EVs at the cusp of next wave of growth, thanks to the Govt’s Development Agenda

Under the FAME II scheme, the government has approved a corpus of Rs 10,000. In addition to this, the GST council has also recently announced the reduction of the GST rate on electric vehicles from 12% to 5% while for the EV chargers it has come down to 18% to 5%.

By: | Updated: August 22, 2019 4:06 PM

The electric vehicle (EV) market in India has been riding a wave of growth in recent times. The ambitious goals of EV manufacturers have made the industry ripe for disruption. This has been complemented by multiple favourable initiatives by the government.

In her latest Union Budget address, Finance Minister Nirmala Sitharaman announced a tax benefit on the purchase of EVs, giving customers purchasing electric vehicles the option of availing a tax benefit of INR 1.5 lakh on the interest paid on their vehicle loan. A corpus of INR 10,000 crore has also been approved under the FAME II scheme while, recently, the GST Council has announced the reduction of the GST rate on EVs from 12% to 5% and that on EV chargers from 18% to 5%.

The impact of recent government initiatives on the Indian EV ecosystem

These initiatives are more than enough reason to believe that the government is actively looking to promote the sustainable mobility ecosystem and increase the number of EVs on Indian roads. They will go a long way in incentivizing customers to opt for these sustainable modes of transport – and to nurture a more localized EV manufacturing hub in India.

With EVs becoming more affordable, consumer demand is bound to increase substantially. Leading manufacturers in the country will ramp up production to meet market demand. This will lead to component manufacturers see merit in investing in the sector. Not only will this stimulate economic activity in EV manufacturing hubs across the country, but will also create lucrative job opportunities for the workforce in these regions.

Can the industry’s growth be accelerated further?

However, there remain certain roadblocks which need to be addressed before this high-potential sector can achieve its full potential. One of the major factors hindering the industry is the lack of proper infrastructure to support the growing number of EVs on the road. While NITI Aayog has proposed 100% electric mobility in the country by 2030, no tangible plans have been made regarding the establishment of more power stations to keep these vehicles running smoothly.

Currently, there are around 222 charging stations with 353 charging points for about 187,802 electric vehicles in the country. Needless to say, we need a lot more.

The lack of a proper infrastructure will only fuel the range anxiety of customers and perpetuate a reluctance towards the purchase of EVs. Since charging stations are few and far in between, users will remain unsure of reaching their destination and being stranded, with no chances of charging up. The government and car manufacturers will thus need to work together to create a viable ecosystem for EV adoption by pushing for the creation of more fast-charging power stations.

Another challenge being faced by manufacturers is related to the high cost of the Lithium-Ion batteries that are used in most EVs. Since these batteries are usually imported from foreign markets such as China and the US, they are the biggest cost factor in EV manufacturing, accounting for around 70% to the total cost. Until battery production is not localized, manufacturers will not be able to provide EVs at truly competitive and cost-effective price points.

On the bright side, the Union Cabinet has approved the setting up of a National Mission on Transformative Mobility and Battery Storage to support the establishment of large-scale, export-competitive battery manufacturing plants in India. Announced in March 2019, this decision will help manufacturers localize production across the entire EV value chain, considerably bringing down the cost for end-users.

A few other steps that the government can take to promote the adoption of EVs is to waive off-road tax and toll charges for electric vehicles, reduce power tariffs for charging EVs and offer free parking to EV users. The government should also introduce sector-specific subsidies to make EVs more accessible, affordable, and feasible for the masses. Just like GST reduction, these steps would make EV purchase a more attractive proposition for Indians, thus encouraging large-scale production of these vehicles.

The growth of any new sector is often dependent on the incentives that come with its adoption. By changing policies, promising reduced costs and providing tax benefits to customers, the government will undoubtedly motivate customers to make the switch to EVs. With continued efforts from the government, automakers and component manufacturers, EV manufacturing and subsequent adoption are bound to skyrocket in the years to come.

Author: Pankaj Tiwari is the India Business Head at Avan Motors India. He possesses two decades of experience in sales and marketing in the two-wheeler automotive space, having worked with and held leadership positions in companies like Yamaha, Kinetic, Suzuki, and Mahindra Electric in India and abroad.

Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or any employees.

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