Union Minister of Road Transport and Highways Nitin Gadkari believes the Indian electric vehicle market no longer requires government subsidies. Speaking at the BNEF Summit on Thursday, Gadkari noted that while manufacturing costs were initially high, the growing demand for EVs has driven production costs down, making subsidies unnecessary. He emphasised that with GST on EVs at just 5%, the sector already enjoys significant tax advantages over petrol and diesel vehicles, which are taxed at 28%.
“In my opinion, manufacturing of electric vehicles no longer needs to be subsidised by the government,” the minister said.
“The GST on a petrol, or diesel vehicle is 28%; the GST on an electric vehicle is only 5%. Still, after getting 5% GST, if someone is expecting a subsidy from the government, my honest opinion is that asking for subsidies isn't justified anymore,” Gadkari added.
Furthermore, Gadkari reaffirmed his commitment to promoting cleaner vehicles in the Indian market. He stated that consumers are increasingly choosing cleaner fuels like CNG and LNG on their own, and he envisions a future where vehicles run on a variety of alternative fuels, including methanol, green hydrogen, and ethanol with India becoming a leading producer of green-fuel automobiles.
Gadkari highlighted India's progress in transitioning to cleaner energy, dismissing the need for additional taxes on fossil fuel-powered vehicles. He instead, focused on expanding the use of EVs, particularly in public transport, with plans to launch inter-city electric buses.
"Electric buses can play a major role in reducing fossil fuel dependence and pollution levels," he noted.
He said that bus stops on highways would soon have electric charging points so that long-distance e-busses would not face any difficulties.
The road transport minister projected that EVs will achieve price parity with internal combustion engine (ICE) vehicles within two years, driven by decreasing lithium-ion battery costs, which have fallen from $150 to $107-108 per kilowatt-hour.
As domestic EV production and demand increase, he added that the country could become the largest exporter of lithium-ion batteries within the next five years. Gadkari also revealed that five companies will soon start lithium-ion battery production particularly benefiting from the government's production-linked incentive for advanced chemistry cells (PLI-ACC).
He expressed confidence that India's low production costs will attract automobile manufacturers, boosting both domestic and international markets, and leading to a steady decrease in automobile imports. Highlighting India’s recent emergence as the third-largest automobile manufacturer globally, Gadkari noted that the shift towards electric mobility will further bolster the nation's automotive industry.
However, despite the government's target of 30% EV penetration by 2030, EV adoption remains slow in India. As of August 2023, only 5.28% of two-wheelers and 1.99% of four-wheelers sold in India since 2018 were electric, with three-wheeler e-rickshaw sales dropping nearly 21% year-on-year in the June quarter.
