Union Budget 2019 India: To make India as an EV manufacturing hub, decision on incentivizing EV manufacturing by extending benefits under Section 35AD(1) is a move in the right direction.
Budget 2019 India: Union Budget 2019 has been presented and there are a lot of announcements for the auto sector. The Indian auto market has been on a decline and has a lot of challenges ahead. With the union budget now announced, the electric vehicle manufacturers breathe a sigh of relief with GST benefits and custom duty exemptions for certain EV components. Here is what the industry had to say
Sohinder Gill, Director General, Society of Manufacturers of Electric Vehicles (SMEV):
“The announcements on Electric Vehicles (EVs) in the union budget 2019-2020 bring cheers to both consumers as well as e-vehicle manufacturers.
To make India as an EV manufacturing hub, decision on incentivizing EV manufacturing by extending benefits under Section 35AD(1) is a move in the right direction. It will help in the creation of a local manufacturing base and encourage component manufacturers to invest in the sector. Provision of additional income tax deduction of an amount of up to 1.5 Lakh rupees on purchase of EVs would encourage customers to opt for EVs.
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Additionally, bringing down custom duty on lithium-ion cells to nil would further cut down the cost of batteries and help local battery manufacturers to scale-up the business. The EV industry has witnessed 100% growth in the FY 18-19, and with these key measures announced today, we anticipate a brighter future ahead for the industry.”
Naveen Munjal, Managing Director of Hero Electric
“The electric vehicle industry needed a substantial boost & support from the government and we welcome the government’s recommendation of reduction of GST on EVs from 12% to 5%. In addition to this, income tax reduction of up to Rs 1.5 lakh on the interest paid on EV loans is an extremely positive move which will encourage customers to make a switch from ICE vehicles to EVs. Reduction in customs duty on lithium-ion cells would help local component manufacturers in scaling up the production thereby further reducing the overall upfront cost of electric vehicles in India. Government’s continued emphasis on FAME II initiative and strengthening of EV infrastructure will definitely encourage manufacturers to further invest in the ecosystem thereby lowering both crude oil imports and air pollution leading to a cleaner and greener future.
We are confident that such directives will boost up the rate of EV adoption in the country and will act as a catalyst in the government’s aim of faster adoption of electric vehicles and a higher level of localization under the ‘Make In India’ initiative.”
Shailesh Chandra, President – Electric Mobility Business and Corporate Strategy, Tata Motors Ltd
“The incentives announced today by the Finance Minister, in terms of, additional interventions and steps to support the EV adoption, reinforces a strong commitment by the government to steer electrification on a faster trajectory. The proposal to lower the GST rate for EVs to 5% and reduction in duties of EV components, which we are studying, is a welcome step. It will help in further narrowing down the cost of ownership gap against ICE vehicles. Additionally, private buyers, who were earlier not considered for a subsidy through FAME 2, will now have a reason to seriously consider an EV with the tax exemption of up to Rs. 1.5 lacs. Tata Motors has been proactively participating in EV ecosystem creation, aligned to government’s vision of achieving a high EV penetration by 2030. Today’s announcement further emboldens our resolve and we will further accelerate our efforts.”
Chetan Maini, Co-Founder and Vice-Chairman, SUN Mobility
“The decision to reduce GST on EVs from 12% to 5% is a reassuring move by the Government and furthers the country’s commitment to transition to an EV future. As an EV energy infrastructure provider, we welcome the move; however it would be more beneficial for the end-user, if the Government also focus on reducing GST on charging / battery swapping services from 18% to 5% (same as that for public transport services)” said Chetan Maini, Co-Founder and Vice-Chairman, SUN Mobility.
On the impact of the GST cut on the prices of vehicles, he added, “This GST cut on electric vehicles will help in reducing the cost difference between ICE and EVs especially in 3-wheeler segment where the differential will now be 23% (28% – 5%). This is a big boost to EV makers to be able to create more affordable EVs.”
Naga Satyam, Executive Director, Olectra Greentech:
“There were doubts in the minds of investors about the intentions of the Government in terms of the EV industry. But the announcements made in the current year’s budget must have definitely quelled their doubts. Also, with this budget the Government has made it sufficiently clear that EV manufacturing is the next big thing in its vision. Now, it is the responsibility of the industry to rise to the expectations of the Government and work towards more localization.”
