Government’s New Policies Could Make EVs More Affordable in India: Here’s How

New EV Policy: India is planning to expand the incentives for electric vehicles to all the auto manufacturers that are producing vehicles at existing factories in the country. To boost electric vehicles in India, the government announced a new EV policy in March 2024, which aimed at benefitting companies investing in building new manufacturing plants.

India's EV policy, which is still under the process of finalisation, was first developed to prompt Tesla to enter the Indian market and manufacture locally. However, the Tesla backed off from those plans earlier this year.

What does the India EV Policy say?

Under the policy, an auto manufacturer, that is investing at least $500 million to manufacture EVs in India with 50 per cent of auto components being sourced locally is permitted to a huge cut on import taxes. There will be no cap on the maximum investment. There is a drop of 15 per cent in import taxes from as high as 100 per cent tax for up to 8,000 electric cars per year.

Tesla has still not officially announced any plans to set up a manufacturing plant in India. According to a report from Reuters, the government will also consider investments in electric vehicles at its current manufacturing facilities, which are currently producing petrol, diesel, or hybrid cars. However, the automaker should meet the criteria of producing electric vehicles on a separate production line and source components locally.

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How is government promoting EVs in India?

The government has announced several policies and initiatives to boost the adoption of electric vehicles in India. For starters, there is the PM e-Drive scheme, which was launched in October with an outlay of Rs 10,900 crore. This scheme focuses on the faster adoption of EVs in India, charging infrastructure, and the development of EV manufacturing in India.

This initiative was announced shortly after the government announced the extension of the PM e-Drive scheme for cargo three-wheelers. Under the PM e-Drive scheme, the buyers of the e-2W, e-3W, e-ambulances, e-trucks and other new emerging EV categories will get subsidies and grants by the government.

Recently, the Telangana government also announced a 100 per cent waiver of road tax fees in the state for electric vehicles. The government announced this scheme in November and will be applicable till December 1, 2026. This waiver will be applicable on electric two-wheelers, electric four-wheelers, commercial passenger vehicles such as taxis, private cars, electric three-seater auto-rickshaws, electric light goods carriers, including three-wheeled goods vehicles, electric tractors, and electric buses.

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How will government's EV Policy and other subsidies impact EV adoption in India?

In India, GST levied on the internal combustion engine (ICE) cars is 28 per cent. However, electric cars are covered under a GST bracket of only 5 per cent, which lowers their price.

With this initiative from the government, the prices of electric vehicles will come down and benefit global automakers like Kia, Hyundai, Skoda, Volkswagen, and Toyota to manufacture electric vehicles here. Eventually, these benefits could also be passed down to the buyers. In addition to this, government's new schemes could also make it easy for automakers to set up new manufacturing facilities in India, which in turn will help create more jobs and make a new business case for automakers to have global electric models at an affordable price in India.

On the other hand, Telangana’s government's 100 per cent waiver on the road tax for customers will help in lowering the on-road price of an electric vehicle in the state compared to an ICE vehicle. This, in turn, will help promote EV adoption in the state.