CARVERSAL

The electric vehicle (EV) sector is receiving a tailwind as India moves towards greenness. The government is involved in formulating policies that will help reduce the cost of EVs, put in place the required infrastructure, and encourage local production. With the Union Budget for 2025-26 just around the corner, everyone is eager to see how developments in that arena reshape the automobile sector.

Areas being targeted include finance incentives, infrastructure development, tax regime, and technology to facilitate national adoption of EVs.

Government Initiatives to Boost the EV Sector

The Indian government has set into motion schemes and incentives that would make EVs affordable and viable. Some prominent schemes are: 

• FAME India Scheme – The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) scheme was initiated to encourage EV adoption. Now in its second phase (FAME-II), the scheme provides financial incentives for EV purchases and charging infrastructure setup.

• Production-Linked Incentive (PLI) Scheme – The scheme has been introduced to spur local manufacturing of EVs, auto parts, and high-tech battery technologies.

• Advanced Chemistry Cell (ACC) Scheme – Implemented to promote domestic battery production, making India less dependent on imports.

• State-Specific EV Policies – State governments have put in place their own incentives such as exemptions in road tax, waiver of registration fees, and direct subsidies to EV purchasers.

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Challenges in the Indian EV Market

Strong policy support notwithstanding, the Indian EV industry has some challenges:

1. High Cost of EVs

EVs remain costlier than petrol or diesel cars because of exorbitant battery prices. Although incentives from the FAME scheme have succeeded in lowering prices, battery prices are still a big challenge. Industry experts are demanding more subsidies and tax concessions to make EVs affordable for the middle class consumer.

2. Lack of Charging Infrastructure

A proper charging infrastructure is nevertheless needed for mass acceptance of EVs. While governments and private players are installing charging points, these are predominantly located in metro cities. It is critical to access Tier-II and Tier-III cities to provide much-needed services for wider acceptance of EVs.

3. GST and Taxation Issues

EVs now come with 5% GST, while EV batteries and charging stations pay 18%, which is the cost of owning them. Experts are urging that all EV components be subjected to a flat rate of 5% GST for price equivalence with traditional cars.

Key Expectations from Government Policies

1. Lowering EV Prices Through Financial Incentives

A restructured FAME-III plan could offer increased subsidies on the purchase of EVs, particularly low-cost electric two-wheelers, three-wheelers, and mass-market electric vehicles. Increasing subsidized financing opportunities for EV consumers would also increase demand.

2. Expansion of Charging Infrastructure

The government will declare a national strategy for EV charging stations so that all major cities and highways have charging points that are easily accessible. Incentives for private sector players to install charging networks will also be important.

3. Reduction in GST and Import Duties

A standard 5% GST on all EV components, such as batteries and charging points, would bring down the cost of ownership substantially. Also, reducing import duties on EV components in the short term while increasing local production would fill the affordability gap.

4. Support for Domestic Battery Manufacturing

With India's reliance on China, Japan, and South Korea for import of batteries, there is a clear push to set up domestic units for lithium-ion battery production. The government can launch new PLI schemes for cutting-edge battery technology to enhance local production and recycling facilities.

How Will the New Policies Impact the Car Industry?

The new policies and upcoming budget will transform the Indian car industry by:

• Reducing the cost of EVs with tax incentives and subsidies.

• Incentivizing carmakers to increase EV production, away from conventional petrol and diesel vehicles.

• Increasing domestic battery manufacturing, decreasing dependence on imports and cost stabilization.

• Scaling up charging points, building consumer confidence in switching to EVs.

• Promoting foreign and domestic investment, pushing innovation in the EV space.

Conclusion: A Transformational Shift for India’s Auto Industry

India's aggressive drive to adopt EVs is likely to bring about a more sustainable, indigenous, and economically sustainable automobile industry. Challenges notwithstanding, the interplay between financial incentives, infrastructure growth, and policy push has the potential to turn EVs into a mass-market offering for Indian consumers.

​The sector looks forward to an all-encompassing EV policy framework that encourages innovation, bolsters domestic manufacturing, and drives India toward a greener and cleaner tomorrow.

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