Government Policies & Incentives Driving EV Adoption for Investors

Imagine when you were kids – you used to think all the time – “agar battery se gadi chalta to kitna accha hota na? Aise sochte the ki flying car hoti to traffic ka tension hi khatam!” Well, guess what? One of your dreams came true in India!

The electric vehicle (EV) revolution is not a far-off dream anymore, it is happening now! 

One of the largest automobile markets in the world – India, is taking flagship steps towards electrification. However, let us be frank: moving from fuel-driven vehicles to electric is never an easy task. Cost issues, range anxiety, and the ever-harrowing lack of charging stations pose imminent threats. This is where the government steps in with a set of policies and benefits to hasten the acceptance of electric vehicles.

What’s in it for investors, consumers, and businesses? Let’s find out.

Why is the Government In Favor of EV Adoption?

By 2030, India aims to have 30% of total vehicle sales to be electric, demonstrating their electric vehicle targets are quite aggressive. The major drivers of this are three:

• Reducing Dependence on Imports – EVs can help reduce the dependence on fossil fuels, which is critical since India imports over 85% of its crude oil.
• Lessening Air Pollution – Changing gas-powered vehicles to electric can greatly improve the air quality of India, which has 14 of the world’s 20 most polluted cities.
• Economic Development – Clean transportation will put India on the map and investing in EV technology will help increase employment.

Now, let’s take a closer look at the government policies and incentives driving this change.

Central-Level Provisions: Incentives Provided 

Faster Adoption and Manufacturing of Electric Vehicles (FAME) Scheme:

One of the most instrumental programs is the FAME scheme, which was established in 2015 with the aim of encouraging the use of electric mobility. Let us know this in depth.

FAME I (2015-2019): The Beginning

Budget: ₹359 crore

Focus: Provided direct subsidies for electric two-wheelers, three-wheelers, buses, and hybrid cars.

Impact: While it did promote and facilitate support from certain sectors, it did not achieve significant influence in the industry.

FAME II (2019-Present): Bigger & Better

Budget: ₹10,000 crore

Objective: Promoting widespread adoption of electric vehicles by providing subsidies for vehicle purchases and charging infrastructure.

Incentives: 

• Electric two-wheelers: ₹15,000 per kWh with a limit of 40% of the overall cost
• Electric three-wheelers & e-rickshaws: Up to 50,000 per vehicle.
• Electric four-wheelers: 1.5 lakh per vehicle for personal use.
• Electric buses: Up to 50 lakh per bus.

Additional Push: Over 2700 charging stations are to be constructed across India for the use of e-vehicles.

Impact: The sales of EVs exploded, particularly in the two-wheeler and three-wheeler segments. Today, India is among the world’s leaders in electric vehicle adoption.

Production Linked Incentive (PLI) Scheme:

To increase domestic production of EV and battery parts and lower the need for importing products, there is a PLI scheme that motivates local manufacturers.

PLI for Advanced Chemistry Cell (ACC) Batteries:

Budget: ₹24,000 crore

Objective: Encourage the large-scale production of batteries in India.

Incentive: For producers, 2000 to 3000 per kWh battery produced.

PLI for Automobile and Auto Components:

Budget: ₹25,938 crore

Incentive: Targets domestic EV production facilities by encouraging companies to invest.

Impact: Several companies have increased their capacity to produce EVs like Ola Electric, Tata Motors, and Mahindra and Mahindra, which has resulted in a cost reduction and enhanced availability of the products.

Tax Rebate & Financial Help

EVs as a market in India come with great opportunities due to the special provisions given by the government in terms of taxes on companies and ordinary individuals using vehicles.

• GST Reduction: EVs incur a GST tax of only 5%, you can see the difference of 28% for petrol or diesel vehicles.
• Income Tax Deduction: There is a claimable deduction of up to ₹1.5 Lakhs for EV purchases financed by loans.
• Road Tax & Registration Fee Exemptions: A large number of state governments have eliminated or reduced the taxpayer’s burden of road tax and registration fees associated with EVs.

Impact: Consumers and EV operators willing to become owners of EVs have increased owing to the reduced costs.

State-Level Provisions: Incentive Competition 

A number of Indian states have supplemented the central government’s policies with their budgetary provisions which include more subsidies, tax breaks, and assistance for charging sites. 

Let’s analyze a few of the outstanding states.

• Bihar: The government offers subsidized EVs to promote affordability, and is working on expanding the charging infrastructure.
• Delhi: EV buyers are subsidized by 1.5 Lakhs and do not have to pay road tax or registration fees.
• Maharashtra: Has up to 2.5 lakh subsidized EVs and battery swapping incentives.
• Tamil Nadu: Brands such as Mercedes-Benz, Renault, and LG have invested heavily due to the government focusing on EV manufacturing.
• Karnataka: The state has the first dedicated EV policy in India which helps Bengaluru gain recognition as an EV hub. 

Impact: Businesses started investing and launching their products in regions where policies supported Electric Vehicles the most, leading to the fastest adoption rate.

Deployment of Charging Infrastructure

There are insufficient charging stations available for the general public, which poses one of the most significant obstacles to adopting electric vehicles. The government has implemented policies with the intent of resolving these issues as soon as possible. 

• FAME II & State Level Policies: Grant aid for the many new charging station sites. 
• Public Charging Stations: More than 46,000 stations are expected to be operational by the year 2030. 
• Private Investment Growth: Thousands of charging stations are being installed by Tata Power and BPCL. 
• Impact: EVs being more practical for day to day use, as well as range anxiety, are being moderated with the addition of more public charging stations. 

Add Battery Recycling Policies

The local government intends to make the import of electric vehicle components more affordable by lowering the customs tax to assist in expanding the EV market.

• Lowering Battery Recycling Policy: Offers plans to sustainably build the economy for electric vehicle batteries.
• Impact: Reduced taxes and ecofriendly policies will, in the long run, strengthen the EV market.

Future Possibilities are high. 

When it comes to adopting EVs, India has the most aggressive policies in the world. Through tax initiatives, subsidies, and infrastructure development, EVs are now a feasible option for businesses and consumers alike.

Obstacles still exist. Battery supply chains, charging infrastructure, and general affordability still need improvement. However, with ongoing government support and increasing participation from the private sector, India is poised to be an EV powerhouse.

If you are looking to invest in the EV space – be it as a business, manufacturer, or consumer – now is the time to get started!