Jeetender Sharma, Founder & Managing Director, Okinawa Autotech
“The Union Budget 2019-20 is very progressive and growth-oriented. The Finance Minister’s emphasis on FAME II initiative and pushing EV infrastructure will help in attracting investment for local manufacture of components which will further strengthen ‘Make in India’ initiative and ensure clean and green energy over time. Positive moves like reduction of GST to 5 percent from 12 percent on Electric Vehicles and Tax benefits up to Rs 1.5 lakh on EV Loan will make EVs affordable for consumers. With emphasis on offering upfront incentive on purchase of EVs and the push to power availability, we expect more buyers of two-wheeler vehicles to shift preference to electric two-wheelers which in turn will help the EV industry’s growth. With Rs 80,250 crore dedicated to building 125,00 km of roads in the next 5 years, the budget has also heavily focused on construction and development of roads which will be another boost towards demand from rural economy. This will positively impact the two-wheeler industry in rural sector and increase pick-up of Electric Two-Wheelers. The Government’s mission to bring e-mobility revolution to India by 2030 is a truly commendable and will provide the much needed impetus to the industry. As the government gears up for clean and green mobility, we are hopeful that India will emerge as one of the leading manufacturing hubs for electric vehicles.”
Rajeev Kapur, MD, Steelbird Helmets & President Two Wheeler Helmet Manufacturers Association
“We welcome the move of the Government to reduce corporate tax by 5% for companies having turn over up to 400cr was a long pending reform and I am sure this will create extra space for mid size companies to invest more into research, development & capacity creation. Besides, the focus area of E-vehicles will also help auto sector to transform rapidly and create a level playing field for new innovation in mobility. In the budget, Government has shown its intent on two key areas that is strengthening rural roads & national highways. It is a step worth applauding as it will lead to the better conditions and better network of roads significantly reduce fatal accidents, reduce the health care burden and improve the overall connectivity”
Parveen Kharb, CEO and Co-Founder, 22KYMCO:
“The budget announced by the Finance Minister for 2019-20 will catalyse India’s journey to electrification and will be beneficial for both, the e-mobility industry as well as consumers who are looking to make the shift to electric vehicles. The budget has a strong synergy with the FAME – II scheme and the announcement will generate a positive sentiment. Lowering GST rates on electric vehicles to 5% will make EVs more attractive to the buyer in the future. In addition, incentives on income tax will also increase the momentum for the sector. We welcome the new budget and trust that this will encourage faster adoption of e-mobility in India.”
Tarun Mehta, CEO, Cofounder, Ather Energy:
“Government has already moved GST Council to lower GST on EVs from 12 percent to 5 percent and the additional income tax reduction is a major boost for end consumers to purchase EVs. It addresses the concern of the upfront cost of purchasing electric vehicles. This is the best example of a consumer driven change and is also how Ather envisions the EV sector to achieve scale and growth. It now becomes imperative that OEMs chalk out plans that allows the industry to scale up and meet the demand for compelling products.”
Maxson Lewis – Managing Director – Magenta Power
“The budget is a positive push for adoption of Electric Vehicles in India and is in line with the series of steps taken and announcements in that direction. Namely on 4 counts – 3 direct and one indirect aspect are important from that perspective. While the total cost of ownership was always in favour of EV, the announcement in the reduction of GST rate on electric vehicles from 12% to 5% reduces the upfront higher cost as against an ICE engine and improves the buying decision in favour of EVs. The additional income tax deduction of ₹1.5 lakh on interest on loans taken to purchase electric vehicles is a bonus and the industry had not anticipated that. Credits to the government for this innovative idea to push for EV.A day ahead of the budget 2019, the government lowered customs duty on import of parts and components. This will drive domestic assembling of electric vehicles, which today is plagued by Chinese imports and is actually hurting the EV industry. The EV industry primarily belongs to start ups and will not be the domain of large monoliths. The push to simply and support the Start Up ecosystem will in effect push the EV growth a lot faster.”
Pankaj Dubey, Country Head, Polaris India
“The overall vehicle portfolio of Polaris India & Indian Motorcycle is being imported from the US. The increase in the customs duties on automobile spare parts will give therefore affect the customers as this is likely to lead to a price increase on parts as the spare parts of Polaris & Indian Motorcycle vehicles are directly imported from the US.
Our expectations regarding a boost for the overall automobile sector with regard to policies and taxation system have not been directly met in this budget.
