India is continuing its push to attract companies making electric vehicles (EVs), with sources recently telling Reuters the country expects to attract $14 billion of investment over the next five years.
This development follows the news that Tesla is exploring an arrangement with India’s Tata Power to set up charging infrastructure for electric vehicles in the country. While Tesla’s India ambitions are already known, rival car manufactures that are planning to invest big in EVs to ensure they meet global emissions regulations, may be hot on the company’s heels.
India has sought to promote EVs to cut pollution and reduce oil dependence, but lack of investment and weak demand have hampered this in the past. But under the country’s new automotive sector scheme, incentives are expected to attract interest.
Still, there is more work to do before India becomes truly attractive to EV makers and stands out from its competitors.
Manav Raheja, a partner at Veritas Legal, says limited options and high pricing of vehicles pose challenges for India’s EV market.
“While the cost of running an EV is cheaper than gasoline cars, the purchase price could be 25 percent or more,” Raheja adds.
Additionally, the majority of EVs are premium cars, says Raheja, advising that manufacturers should “focus on entry-level vehicles in A-segment (mini hatchbacks), B-segment (small hatchbacks) and C-segment (small sedans or family cars) to bring a real fight with gasoline vehicles in these segments.”
“The Government should consider providing some incentives such as reduced registration fees and road taxes, for auto manufacturers focusing on EV development in these high-volume segments,” Raheja notes, calling for charging stations to be as accessible as petrol pumps.
Vineet Aneja, managing partner of Clasis Law, says that in addition to initiatives and policies, different wings of the government are working to actively promote electric mobility in the country.
The major actions Aneja has observed include GST on EVs reduced to 5 percent, down from the current rate of 12 percent, along with the Ministry of Road Transport & Highways issuing an exemption of permit for battery operated commercial vehicles along with a green number plate for EVs.
Additionally the government “has extended an additional income tax deduction of Rs 1.5 Lakh on interest paid on loans to the buyers of Electric Vehicle to buy EVs,” while the Ministry of Power “has allowed sale of electricity as ‘service’ for charging of electric vehicles. This would serve as an incentive to attract investments into charging infrastructure,” Aneja adds.
But Raheja says for companies looking to establish manufacturing capabilities in India, there will still be many hurdles including challenges around land acquisition, supply chain and logistics and sourcing qualified engineers, and there is plenty more that can be done.
“The state governments should consider designating green zones with suitable infrastructure for setting up EV manufacturing plants. To support India’s EV ambitions, reliance on fossil fuels needs to reduced and clean renewable energy sources also need to be developed at the same pace to support the EV revolution,” Raheja says.
At the same time, batteries for EVs need more research and development, and this is a space where the government “should push the industry leaders to leverage their knowledge and expertise to make India a manufacturing hub for EV batteries and components,” Raheja adds.
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