Continued customs duty support, subsidy parity: EV ecosystem pens down wishlist ahead of Union Budget

India’s electric vehicle ecosystem has been vibrant with activity, propelled by favourable government policies, subsidies, and focus on new vehicle categories under the PM E-DRIVE scheme. As the Union Budget approaches, companies in the ecosystem hope for continued capital allocations and support from the government. 

Original equipment manufacturers (OEMs) have had a tumultuous year with the rare earth magnet shortage casting doubt on whether supply can match up to demand. However, according to experts, manufacturers have quickly adapted to the crisis by widening their sources, away from China, or by coming up with rare earth free-magnet motors. 

But one of the key sticking points is the uncertainty around customs duty attached to lithium-ion cells. Currently the industry is paying 5% basic custom duty on importing lithium-ion cells instead of 18%, and OEMs hope for this to continue, according to Aravind Mani, Co-founder and CEO at River Mobility. 

India has set up limited capabilities to meet the rising demand for lithium-ion cells in today’s EV ecosystem. While the government hopes for cell production in India to increase as more gigafactories come up in India, supported by the Production Linked Incentive Scheme (PLI), the ecosystem hopes the current rates remain the same. 

“India needs to be a little more self-sufficient in terms of battery production because we still have very limited cell production capacity. While the government is working on this through PLIs for battery manufacturing, etc, most of it has not kicked in, in terms of manufacturing capacity, the real capacity. So still we are largely dependent on imports for our lithium-ion cells and the duty benefit for lithium-ion cells will have to continue till the time we are self-sufficient in terms of the cell production,” noted Mani. 

Other players have welcomed moves that look to implement stringent rules for resignations of fossil-fuel run three-wheelers. For instance, under the draft EV Policy 2.0, the Delhi government had suggested halting new registrations for CNG and petrol-run auto-rickshaws. However, the cabinet decided to withdraw these recommendations, reports suggest. 

In states like Maharashtra, Karnataka, and Tamil Nadu, drivers are penalised through higher taxes for registration of a CNG or petrol run three-wheeler to encourage adoption of e-autos. 

Meanwhile, Kazam, which offers battery charging solutions for electric three-wheelers, hopes that the PLI subsidy gets refreshed with fresh capital allocation for electric three-wheelers. “Three-wheeler sales rent has gone through almost 13%, but its allocated PLI subsidy has been consumed as of December end. If that is completely removed, then there is a high chance that it can push back sales. So we do not want that. We want to have parity with say, petrol vehicles, etc. And for that, I would hope there is a reduced subsidy, if not a significant one, to ensure that it is in parity with a petrol E3W,” noted Akshay Shekhar, CEO and Co-founder at Kazam. 

As the Indian EV ecosystem matures and vehicles begin to approach the end of its life cycle, lithium-ion battery recycling firms have voiced their expectations from the upcoming budget which include policy and capital support across the supply chain. According to Manikumar Uppala, Co-founder and Chief of Industrial Engineering at Metastable Materials, this includes dedicated capital support for recovery infrastructure. 

Moreover, he also noted that current schemes reward production numbers and not outcomes like emission intensity of material recovery rate. “Mature EV markets are including lifecycle performance metrics in fiscal frameworks, and India should not lag here. As batteries last longer, are easier to recycle and recover more valuable material, replacement frequency, import needs and future subsidy needs all reduce along with making EV pricing more predictable.”