Winning Bizness Bureau
Mumbai: After a long wandering of incentives and subsidies on electric vehicles, the Indian government has ultimately focused on building Electric Vehicles (EVs) infrastructure in the country by showering decent budgetary provisions in the recent budget and by this initiative India has now joined governments in China and Europe that have offered extensive fiscal incentives and a favorable regulatory environment for EV market.
Before we proceed, it would be pertinent to mention that in a bid to push the market of EVs in the country, the finance minister Nirmala Sitharaman, while presenting her maiden budget, recommended reducing the GST rate on EVs from the current 12 percent to five percent, besides, providing an income tax deduction of Rs 1.5 lakh on the interest paid on the loans taken to purchase electric vehicles.
The minister has also provisioned the customs duty exemption on lithium–ion cells, which will help lower the cost of lithium-ion batteries in India as they are not produced locally.
The impetus given to purchase of EVs, is expected to boost sales for the alternate fuelled vehicles, which has been a major agenda for the government since the previous term, especially in terms of reducing carbon footprints.
In order to curb rampant pollution afflicting major cities and to cut costly oil imports, the Indian government has already launched the second phase of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME 2) scheme, with an outlay of ₹10,000 crore. This budgetary outlay, according to insiders, may not be looking significant compared to some developed countries, but Industry experts are of the view that incentives proposed in the Nirmala Sitharaman’s budget for this sector will go a long way to push entire industry at the track.
Underlining the benefits of green mobility, Vice Chairman & Whole-time Director of Toyota Kirloskar Motor Shekar Viswanathan said that undoubtedly EVs do bring the benefits towards fossil fuel conservation and lowering of carbon emissions.
Shekar Viswanathan further said, “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 the reduction of fossil fuel & betterment of the 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.”
According to a detailed report unleashed by the International Energy Agency (IEA), China was home to half of the world’s electric vehicles in 2018, followed by EU countries and the US. According to an article published by the World Economic Forum, China plans to sell 46 lakh electric vehicles by 2020, while Japan and South Korea too have significantly increased incentives for electric vehicles.
According to the IEA’s report, Japan plans to reduce 80 percent of green house gas emission from vehicles by 2050 while South Korea has extended its National Subsidies to 57,000 electrified vehicles in 2019, compared to 32,000 vehicles in 2018.
Analysts here in India feel that despite the government incentives, India still is far behind China in terms of setting up an EV ecosystem. Rajiv Bajaj, MD of Bajaj Auto has said the transition from petro-driven cars to EVs has to be done in a phased manner and also outlined that a complete ban on internal combustion engines is not a solution.
Sharing his expert comments regarding the budget’s impact on EV’s future, Bajaj said, “I appreciate that the government has shown its focus in the EV space which I think should help generate consumer interest and demand for EVs at a time when the auto industry is undergoing a difficult phase.”
Another expert on automobile market Puneet Gupta, the associate director at IHS Markit (Vehicle Sales Forecasting) said that merely offering tax exemptions are not enough to give push to EV industry.
He said, “When we see in the developed countries, we find that governments there provide subsidies upto 20 to 25 percent of the total vehicle cost. Simply offering tax concessions or exemptions are not going to impact much unless these offering are not accompanied by non-fiscal incentives. Also, there should be a mandate that leading manufacturers should have a certain share of their sales from EVs after a particular time period.”
It is a known fact that most of the major cities in developed countries, Electric Vehicles (EVs) are given free parking space and experts are of the view that Indian government should take some clue out of them to develop India as a potential market for such vehicles.
If we have look what sort of developments are taking place with regards to bolster the EVs in India, then we find that the Indian government itself is leading by example. In its efforts to push forth electric vehicle adoption in the country, 15 EV charging stations have been installed at the parking space of the Prime Minister’s office, which reportedly has the maximum number of EV charging stations among all government ministries and departments. Government think-tank NITI Aayog and the Ministry of Finance are not far behind and both have 10 charging stations each.
There are some private players also in the market who are not behind to join the bandwagon. South Korean automobile major Hyundai has launched the India’s first electric SUV christened as Kona Electric with a price tag of Rs 25.30 Lakh. Besides, Hyundai has recently committed to invest $200 Mn to develop affordable electric vehicles for the Indian market over the next three years.
In addition to this, Ecom Express Private Limited, a leading end-to-end technology enabled logistics solutions provider to e-commerce industry, has introduced Electric Vehicles (EV) in its operations and has started with the deployment of 20 electric vehicles in Delhi-NCR Region.
But, lately there have few opinion that say that budget boost to electric vehicles are not going fix auto sector’s problems which has been languishing, with sales plummeting for almost a year. Barring Bajaj Auto, June quarter sale of all auto manufacturers contracted on weak demand.
Prayesh Jain, the executive vice president at Yes Securities Ltd, feel that the budgetary measures would narrow the cost difference between electric and internal combustion engine vehicles but the key hindrance is the lack of charging infrastructure and availability of products with an adequate charging range at affordable prices.
He also said that the time taken by EVs to charge its batteries is not only a matter of expense but also cause inconvenience on a logistical level.
According to the Economic Survey, the market share of electric cars is only 0.06 per cent in India when compared to 2 per cent in China and 39 per cent in Norway. Reasons for lesser market presence of EVs in India are lack of charging infrastructure and high cost.
Therefore, only time will tell the future road map of emerging EV market in India.