In the run-up to Budget 2025, the Indian EV market is raising expectations of reforms that will ensure that India’s journey towards green mobility is expeditious. Will the government live up to these promises and keep the industry in momentum?
The EV Industry’s Wishlist
Finance Minister Nirmala Sitharaman will release the Union Budget 2025 on February 1. One of the most pressing needs of the electric vehicle (EV) industry is to implement a standard 5% GST on all EV parts. The GST landscape for EVs, though, is far from straightforward at present.
EVs, batteries and charging facilities have a generous 5% GST, however spare parts and accessories charge you a whopping 28% GST, and maintenance services charges 18% GST. Such an inverted tax has become a pain in the neck for manufacturers and is overwhelming working capital.
Dinkar Agrawal, Founder, CTO & COO at Oben Electric, demands reforms “The only way to cut the cost and grow is through a standard 5% GST on EVs, components and charging infrastructure.
Plugging into Domestic Manufacturing
Another big item on the industry’s wishlist is support for domestic battery production. EVs depend on batteries, and India’s reliance on imports hampers its ability to be a world EV leader.
Market participants have proposed performance-linked incentives (PLI) for battery innovation and local component production. These could be part of the government’s “Make-in-India” agenda and would mitigate import dependency and spur local innovation.
Agrawal further says, “PLI initiatives will further establish India’s presence in the EV market, allowing for a self-sustaining manufacturing model for both consumers and manufacturers.
Bridging the Affordability Gap
The affordability issue for the consumer is a big obstacle in the adoption of EVs. The industry is pushing the government to lower interest rates on EV loans and provide buyers with subsidies. Reducing these costs would make EVs even more accessible and affordable for a larger segment of the population.
“Broadening the gap in affordability can be done through lower interest rates on EV loans and focused subsidies for electric vehicles,” Agrawal stated.
The Missed Opportunities of 2024
But as much as the 2024 Budget was anticipated by the EV industry, it was not what the industry wanted. But with the release of the 10,900 crore PM E-Drive subsidy package in September 2024, hope had returned. The move, a third stage of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) plan, would subsidise more than 1.6 million EVs, creating a great foundation for future development.
A Vision for 2030
India’s climate targets include 30% market share of EVs by 2030. The Union Budget 2025 could help in removing challenges such as manufacturing costs and consumer resistance. If GST is made easier and there is an infusion of domestic manufacturing, the government can ensure that the EV sector has the facilities and policies it requires to flourish.
What Lies Ahead For EV Industry
Budget 2025 holds a lot of weight. Demands in the EV sector reflect a larger vision for a more sustainable and green future. India, with the right policies, could become a global leader in EV development without going against its climate objectives.
With the onset of February, everything revolves around Finance Minister Nirmala Sitharaman. Could this budget be the year in which India gets a breakthrough on EVs? Stay tuned as the country takes off into a more pure, cleaner future.