We do feel the finance ministry to expedite resolving cases of high duty of GST on s products like snow scooters which is extremely punitive @45, for a product that is used in security and tourism development in the country.”
N K Minda, Chairman & Managing Director, UNO Minda
“I would like to take this opportunity to congratulate Nirmala Siatharaman on her first annual budget. As a component manufacturer, we welcome the announcement made by the government to encourage Electric Vehicle industry in India with a reduction in GST rate on electric vehicles from 12% to 5%, along with additional income tax deduction of `1.5 lakh on the interest paid on loans taken to purchase electric vehicles. This will definitely provide an impetus to the EV manufacturing in India, adding up to the Government’s vision of India as a global manufacturing hub for Electric Vehicles.
Government’s cherished EV project will also have a major ‘Make in India’ boost with the levy of customs duty on import of Auto Components and the relaxation of custom duty on lithium-ion battery, which would help local manufacturers to supply affordable batteries & components to the OEMs.
We also welcome the government’s move to increase investment in Infrastructure, Job Creation in SME & MSME, extending support towards start-ups, digital economy and urban & rural India, which will provide the right impetus in job creation and a new vision for India.”
Ayush Lohia CEO Lohia Auto Industries
“It’s a welcoming that government has reduced GST on electric vehicle from 12% to 5% & also allocated Rs 10,000 crore for faster adoption of electric vehicles and has announced upfront incentives for electric vehicles. This will help attract investment for manufacturer and ensure clean energy over time. This decision will represent the next generation in sustainable mobility & make them an attractive alternative to consumers. To give more boost to E vehicle sector. We propose a more cautious, clear and realistic road map towards the adoption of EVs & hoping more positive step will be taken by government to cheer up the overall industry and consumer both.
Kapil Shelke, Founder, Tork Motors
“India to make global hub of manufacturing of electric vehicle will mean more component manufacturing will happen in India which will help us with reduced material cost and lead time. GST of electric vehicle will be lowered from 12% to 5% is a positive sign for start-ups like us who will soon begin selling electric motorcycles. The end cost for the customer will reduce. Additional income tax deduction of Rs 1.5 lakh for interest for loan taken to purchase the electric vehicle will mean that the off take for EVs will go up even for premium vehicles.
Munira Loliwala, Business Head – EMPI, TeamLease Services
“Budget 2019’s targeted focus on boosting electronic vehicles is a welcome move as it will fast-track the adoption of plug-in mobility in India and build an efficient ecosystem for such eco-friendly vehicles. The tax reforms introduced by the government and the exemption of customs duty on certain parts of EV will make the ecosystem more conducive. The budget takes note of the lack of charging infrastructure for EVs and the need to invest in battery technology so that post sales and maintenance costs of EV’s are efficiently controlled. Building the infrastructure for EV should be a primary focus area and the emphasis should also be on manufacturing and production of batteries. FAME II scheme aims to provide necessary these necessary changes and encourage faster adoption of electric vehicles. While the GST reduction from 15% to 5% will enable growth in the sector, it is also important to address the increasing costs of EV components. The budget should have also looked at infusion of funds and labour at periodic intervals to ensure smooth manufacturing and development of EV technology in India. From a consumer perspective, the tax incentive and interest subvention for up to Rs 2.5 lakh will encourage more buyers in the segment.”
Rahul Sharma, Founder, Revolt Intellicorp
“This budget has been very promising for our industry. The proposal to lower GST rates on electric vehicle from 12% to 5% is a positive sign and we hope to see it implemented at the earliest. The budget is an opportunity for consumers to start adopting electric vehicles. An additional income tax deduction of 1.5 lakh on the interest paid on the loans would make the purchase more affordable. This is the start of a revolution and we believe 3 years from now things will change rapidly and India will be ahead of the curve in its adoption rate”
Bhavish Aggarwal, Co-founder & CEO of Ola
“The Government’s focus on Electric Mobility and EVs in the Budget 2019 is inspiring. Lower GST rate, interest subvention for EV loans and the commitment of Rs. 10,000 cr towards FAME 2 are encouraging. This further reinforces Ola’s mission to build Electric Mobility for India and the world and contribute toward making our nation, the global hub for innovation in this space. The various startup friendly initiatives announced as part of the budget are important for this fast-growing ecosystem and will encourage India’s youth to create value, wealth and livelihood opportunities for millions. The thrust on digital payments will further accelerate the nation towards a transparent and cashless economy.”
