Budget 2022: Gating factors facing the EV industry in India

India’s EV ambitions gained strong momentum in 2021 with robust growth in demand and on-ground traction. Budget 2022 will have the gating factors facing the EV industry on top of its agenda.

Customers are fast realising the cost parity at total cost of ownership (TCO) level. However, given the higher upfront cost, financing for EVs is a critical aspect to achieve higher adoption. Despite the need, financing for these vehicles is not easily available as the life of the batteries/vehicles is not established in the market. An important step for the Government to increase EV adoption would be to introduce measures to boost the EV financing ecosystem. Increase in financial support by making EV a priority sector in lending, coupled with measures to establish the life of the vehicles through improved certification processes, will provide a push towards faster adoption of EVs. We can expect to see some steps by the Government in this regard.

Another key challenge for the Government is creation of robust charging infrastructure supported by grid upgrades for electrification of large vehicles. Focus on charging infrastructure is essential to mitigate customers’ concerns related to range anxiety. OEMs are trying to solve this issue in silos for their own vehicles. For e.g., some OEMs have vehicles with 100% portability, some other OEMs have a fast-charging network for their vehicles, etc. Strong focus on developing a wide standardised charging network will benefit EV adoption in the longer run. Development of charging infrastructure will also require significant focus on upgradation of the local grid to handle high power fast chargers. Setting up a dedicated corpus for charging infrastructure is one of the top points on the wish list for the stakeholders in the segment.

Other key areas that require attention include dependency on imports and an inverted duty structure. Imported components are not specifically designed for Indian conditions. Their performance is significantly sub-optimal. Thus, a significant emphasis must be given on localisation. Assistance to address these concerns with tax waivers and change in duty structure can further provide a boost to the segment. Localising cell manufacturing in India is the need of the hour for the country considering long term energy security. With India lacking key resources for local manufacturing – battery technology, access to raw materials, skilled labor for manufacturing and capital, the policy makers have a big task at hand to expedite the battery cell localisation in the country.

Additionally, increased awareness of other benefits of EVs like clean air, reduced noise, etc. should also be prioritised in the budget. Some part of the EV budget should also be allocated to these educational initiatives to sensitise the customers and further drive-up EV adoption. The environment for EV adoption is ripe, with the right policy nudge the EV penetration can exponentially grow over next 12 months.


Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.