The global Electric Vehicle (EV) sector has grown significantly during the previous decade. China has been a leader in the electric vehicle market, with significant advancements in battery manufacture, charging infrastructure, and new EV model development.
Due to its large production capacity, China can make EVs at a reduced cost. India, on the other hand, lags behind other nations in terms of electric vehicle market penetration. When it comes to electric vehicles, the country has a low acceptance rate. There is still a lot of work to be done in terms of model types, charging infrastructure, and financial incentives for EV makers.
In this blog, we will understand the incentives offered by govt. to consumers for buying electric vehicles in India and we will also see what the policies supporting them.
India currently dominates the 2W and 3W markets, as well as being in the top five for passenger cars and commercial vehicles (CV). Despite this, the country’s electric vehicle (EV) market share remains minimal. Since 2012, 1,04806 electric vehicles have been registered in India.
Electric buses are becoming more widely recognized as everyday sources of transportation. Around 400 electric buses were sold in the financial year 2021. In FY2022, it is expected that this number would climb to roughly 900.
In its budget for 2021-22, the Indian government reaffirmed its support for the electric vehicle sector. To improve the market penetration of electric vehicles in India, the government recommended several reforms.
Government Policies and Incentives for Electric Vehicles in India
The Indian government is committed to making India a global leader in the electric vehicle market. For this, the government has introduced several schemes and incentives to increase demand for electric vehicles and to encourage manufacturers to invest in electric vehicle R&D and related infrastructure.
So far, the Indian government has launched FAME-II, PLI SCHEME, Battery Swapping Policy, Special Electric Mobility Zone, and EV Tax Reduction. Let’s have a look at all of them and understand what are they?
The Indian government started the FAME India project on April 1, 2015, to minimize the use of gasoline and diesel vehicles. This program was a critical component of India’s electric mobility strategy. The FAME India Scheme is designed to encourage the use of all types of automobiles.
The following are the four focus areas of the Fame India Scheme:
- Technology is in high demand.
- Technological advancement.
- Need for Charging infrastructure for Electric Vehicles.
The FAME II scheme, which has a budget of Rs 10,000 crore, was launched in April 2019 to support 5,00,000 e-three-wheelers, 7,000 e-buses, 55,000 e-passenger vehicles, and a million e-two-wheelers. The goal was to increase EV adoption in India.
The program was set to expire in 2022. However, the Government of India has chosen to extend the FAME-II scheme till 31 March 2024 in the budget for FY2022-23.
The Production Linked Incentive for Advanced Chemistry Cell Battery Storage was launched by the Department of Heavy Industry in June 2021. (PLI-ACC Scheme). Its purpose is to attract both domestic and foreign investors to invest in India’s Gigascale ACC manufacturing facilities. The PLI-ACC Scheme is one of thirteen programs approved by the Union Government to help Prime Minister Narendra Modi achieve his aim of “Atmanirbhar Bharat.”
The total payout under the scheme is INR 18,100 crore. After the production plant is operating, this will be paid over five years. To be eligible for subsidies, the manufacturing plant must be operational within two years, according to the policy, and a 60 percent domestic value addition must be accomplished within five years, according to the Bid Documents.
Due to severe selection requirements, many small and mid-sized enterprises that manufacture EV batteries and car parts are unable to apply for the scheme’s benefits. Smaller businesses are crucial to resolving the industry’s demand-supply imbalance. The EV community will benefit by changing current standards or offering a substitute to make the plan a realistic option for these enterprises.
Battery Swapping Policy
The government aims to implement a Battery Swapping Policy, according to the Finance Minister. This initiative would harmonize the battery specifications that will be utilized in EVs across India. The law will aid in the promotion of electric vehicles in time-sensitive service sectors such as deliveries and intercity transportation, as switching a depleted battery for a fully charged one is a more feasible choice than on-the-spot recharging, which can take hours.
Interoperability will be a breeze as a result of this. Buyers do not need to be concerned with the configuration of new batteries being installed if all of the batteries are of the same configuration for all of the same category of EV.
Battery switching, if done correctly, is projected to gain acceptability in commercial applications such as 2W and 3W automobiles, allowing for faster market penetration.
Manufacturers will benefit from the Battery Swapping Policy as well. Machine spare parts will be more readily available after the standards are implemented. Furthermore, by utilizing economies of scale, this strategy will help battery manufacturers reduce costs.
Duty Reduction on Electric Vehicles
Customs charges on nickel ore and concentrates would be reduced from 5% to 0%, Nickel Oxide would be reduced from 10% to 0%, and Ferro Nickel would be reduced from 15% to 2.5 percent, according to the budget. NMC (Nickel Manganese Cobalt) is an important component of lithium-ion batteries, which are used in electric vehicles (EVs).
These ores are in short supply in India, and battery production is heavily reliant on them. As a result, nickel alloys are primarily imported. The reduction in customs taxes will assist local EV battery manufacturers in lowering production costs.
There is also a plan to reduce customs duty on motor parts from 10% to 7.5 percent, which would help to reduce the overall cost of electric vehicles.
Special E-mobility Zone
The government intends to create electric vehicle-only mobility zones. In the administration-designated zones, only electric or equivalent cars will be allowed to operate. Many European countries, as well as China, have policies like this.
The unspoken benefit of special electric mobility zones is that they will help to alleviate traffic congestion caused by private vehicles. People who travel through these zones must either drive their EVs or take a public EV, increasing the market share of EVs.
Electric vehicles are gaining popularity in all locations, industries, and philosophies. In the future, electric vehicles will become a trillion-dollar industry while also helping to save the environment.
Given their vast quantity and popularity, electrifying vehicles in emerging countries is crucial to rapidly decarbonizing transportation. As a result, the government’s involvement is crucial. The impacts of incentives are extremely obvious when it comes to government subsidy programs.
Government subsidies aren’t the only way to encourage people to buy electric vehicles. As previously noted, manufacturers have practical ramifications in addition to changing customer behavior. Successful policies indicate how governments can help solve these problems. We hope that the government’s actions would allow India to continue on its path to a more environmentally friendly future.