2019: A Year of Positive Momentum for India’s EV Sector
Tax exemptions, policy support, and a clear roadmap marked 2019’s most significant developments
The electric vehicle sector in India saw a lot of positive moves in 2019, with the launch of FAME India – II, introduction of tax exemptions for buyers, subsidies for manufactures, Goods and Services Tax (GST) cuts, and duty imposition on imports to push domestic production. However, the industry is still in its nascent state because of technological and infrastructure constraints, along with a lack of awareness.
Electric vehicle adoption in the country is still hindered by a plethora of issues like the lack of robust EV charging infrastructure, long battery charging duration, limited mobility range, and domestic production issues.
From the viewpoint of an average consumer, EV is still not a convincing option. It remains almost exclusive to individuals who want to reduce their carbon footprint. Petrol and diesel cars are still cheaper and much more affordable. In India, this is making it difficult for an average consumer to make the shift to EVs.
That said, 2019 proved to be a year when the central and state governments finally woke up to the benefits of EVs – improved air quality and reducing import bills.
The biggest incentive to the prospective EV consumers came in the form of tax reduction. The government has cut the applicable rate of GST on EVs from 12% to 5%. Additionally, the GST rates on chargers or charging stations for EVs have been reduced from 18% to 5%, effective August 1, 2019.
The budget announced by the BJP government also had several sops for the consumer, encouraging the switch to intelligent mobility. Finance minister Nirmala Sitharaman announced additional income tax deductions to the tune of ₹150,000 (~$2,190.97) on the interest paid on loans for the purchase EVs. This amounts to a benefit of around ₹250,000 (~$3651.63) over the loan period to the taxpayers who take on debt to purchase EVs. In her speech, Sitharaman also talked of a plan to make India a global hub for EV manufacturing.
To encourage the widespread adoption of electric mobility, the government announced the second phase of the FAME program with a total budget of ₹100 billion ($1.41 billion) to be deployed over a period of three years starting April 1, 2019.
Towards the beginning of 2019, the Ministry of Power (MoP) proposed a plan to develop electric vehicle infrastructure across 70 cities and 20 highways in the next five years between 2020-25 at a cost of ₹50 billion (~$700 million).
A key announcement came in June by the National Institute of Transforming India (NITI) Aayog, the government’s think tank, which charted its ambitious plan to mandate electric vehicles by 2030.
This was met by strong opposition by automobile manufacturers who argued that such a move would spell doom for the domestic industry and jobs. A significant chunk of products in the value chain in the existing automobile manufacturing is outsourced to smaller companies who specialize in manufacturing just one or two components.
However, the government has acknowledged that its vision of achieving 100% e-mobility by 2030 cannot be achieved without a robust e-mobility ecosystem, including the domestic vehicle manufacturers, charging infrastructure companies, fleet operators, and service providers.
The threat of the looming technology disruption that will arise from switching entirely to electric vehicle manufacturing and the jobs they support prompted transport minister Nitin Gadkari to acknowledge these concerns in a new roadmap.
Meanwhile, the union cabinet has also approved the creation of the Phased Manufacturing Program (PMP) to support the development of large-scale, export-competitive integrated batteries and cell-manufacturing giga-scale projects in India. The program, valid until 2024, will help in localizing the production across the entire electric vehicle value chain. Further, to boost domestic manufacturing, the PMP also proposed a 15% customs duty on EV parts, the doubling of customs duties on completely built-up (CBU) buses and trucks to 50% and hiking rates for semi-knocked down two-wheelers, buses and trucks to 25% from 15% earlier.
The year saw several initiatives undertaken by the government to make things easier for the EV manufacturers. The ministry of road transport and highways (MORTH) put forward a proposal to relieve electric and battery-operated vehicles from registration charges. It said it had planned to introduce differential registration fees as per the Central Motor Vehicles Rules (CMVR), 1989.
For the broader adoption of EVs in public transportation, the Department of Heavy Industry approved 5,095 electric buses to be deployed in 64 cities under the FAME-II program.
The National Electric Mobility Mission Plan (NEMMP) 2020 also set targets for the deployment of seven million hybrid and electric vehicles (EVs) in India by 2020.
While the EV sector is gathering speed, the government is now trying to focus on developing a robust infrastructure for the charging of electric vehicles. Without an adequate charging network, the widespread adoption of EVs will remain impractical and unfeasible.
In line with this, the Union Power Minister R.K. Singh approved amendments in electric vehicle charging guidelines and specifications. He also stated that to address issues regarding inter-city travel and long-range or heavy-duty electric vehicles like buses and trucks, the central government plans to install fast-charging stations at every 100 km on each side of the highways.
Besides the government’s announcements to help the cause of EVs, the segment also saw plenty of initiatives from the private sector, with companies shifting to EVs for employee transportation, partnering up and building charging networks, and working with the government to establish a firmer foundation for EVs. The government has also, to a reasonable extent, taken into account the concerns of industry stakeholders and has promised to work on its policies with a more holistic mindset.
This year, the government has reiterated its intentions for the future of electric mobility in India. It aims to grow the segment in the country into one that is not just sustainable, future-proof, and practical, but also a market leader in the segment. Given the shape of things in 2019, the next year looks promising for the domestic EV sector.
Nithin Thomas is a staff reporter at Mercom India. Previously with Reuters News, he has covered oil, metals and agricultural commodity markets across global markets. He has also covered refinery and pipeline explosions, oil and gas leaks, Atlantic region hurricane developments, and other natural disasters. Nithin holds a Masters Degree in Applied Economics from Christ University, Bangalore and a Bachelor’s Degree in Commerce from Loyola College, Chennai. More articles from Nithin.