Budget 2024: From GST cut on parts to accessible financing options; here’s what EV industry expects

With the interim budget just around the corner, the automobile industry is anticipating measures that could fasten the electrification journey, especially amongst start-ups. While the speculations are rife that the union government might not announce major policy changes, the automotive and electric vehicle industry anticipates certain measures that could not only propel localisation but would accelerate the country’s EV transition.

GST cut of EV parts         

One of the key measures proposed by industry players is lowering GST (goods and service tax) on electric vehicles and their spare parts. According to Pratik Kamdar, CEO & co-founder, Neuron Energy, lowering the tax rate for electric vehicles and their parts would not only make EVs more affordable but would also propel adoption of EVs in the mass market. "We strongly support a positive change in the Goods and Services Tax (GST) rules, especially urging a lower tax rate for Electric Vehicles (EVs) and their parts. This adjustment won't just make EVs more affordable but will also encourage more people to embrace electric transportation, aligning with our country's goal of sustainable and eco-friendly travel," says Kamdar.

Echoing the same, Anshul Gupta, MD, Okaya EV opines that a GST cut on EVs and their parts would also aid in supporting domestic manufacturers. "A pivotal demand is the alignment of input and output Goods and Services Tax (GST) rates for EVs & spare parts at 5%, creating consistency between input and output rates. This move would significantly contribute to making electric vehicles more accessible to a broader segment of the population. The call for additional incentives specifically directed towards Indian Original Equipment Manufacturers (OEMs) is another key aspect. By supporting domestic manufacturers, the government can catalyse advancements in EV technology and strengthen the indigenous EV industry," observes Gupta.

According to Niraj Rajmohan, co-founder and CTO, Ultraviolette, the reduced GST rates on EVs and chargers have helped narrow the price gap between EVs and fuel-based vehicles. "When the government launches initiatives that encompass technology development in India, we advocate for a subsidy structure without segment caps. Encouraging multiple segments is crucial, and technology, being universal, shouldn't be restricted," says Rajmohan.

Policies for Sustainable Mobility

Industry players also anticipate the additional support from policies such as production-linked incentive scheme and FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles) to align with the country’s electrification target. 

"Last year’s budget paved a path to higher adoption of EVs in India resulting in a sharp shift of customer mental models to make more greener & smarter choices. With the rise of marketplaces and digitisation in India, it is becoming a convenience-first nation that is also setting high benchmarks globally.  We anticipate the Union Budget 2024 to pave the way for innovative policies that accelerate sustainable mobility solutions and drive economic resilience which will help customers with cost-effective solutions and mobility apps to support the evolution of transportation in the automobile industry," says Greg Mohan, CEO & co-founder, Zoomcar.

According to Ultraviolette’s Rajmohan, any extension of the FAME subsidy and removing all caps on the ex-factory price of EVs would greatly enhance the position of startups in electric two-wheeler space.  

Durable and eco-friendly tires

The upcoming interim budget is also crucial for tire industry, as it anticipates strategic allocations for durable and eco-friendly tires. “The 2024 budget is crucial for aligning tire manufacturing and EVs, steering the industry toward innovation and sustainability. The tire industry hopes for strategic allocations that drive innovation in durable and eco-friendly tires. Simultaneously, the EV segment would expect incentivising development of the ecosystem, including charging infrastructure investments, and research support, fostering a greener automotive landscape,” says Harinder Singh, MD & CEO, Yokohoma India. Yokohoma is a wholly-owned subsidiary of Japan-based Yokohoma Rubber Company.

Another proposal put forward by the tire industry is the adjustment in duty rates for rubber production so that local manufacturing can be encouraged. "India faces challenges in rubber production, with high duties on natural rubber. Adjusting duty rates is vital for cost competitiveness. Rising raw material costs and reliance on imports impact profits. Encouraging research, local sourcing under 'Make in India,' and adjusting duty structures will boost global competitiveness and sector resilience,” says Singh.

Accessible financing options for EVs

Easy financing of electric vehicles is another proposal put forward by the EV industry. According to Samarth Kholkar, CEO and Co-Founder, BLive, the automobile industry anticipates that the government will incorporate the Electric Vehicle (EV) sector into Priority Sector Lending (PSL), facilitating more accessible financing options for both personal and commercial electric vehicles. “There is a hopeful outlook for policy initiatives aimed at advancing EV adoption. This includes the extension of subsidies to enhance the affordability of electric vehicles and the implementation of incentives for conversion kits, encouraging the transformation of Internal Combustion Engine (ICE) vehicles into Electric Vehicles (EVs),” says Kholkar.

Meanwhile, Anand Bang, COO – Sales & Marketing, Tata Motors Finance, urges continuation of policy measures and fiscal initiatives needs to continue to orient with infrastructure development, alongside ensuring robust capitalization in NBFC sector.

"As India anticipates the upcoming Union Budget, it is noteworthy to recognize the direct link between government-led infra spending and a flourishing commercial vehicle ecosystem. The demand for commercial vehicles is a crucial metric, reflecting the pulse of the nation's infrastructure development and driving growth for CV financiers, manufacturers, and OEMs. Policy measures and fiscal initiatives needs to continue to orient with infrastructure development, alongside ensuring robust capitalization in NBFC sector," says Bang.