Government Measures Remain key to Boost EV Sales in India: Ind-Ra

Government Measures Remain key to Boost EV Sales in India: Ind-Ra

Ind-Ra in its latest market analysis covers the factors influencing electric vehicle (EV) sales in India during the pandemic and beyond.

India Ratings and Research (Ind-Ra) in its latest market analysis has predicted (that driven by the economic slowdown induced by the Coronavirus pandemic) a delay in the penetration of electric vehicles (EVs) in the Indian automobile industry. In this, what is the third story derived from the Ind-Ra analysis we cover the final factors influencing electric vehicle (EV) sales during the pandemic and beyond.

According to the analysis, government measures remain key to EV adoption in the country. It adds that the Indian government has laid out a Rs 100 billion outlay over FY20-FY22 for faster EV adoption under the FAME – II policy. This includes direct subsidies (86 percent of the total amount) as well as the development of charging infrastructure. Additionally, Goods and Services Tax on an EV is 5 percent compared to 28 percent for an ICE. The government also offers an income tax deduction of Rs 150,000 on the interest paid on the purchase of an EV. Certain states in India (such as Delhi) are providing additional incentives. The aforesaid incentives are important to provide the required push to boost EV sales.

However, capping of subsidies at a specific vehicle price, which is Rs 1.5 million for an e-PV, limits the scope of EVs in the premium car segment. In the case of e-2Ws, the FAME-II scheme has a stricter requirement for speed, range, and energy, which excludes the majority of the models present in the Indian markets. Moreover, the majority of e-2W and 2-3W run on the lead-acid battery while the subsidies are limited to EVs using lithium-ion batteries. Though e-2Ws are gradually transitioning to lithium-ion batteries, e-3Ws may take longer due to cost viability.

Ind-Ra EV Sales in India

The analysts believe that robust government support is imperative, as could be seen globally, for achieving the target of 30 percent electrification by 2030. For example, China (over 50 percent of the global electric fleet) witnessed a subsidy program of over USD 60 billion during 2009-2019. The Indian subsidy programme of Rs 100 billion (equivalent to USD 1.4 billion) is much smaller than China’s. Moreover, the incentives are capped at 20 percent of the vehicle cost in India compared to 30-50 percent in the initial years in China, and 35 percent in the United Kingdom. Thus, it becomes essential for the government to lay down more comprehensive policies, enhance incentives, and ensure a robust implementation of existing policies to increase EV adoption.

The report also adds that OEMs are unlikely to incur material capex in the current climate. It states that although most Indian OEMs have a robust balance sheet, the two years of the slowdown has forced them to reduce capex requirements (8-9 percent of over FY15-FY20 revenue). Historically, OEMs have been incurring higher capex to meet the regulatory requirements including BS-VI, as well as on new product launches to retain their market share. Amid the current slowdown, OEMs are unlikely to incur aggressive capex over the electric platform.

Segment-wise, PVs and CVs have seen e-vehicle launches by conventional OEMs; and hence are unlikely to see material progress in FY21-FY22. In 2W, 3W and buses, newer and smaller players such as Ampere Vehicles, Okinawa Autotech, Ather Energ, Olectra Greentech, JBM Solaris Electric Vehicles have emerged while conventional players are now catching up. Bajaj Auto Limited and TVS Motors Limited have just launched their e-2W, while e-3W is yet to be launched over FY21-FY22. Hero MotoCorp Limited has acquired a stake of 35 percent in Ather Energy.

Ind-Ra believes that larger OEMs would not incur material capex unless a detailed expansion strategy is laid down by the government. Both OEMs and auto ancillaries would continue to make investments in these small entities or collaborate with a foreign partner.

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Ayush Verma

Ayush is a staff writer at saurenergy.com and writes on renewable energy with a special focus on solar and wind. Prior to this, as an engineering graduate trying to find his niche in the energy journalism segment, he worked as a correspondent for iamrenew.com.

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