Will The Union Budget 2023-24 Boost EV Adoption?

The Union Budget 2023-24, is going to be crucial for the Indian automobile sector. All automotive players in India are eyeing the upcoming budget, which will be presented by Union Finance Minister Nirmala Sitharaman on or before 1st February 2023. This budget will set the next growth trajectory of the sector, especially for the Electric Vehicle (EV) Industry which has gradually become the mainstream of the automotive sector.

The EV industry which faced several roadblocks in the year 2022, such as electric two-wheeler and electric four-wheeler explosion cases, range anxiety amongst customers and inadequate charging infrastructure, expects new schemes and policies, rationalisation of GST rates and reduction of duties to create additional demand for the electric vehicles in the country.

Expecting the same from the Union Budget 2023-24, Etrio, an EV maker that works with the vision to lead cargo fleet electrification, uttered the same.

"To emerge stronger in realising the fullest potential of the on-going electric mobility revolution, it is imperative that as a nation India must make its manufacturing capacities stronger and fortify its localised supply chains. We believe that the upcoming Union Budget should focus on introducing more schemes and policies to support innovation and capacity-building, and to reward EV adoption,” said Kalyan C Korimerla, MD & Co-Promoter of Etrio Automobiles. 

The Landscape of EV Startups

The automotive sector which has witnessed massive push for electric and clean mobility adoption from the government in the past few years, also expects the extension of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) scheme beyond 2024, reduction of GST, as well as incentives for MSMEs and NBFCs.

EVage, a company that is electrifying the commercial fleets with vehicles platforms to transform the mobility industry, its Founder & CEO, Inderveer Singh, said, “On the side of innovation, the Government of India needs to take cognizance of the drivers of true innovation in the EV sector - the startups - and create a level playing field for them in their incentive schemes, access to funding and financing and government fleet electrification projects as well. Adding EVs as a priority sector lending (PSL) category could be a solid interim step to encourage fleet owners to choose electric. Because most state EV policies and frameworks do not include 4W considerations or fast-charging infrastructure guidelines, there needs to be a swift revamp in 2023 to galvanize the sector and make it the inflection point for commercial EVs in India.”

Commenting on the same, Niraj Singh, Founder & CEO of Spinny, said "Reduction in GST rates will encourage the efforts to bring transparency in the segment dominated by variables. Similarly, the Government should evaluate incentives such as allowing people to claim depreciation on vehicles, liberalise tax benefits and enable lower interest rates on capital, as this would not only motivate people to buy and upgrade cars. Such steps would not only contribute to the growth of India’s GDP, but would also further organise the pre-owned cars market. We are certain that the Government will introduce viable policy measures and significant initiatives in the upcoming budget that will help in propelling the industry.”

Electric Commercial Vehicle Adoption

As India aims to become the world leader of electric vehicles, the commercial vehicle segment is crucial as it amounts to a large percentage of the Indian automotive sector.

“To ensure that commercial or cargo EV adoption does not remain limited to the larger industry players, the Budget must incentivize small businesses and MSMEs to join the ICE to EV transition bandwagon as well. Furthermore, we would like to see Ease of Investing, Tax Rationalisation and EV Skilling & Upskilling as the guiding principles for the sectoral announcements in Budget 2023." added Korimerla.

Further adding to this, Singh said “With each budget cycle, the government gets another golden opportunity to showcase its willingness to accelerate the adoption of cleaner mobility in the country. 2W EV adoption is growing at a breakneck pace in India, as we are one of the world's largest 2W markets.

However, the commercial vehicles segment is the most significant contributor to the logistics sector's carbon emissions. The government needs to consider commercial EV financing a game-changer to enable lightning-quick adoption in the 4W category. Instead of subsidies, we need to lower interest rates for EV financing and standardize residual battery value calculation. Fleet owners will significantly benefit from the clearance of these hurdles.

Opening Avenues in EV financing

EV financing is the key enabler of EV adoption in India. Today, Indian customers face a multitude of challenges when planning to purchase an EV in India including – high-interest rates, limited financing options, low – loan – to value ratios, product quality issues etc. Therefore, it is the need of the hour to create and provide financing solutions to this segment of consumers by tailoring their needs.

Dev Arora, Co-founder & CEO of ALT Mobility, a full-stack integrated EV leasing and lifecycle management platform, said, “The upcoming union budget should induce a Credit Guarantee scheme and low-cost availability of debt for the fleet owners for faster adoption. Banks and PSUs that hesitate to finance EVs must incorporate new EV financing policies similar to recently a policy that was launched by IREDA for Indian companies having a fleet of commercial cars/bikes operating as a taxi service on B2B and B2C models. Similar policies are required for fleet operators operating last-mile delivery operations with LCVs and E2W.”

Electric Vehicles are the buzz of the future but buying an EV in the current scenario is not an affordable option. 

Expecting the reduction in prices of EVs, Akshay Singhal, CEO & Founder of Log9 Materials, said "To accelerate the penetration of EVs in the country, in the upcoming Union Budget 2023, the Government should include EVs in Priority Sector Lending (PSL) in order to make financing EVs cheaper and making them more affordable for the masses. Also, when it comes to incentives and financial enablers, the Government must take into consideration not just the volumes of production committed by manufacturers, but also the technological superiority of the vehicles and battery technologies in terms of safety, longevity, and fast-charging so as to ensure only the best reaches the final customers"