targets. Currently, there is little understanding on how the EV industry can generate carbon credits and government intervention here could help bring more clarity.
FAME II Subsidy Program Extension
The FAME II Subsidy Program has been effective in encouraging EV adoption in India by offering incentives for the purchase of electric vehicles. The initiative, which is due to end in March 2024, is being pushed for an extension by the industry in order to continue supporting the EV market and make electric vehicles more accessible and inexpensive for customers. By extending the programme, the government may get closer to its 2030 target of having 30% of all vehicles on Indian roads be electric. This would guarantee that EVs stay accessible and inexpensive for customers.
Establishing a Standardised Battery Swapping Policy
The battery swapping industry is currently fragmented, with many players employing various battery types for various kinds of vehicles. Finding suitable charging infrastructure and connections may be challenging. The proposed battery swapping policy, currently in draft stage, holds strong promise for standardising legislation and defining the kind of battery packs, cells, size, and connectors that must be utilised. We will be able to guarantee interoperability throughout the nation and raise the security and dependability of the battery-swapping service by doing this.
Implementing Production Linked Incentive schemes
As the government has implemented a similar incentive scheme for cell manufacturers, it would be beneficial to implement a PLI scheme for battery pack manufacturers as well. Although cell manufacturing plays an important role in battery pack manufacturing, it is insufficient on its own to meet the anticipated demand for electric vehicles. A PLI scheme specifically aimed at battery pack manufacturing would be necessary to ensure sufficient capacity is available to satisfy the projected demand for EV batteries.
By encouraging local battery production, the government can also lower prices for electric vehicle manufacturers, making electric vehicles more accessible to customers. The most expensive part of an electric vehicle is the battery pack.
Overall, India's EV market has advanced significantly in recent years, but there are still a number of issues that need to be resolved. The next budget presents the government with a chance to adopt more measures to encourage the development of the sector and increase Indian customers' access to electric vehicles.
Pratik Kamdar is the co-founder of Neuron Energy, which builds, develop and markets EV Batteries, Solutions, Chargers, and other ancillary products.
