The global electronic vehicle market is expected to reach USD 2,108.80 billion by 2033. SEBI registered expert Dhawani Patel says, “India’s EV market is set for explosive growth, with a projected CAGR of 49% through 2030”. She believes that India is positioning itself as a global EV hub, backed by government incentives for EV companies in India.
Finance Minister Nirmala Sitharaman is set to table the Union Budget 2025 in the parliament on 1st February. As the country awaits Budget announcements, EV companies are eyeing significant Budgetary priority for EV India. Patel believes, “India is positioning itself as a global EV hub, with strong potential for investors in this transformative sector”.
During the annual convention of the Society of Indian Automobile Manufacturers, Union Minister Nitin Gadkari highlighted some key forecasts for the EV segment in India. The minister anticipates the EV market to hit 20 lakh crores, generating one crore annually by 2030.
Dhawani Patel believes that the rising EV market will be “dominated by two and three-wheelers”. Mr Gadkari also voiced the same trend. In the convention, he added that the two-wheeler contributed 56% of the total sales.
The Union Budget 2025 must extend government support to this industry to achieve these targets.
Since 2015, the FAME I and FAME II schemes of the union government have made significant contributions to the EV sector. FAME is an abbreviation for Faster Adoption and Manufacturing of Electric Vehicles.
EV companies and other stakeholders of the sector expected an extension of the FAME scheme and the introduction of FAME III in the 2024 Budget. The finance minister introduced the PM E-DRIVE scheme instead of FAME.
The PM E-DRIVE scheme aims to give a holistic boost to electronic mobility and focuses not only on 4-wheelers but also other electronic vehicles and charging stations.
The industry demands a continuation and robust application of the FAME and PM E-DRIVE schemes. Increased government allocation in the sector by the 2025 Union Budget will give an edge to the Indian electronic vehicle industry. EVs made in India can give strong competition to global players if government aid and subsidies make Indian EVs affordable.
Moreover, the Union Budget 2025 is expected to invest in the infrastructure necessary to support EV adoption through these schemes.
The targets set by the Union Budget can be achieved solely through the fast adoption of EVs. If consumers are not willing to buy electronic vehicles, the expansion of EVs cannot be sustained. Dhawani Patel emphasises that the expansion of the industry is “driven by government incentives, local manufacturing, and expanding charging infrastructure”.
The impact of the Budget on the EV sector is not restricted to subsidies aimed at making EVs affordable. The industry expects the Budget to make significant contributions to constructing and developing charging stations. The lack of charging stations will negatively impact user perspective on EVs.
Moreover, the sector and EV companies have voiced the need for incentivising EV purchases through easier taxation and credit relief.
Currently, there is an inverted duty structure of GST in the electronic vehicle sector. An inverted duty structure implies that the inputs of a product are taxed higher than the product itself.
In India, while the GST charged on EVs is 5%, the tax levied on inputs used in EV manufacturing is 28%. This GST structure increases the cost of inputs needed by manufacturers, resulting in high prices for electronic vehicles.
Reducing expenses and promoting growth needs streamlining the GST system with a consistent 5% tax on EVs, parts, and charging infrastructure. It is also necessary to relax the working capital strain on EV companies and ensure sustainable growth.
The EV companies are expecting the Union Budget 2025 to prioritise the issue regarding the inverted GST structure of EVs. The industry also anticipates a reduction in GST levied on batteries from 18% to 5%.
EV companies believe green financing and lowering interest on EV loans can significantly impact faster adoption. Industry leaders anticipate advancements that will enhance the cost and availability of EVs across the nation this year. These initiatives, together with tax incentives for customers and greater clarity on EV financing, will empower both consumers and producers.
It is critical to understand the role that NBFCs play in increasing electric vehicle adoption in India. One of the major issues in the EV business is the high initial cost, which frequently serves as a deterrent for buyers. NBFCs may address this by delivering new finance options, but supporting government policies is required to effectively scale these initiatives. The industry is voicing the need for the Union Budget 2025 to prioritise the roles of NBFCs in the EV sector.
The impact of the Budget on the EV sector is tremendous. Patel believes that the EV sector in India is set for “explosive growth” with “participation from key automobile players like Tata Motors, Ola Electric, and Mahindra Electric”. For more detailed insights, check out her analysis on StockGro.
The Union Budget 2025 is expected to table policies that will aid faster adoption of EVs resulting in a strong potential for investors in this transformative sector. Policies targeting enhanced charging stations, reduced taxes and interest incentives can not only promote an alternative mode of transportation but also empower the country to achieve its net zero emission target.
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