Can Electric Vehicles Survive Without EV Subsidies in India?

Electric vehicles (EVs) have been seen as a key part of the future of transportation worldwide. In India, this shift towards battery-powered vehicles has received strong support from the government. This backing has been particularly notable under the leadership of Union Minister of Transport and Highways, Nitin Gadkari. The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme was introduced in 2015 to boost the use of EVs through various incentives and subsidies.

For the past decade, India has been working hard to increase the adoption of EVs. Gadkari has been particularly vocal about pushing for local production of EVs to lessen the country’s reliance on imports. 

The first phase of FAME provided the initial push for EV adoption. However, it was FAME 2.0, launched in 2019, that truly accelerated the growth of EV sales. This second phase significantly enhanced the impact of the scheme.

Earlier this year, the Indian government made significant changes by reducing or even removing some of the benefits provided under FAME 2.0. Gadkari recently mentioned that these subsidies might no longer be necessary. He attributed this to the growing demand for EVs and alternative fuels like CNG. Additionally, decreasing battery costs and supportive tax policies are contributing factors.

The Impact of FAME 2.0

FAME 2.0 played a crucial role in promoting EVs across various segments. The scheme offered enhanced incentives for electric two-wheelers, three-wheelers, and four-wheelers, leading to a significant rise in EV sales. Companies like Ola Electric, Ather Energy, and Bajaj Auto took advantage of these incentives to launch affordable electric scooters that gained popularity among Indian consumers.

However, the sudden withdrawal of FAME 2.0 benefits in March 2024 created a shockwave. The immediate result was a drop in EV sales, though it’s worth noting that March saw a spike in sales, possibly due to a rush to buy before the incentives were reduced. This makes it challenging to assess the exact impact of the subsidy withdrawal on the overall EV market.

Can EVs Survive Without Subsidies?

The key question now is whether EVs can thrive in India without government subsidies. Here are some factors to consider:

1. Increased Costs: Without subsidies, the upfront cost of EVs has risen, making them less affordable for many consumers in a price-sensitive market like India.
2. Demand Slump: Higher prices have dampened consumer interest, leading to a slowdown in sales for some EV manufacturers.
3. Industry Challenges: The removal of incentives has posed difficulties for the EV ecosystem, affecting suppliers, charging infrastructure providers, and battery manufacturers.

Despite these challenges, the Indian EV market is showing signs of resilience. Several factors are contributing to a gradual recovery:

• State-Level Incentives: Some state governments have introduced their own EV policies and subsidies, helping to counteract the impact of the central government’s policy changes.
• Growing Awareness: More consumers are becoming aware of the benefits of EVs, such as lower pollution levels and reduced running costs.
• Technological Advancements: Improvements in battery technology and charging infrastructure are making EVs more practical and convenient.

World EV Day Industry Perspectives

On World EV Day, industry leaders shared their views on the future of EVs in India:

• Manu Saxena, Senior Vice President of EV Business at TVS Motor Company, highlighted how far the industry has come and expressed optimism about India’s potential to lead in electric vehicle innovation. He emphasized the importance of government support and the role of state-level incentives in nurturing the EV sector.
• Jyoti Malhotra, Managing Director of Volvo Car India, praised the company’s commitment to zero-emission vehicles and recyclable materials, aligning with the broader vision of sustainable mobility.
• Shradha Suri Marwah, President of ACMA India, acknowledged the pivotal role of the auto component industry in advancing India’s journey toward sustainable transportation. She noted the significant contributions of Indian manufacturers in developing essential EV components.

In conclusion, while the road ahead for EVs in India without subsidies is fraught with challenges, the industry is showing resilience. The growing consumer awareness, state-level incentives, and ongoing technological advancements are helping to pave the way for a sustainable future for electric vehicles in the country.