The Union Budget 2023 is expected to have a lot in store for the EV industry of India. If the expectations are to be considered, the year 2023 shall see a long list of EV-related policy decisions that will be a game-changer for the industry in the longer run.
Taking into account how fast electric vehicles are going mainstream, it becomes only obvious for the government to give the industry the credit where its due.
While the Union Budget 2022 set the stepping stones for the EV industry to become a part of the mainstream, the Budget 2023 should focus on how EVs can further compete in the mainstream. Let’s find out more.
What’s Up With the EV Industry in India Currently?
The EV industry has grown manifolds, over the last two years. The growth performance has surpassed many expectations, enabling EVs slowly seep into the mainstream automotive scene.
Up till 31st July 2021, there were 380 electric vehicle manufacturers in India, according to the government’s e-AMRIT portal. There are more than 14 lakh electric vehicles on road in India as of now. This number is further expected to grow at a sustained rate of growth and might reach 14 o 16 million EVs by 2030.
While there are several factors that led to this growth, the one that’s to be thanked here is the subsidies and incentives provided by the Indian government, and respective state governments around electric vehicles. The government’s FAME II scheme has led to larger rates of adoption for EVs in the country.
Furthermore, the EV industry also enjoys a 5% GST slab on electric vehicles and their chargers and charging components. The import duty on the import of EV components is also fixed at 15%.
If some sources of preliminary data are to be believed, India surpassed Japan to become the world’s third-largest automotive market, behind China and the United States.
While the EV market is currently a small contributor to that growth, it certainly has the potential to change the picture in the coming years.
The Existing Challenges of the EV Industry in India
In order to figure out what are some of the best steps that can be taken in favor of the EV industry in India, it is important to understand the challenges the industry is marred by at the moment.
Supply Chain Disruptions
Citing COVID-19 as a reason might not be fair at this point now.
However, the pandemic did shed some light on how fragile and interlinked the entire supply chain is, for the auto industry. In order to avoid incidents like that, it has become imperative for the Indian government to come up with policies that safeguard the Indian automotive industry’s requirements. Steps are being taken to address the reliance on imports that the country faces at the moment. Initiatives like Semicon India Program, have been conceptualized to promote domestic manufacturing of semiconductors in India.
It is to be seen that supply chain-related issues will affect price-sensitive markets.
Financing Concerns
EVs come with a price tag, that is considerably higher than their ICE counterparts. In a price-sensitive auto market like India’s, this can be an obstacle in the longer run.
While the government is working towards further enhancing the overall education about financing EVs in India, there are some existing options that customers can look up to. The challenge that remains, however, is to ensure that the financing options are far-reaching and help increase the penetration levels of electric vehicles in the country.
Read This To Know More: EV Financing in India 2023: Making EVs Accessible for India
Skill Gaps
The automotive sector and its auxiliary industries employ some of the largest numbers of people in formal and informal capacities. As the EV penetration increases in the country, there’d be a rising requirement for a skilled workforce that knows EVs inside-out.
Transitioning this knowledge from ICE to EVs is another challenge that might not pop up quite adversely in 2023 but in the coming years.
Charging Infrastructure
A universal charging infrastructure all over the country is another challenge that the industry faces at the moment.
The installation of EV charging stations across the country has accelerated in 2022, but efforts are to be made to involve more private players, provide incentives, and make the entire practice more lucrative for investors to actually step in.
Down the line, things like how electricity distribution companies (DISCOM) manage their supply, upgrade their grids and take the EV charging loads into account will also become a point of discussion.
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What is the EV Sector in India Expecting in Budget 2023?
The EV sector has been able to stay and settle in 2022. The question in 2023 for many is- what next?
Incentives and Subsidy Requirements
The FAME II policy can be termed to be one of the most effective government initiatives undertaken, that has changed the way people look at EVs and its degree of awareness amongst users. Industry players are vouching for the existing policy to be further extended than its current expiration date which stands on 31st March 2024.
Furthermore, there are suggestions that the FAME II policy shouldn’t be time bound but should depend on the certain percentage of EV adoption in the country before the policy expires. Hence, giving EV manufacturers, customers, and the rest of the stakeholders a sense of confidence and a sort of long-term approval.
Tax benefits
Another concern that’s been brought up by many industry experts is that of some substantial tax benefits. Currently, one of the major components of an EV’s battery is lithium-ion cells which are largely imported, and hence, attract some massive import duties.
The call for reducing this duty is constant across all the stakeholders in the EV industry. The current slab of 20% tax rate can be reduced to 5%.
A more robust industry-government partnership
Policymakers need to be in constant touch with electric mobility and the electric vehicles industry alike.
While one can provide inputs on how to optimize the production of EVs in the country, the electric mobility industry, which is touted to be one of the largest customers for the EV industry will further determine how they can increase their operability.
In one of the recent interviews, BluSmart’s Chief Business Officer, Mr. Tushar Garg shared his thoughts on one of the measures that the government can undertake to increase an EV’s usage.
Measures like these can not only help EV manufacturers and other EV-related industries to gain that initial push but will also improve the adoption rates among the final customers.
Infrastructure & Production Linked Incentive Schemes
From a consumer point of view, issues like range anxiety are still one of the top hindrances for them to switch to EVs. In order to address this, favorable policies for a better EV charging infrastructure should be brought up in the Union Budget 2023.
The EV players are hopeful of policies that involve an equal state and center-level partnership. Providing subsidies on initial capital expenditures can go a long way in ensuring that EV penetration takes place in a more sustainable manner.
A Common GST Slab
While the initial step of bringing the EVs and EV chargers under the 5% GST slab has already been undertaken by the government, many EV experts mention that there needs to be some more clarity.
According to them, different EV components tend to have different tax rates. For instance, the sale of EVs attracts a 5% GST, battery swapping has an 18% GST and EV spare parts have a 28% GST.
A true Budget for 2023 for EVs in India, should involve a clearer, and more common tax slab for EVs and its subsidiary industries. Moreover, there has to be clarity on EV charging as well, which attracts a 5% GST if considered a product and an 18% GST if it is regarded as a service.
Conclusion: Budget 2023 For EVs in India. What’s it Going To Be?
A lot of hopes are pinned on the Union Budget 2023 from the EV industry.
One can state that the industry has given its fair share of performance in 2022, and in 2023 the EV industry only hopes to keep that momentum going.
The challenges and expectations mentioned above should go a long way in creating a more dynamic and sustainable structure for India to meet its EV adoption goals by 2030.
Just like the rest of the electric vehicle and mobility industry, BluSmart is looking forward to a Union Budget that takes into account all the points addressed by the industry’s stakeholders.
NOTE: With inputs from various sources.