Finance Minister Nirmala Sitharaman will present the Union Budget on February 1, 2021.  The budget, the first after the COVID-19 pandemic, will be keenly watched by the renewable energy sector in general and the electric vehicles (EV) segment in particular.

Manufacturing and sales activity in the EV segment were adversely affected by the pandemic in the first half of 2020 due to a lengthy lockdown and exodus of the workforce from the cities.

The sale of electric two-wheelers (E-2W) in India declined by 5.46% to 25,735 units in 2020, compared to 27,224 units in 2019.

The headwinds notwithstanding, companies expect a phenomenal year for electric vehicles in 2021.

Mercom spoke to a cross-section of several industry stakeholders to get a sense of what the EV segment expects from the upcoming budget.

The EV industry expects it to be included in the priority sector lending list to boost e-mobility in India. It also hopes the government announces incentives to EV manufacturers to accelerate local EV production and reduce the Goods and Services Tax (GST) on battery swapping.

Industry’s Expectations

Naveen Munjal, Managing Director of Hero Electric, wants the EV segment in the list of priority sector lending to help consumers procure EVs for commercial operations.

“The government also needs to rehaul the existing Faster Adoption and Manufacturing of Electric Vehicles in India (FAME)-II program or reintroduce FAME-I. The GST on battery swapping facilities must be reduced from 18% to 5%. The government can also include the EV sector in the Swatch Bharat Mission under the Clean Air and  Corporate Social Responsibility programs to accelerate wider adoption of EVs,” he said.

With a total budget of ₹100 billion ($1.41 billion), the FAME program is being deployed over three years from April 1, 2019.

Mohal Lalbhai, Founder and Chief Executive Officer (CEO), Matter, endorsed Munjal’s views. He said, “The GST on replacing lithium-ion batteries used in EVs needs to be reduced from 18% to 5%. To benefit more consumers, the government should increase the cap of EVs’ ex-factory price for availing of subsidy from ₹150,000 (~$2,051) to ₹165,000 (~$2,256). The government needs to provide clarity about the criteria of vehicles that will be eligible for subsidies as the sale of EVs is allowed without pre-fitted batteries.”

Vikas Jain, Founder and CEO at Welectric, said, “The government needs to reduce the GST on spare parts of EVs including batteries and chargers from 18% to 5%. The import duties on importing lithium cells, which are not available domestically, need to be kept as low as possible to accelerate the lithium-ion batteries’ domestic production. The EV segment must be included in the list of priority sector lending to facilitate easy financing.”

Deepak MV, Co-founder and CEO of Etrio, expects that the government will take measures to boost the development of charging infrastructure.

“The budget needs to provide more information on the production-linked incentive program to localize the EV supply chain. An attractive financing option for EVs should be included in the budget, and tax refunds and incentives should be rolled out quickly. We also hope that the budget addresses the need for incentives for retro fitment of vehicles under the FAME-II program.”

In September, Union Heavy Industries and Public Enterprises Minister, Prakash Javadekar, said in Lok Sabha that the Centre had provided a demand incentive of ₹950 million (~$12.9 million) towards 27,201 EVs until September 10, 2020. The government is all set to assist with demand incentives to cover 7,000 electric buses, 55,000 electric cars, and one million electric two-wheelers under FAME-II.

According to Amit Gupta, Co-founder and CEO of Yulu, a Bengaluru-based micro-mobility service provider, the government should direct banks to provide loans at lower interest rates to e-mobility service providers for the procurement of EVs in bulk to expand their fleets. He also wants subsidies to be extended to low-speed electric two-wheelers (E-2W).

“The budget requires incorporating programs that provide stable support and incentives for E-2W manufacturers to produce quality vehicles. The government has to focus on E-2W mobility rather than electric cars while developing the charging infrastructure,” he said.

Ravikiran Annaswamy, CEO and Co-founder of Numocity Technologies, a digital technology platform provider for EV charging, said the government needs to promote local technology platforms, including battery swap software and connected vehicle software, to digitalize the EV sector.

“To accelerate the digitalization of the sector, the government can develop technology parks for the EV segment similar to IT hubs and provide tax exemptions for the initial five years. Installing another 5,000 charging stations in the upcoming year can help accelerate the adoption of EVs,” he said.

Electric vehicles are fast gaining market share as the state and central governments have provided policy push coupled with demand incentives. Investors also see the EV market on the brink of a boom, which is evident in their investments in 2020.

Here is a look at the noteworthy developments that shaped India’s EV landscape in 2020 and gave us a sense of things to come.