Pankaj M Munjal, Hero Cycles
“It has been quite a promising budget for the promotion of Electric Vehicles (EVs) in India. As the Modi 2.0 government wants to make our country the global hub of manufacturing of EVs, Nirmala Sitaraman in her budget speech has announced many steps to give a major push to the electric vehicle segment. The Government has not only lowered the GST rate on EVs from 12 percent to 5 percent but also encouraged the citizens to shift to this emission-free mobility by making it affordable. EV-owners will also get additional income tax deduction of Rs 1.5 lakh on the interest paid on the loans taken to purchase the EVs. This will give the EV-owners an interest subvention for up to Rs 2.5 lakh for buying them. Even the custom duty levied on EVs has also been exempted from now onwards. These announcements will enable us to have a positive impact in creation of electric vehicular ecosystem in the long-term, thereby also resolving to lowering the air pollution in our country in accordance to our objective of promoting clean mobility. We at Hero Cycles, compliment the vision of government by inducing Electric Bicycles which can be a more immediate solution to green and clean mobility.”
Sulajja Firodia Motwani, Founder and CEO of Kinetic Green and Vice Chairperson, Kinetic Group
“The Budget 2019 announced by Hon’ble Finance Minister today is extremely positive for the Electric Vehicle sector, and re-affirms the Indian Government’s commitment to rapid electrification of India’s automobile sector. Finance Minister has announced approval and adoption of FAME II; Government’s detailed policy to incentivize and support accelerated adoption of EVs; with an outlay of whopping Rs. 10,000 crores for next 3 years. This removes all ambiguity surrounding the long term EV Policy and I am confident that this move will encourage manufacturers to enhance investments in this sector and customers to purchase move EVs.
Reduction of GST on EVs from already concessional 12% to 5% will make them more attractive when compared to engine vehicles that attract 28% GST. Further, the proposed increase of Rs 1 in price of diesel and petrol, will enhance the attractiveness of lower running cost of EVs. The tax deduction for loans taken by customers to purchase EV will also help in creating demand from consumers. Further, announcements such as proposed tax breaks on Mega investments for lithium battery and cell manufacturing will pave way for a “Make in India” focus across entire supply chain of EV manufacturing in India. All in all, Government has taken several steps in the right direction for a rapid increase in investments in EV by the industry and adoption of EVs by the consumers. We welcome this budget and appreciate Government’s commitment to lower pollution in our cities and move towards fuel security of our nation!”
“The focus of the 89th Union Budget has mostly been on connectivity and infrastructure emphasizing on demand for connectivity across rural and urban markets. Infrastructure focus including those on road development, will lead to faster and more effective mobility solutions. This is positive news for the auto sector.Initiatives for improving liquidity in the market by capital infusion in the banks should also be of some help to the industry. Furthermore, the proposal of streamlining labor laws could lead to faster resolution of labor disputes.
We appreciate government’s initiative to promote clean & green environment with special benefits to encourage electric vehicles (EV). EVs do bring the benefits towards fossil fuel conservation & lowering of carbon emissions. There are other forms of green mobility which will help the government achieve the same objective. The government should also align its taxation policies towards such green mobilities which promote reduction of fossil fuel & betterment of environment. Thus, the focus of taxation should not only be restricted to promote and facilitate the shift to all types of green mobilities but should also be towards all other means which contribute effectively to increased fuel economy and reduced tailpipe emissions.
We see the future moving towards an era with more alternate cleaner & efficient powertrains on roads that the customers and market will ultimately decide based on their mobility requirements. The eco-system should facilitate the consumers to choose the clean vehicle technology that best suits his/her mobility needs, thus enabling an environmentally sustainable growth of the nation.”
Martin Schwenk, Managing Director & CEO, Mercedes-Benz India
“We welcome the Government’s vision of achieving a 3 trillion dollar economy and becoming the 6th largest economy in the world by end of this year. However, the decision to increase the custom duty on automotive parts was not expected and it is not going to help create demand in the industry which already is facing continued strong macro-economic headwinds, resulting in subdued consumer interest. The increase in custom duty coupled with increased input costs due to fuel price hike, could lead to an increase in the price of our model range. Though the budget has given a boost to green mobility, we wished for the inclusion of Plug-In-Hybrids for duty exemption as well, as that would have further given a push to the green mobility efforts.”