Industry exposure to changing government policies in the electric vehicle sector

- Worry that the reduction in subsidy of e-two wheelers will make their purchase more expensive

On the one hand, the government is trying to increase the spread of electric vehicles in the country, while on the other hand, it is also taking decisions that are unfavorable to the electric vehicle industry, as a result of which the possibility of electric vehicles becoming more expensive instead of cheaper has arisen, and the attraction towards them has also decreased. Concern is being expressed to meet. The Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (Fam-Two) subsidy for electrified two-wheelers, which are playing a key role in revolutionizing the electric vehicle sector, has been reduced from Rs 1,500 per KWh to Rs 10,000. The subsidy limit, which was currently a maximum of 40 percent of the selling price, has been reduced to 15 percent.

In FY 2022-23, the overall sales of electric vehicles crossed one million units for the first time, of which more than 60 percent were e-two wheelers. The reason behind the high sales of e-two wheelers is the subsidy. It is believed that the government has now decided to change the subsidy as the sales started to increase.

To increase the sales of electric vehicles in the country, the Faster Adoption of Electric Vehicles Scheme-2 (Fam-2) has been implemented by the government since 2019, under which special subsidies are provided on the production of electric vehicles subject to certain conditions. But the sudden decision of the government to reduce the subsidy does not rule out the possibility of long-term impact on the companies shifting to the production of electric vehicles. Generally consumers in India are very price sensitive. Most of the petrol and diesel powered two wheelers cost less than one lakh rupees while the electric two wheelers cost much more than that.

To get rid of the pollution caused by vehicles in the country, the government is talking about electric vehicles, but if the spread of electric vehicles is to be increased in the country, then it is necessary that they should be available at the same price as the existing conventional vehicles.

Even earlier, the government stopped the subsidy amount payable to some e-two wheeler manufacturing companies, which consequently affected their sales. As a result of the drastic measures taken by the government, the registration of electric two-wheelers saw a drop of 25 percent in April. As against 82292 in March, the registration number of electric two wheelers was 62581 in April. Actions were taken against the companies for allegedly violating the requirement of 50 percent localization in the production of their scooters and suspension of subsidy payments.

In the financial year 2022, 2.50 percent of the total sales of new vehicles in the country were sales of electric vehicles. In fiscal 2021, the sales figure was less than one percent. Subsidies and other incentive schemes may be responsible for the increased production of electric vehicles, but India ranks far behind among the fifteen countries in terms of readiness to make a strong move towards electric vehicles. Thus, India is progressing slowly in terms of the spread of electric vehicles.

Due to high global crude oil prices, the fiscal calculations of many countries of the world, including India, have been disrupted. If such calculations are to be prevented in the future, it is necessary to reduce the consumption of petrol-diesel in vehicles or even the dependence on it. Due to the energy crisis, Germany has been pushed into recession. Even without petrol-diesel, if the development of the country's economy is to be advanced, the first condition for that is that along with the incentives given to the electric vehicle sector, a liberal attitude towards the manufacturers should be maintained for a long time.

In the still nascent electric vehicle sector in the country, more and more entrepreneurs will come forward to invest only when they are assured of sufficient cooperation from the government. A concerted solution to strict enforcement by the government in terms of subsidies before it affects the production of electric vehicles will speed up the migration to electric vehicles in the country otherwise the growth of the sector will not be hampered.

E-vehicles account for around five percent of the overall vehicle sales in India. By 2030, the government's target is to have 30 percent electric cars in the overall sales of private cars, 70 percent in commercial vehicles and 80 percent in the overall sales of two and three wheelers. To achieve this target, the government will have to maintain consistency in its policies otherwise. Investors as well as users will not be disappointed.