Budget 2019: Govt's EV Push Casts Shadow On Traditional Automobile Sector

Budget 2019 From GST rate cut to incentives for buyers here's all that FM announced on EVs

To drive higher adoption and sale of electric vehicles, the finance minister announced that GST on EVs will be brought down to five percent from the existing 12 percent.

"We want lot develop India as a manufacturing hub for electric vehicles and want to encourage the purchase of these vehicles".

The government's focus on electric vehicles means that soon companies like Maruti Suzuki, Tata Motors, and Hyundai will plan electric cars soon.

While presenting the Union Budget 2019, Finance Minister Nirmala Sitharaman announced that there will be an additional tax benefit of Rs 1.5 lakh on the interest paid on the loans taken for the purchase of the electric vehicles (EVs).

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Sitharaman said that already Rs 10,000 crore has been approved on April 1, 2019, to encourage faster adoption of EVs in the country under the FAME II scheme, which aims to encourage faster adoption of EVs by right incentives and charging infrastructure.

While, Gemopai Electric Co-Founder Amit Raj Singh said the reduction in GST along with an additional IT deduction of Rs 1.5 lakh on interest paid on loans for EVs, will help break the entry and perception barriers for the price sensitive Indian customers.

While the research paper titled "Finding a New Route to Southeast Asia's Electric Vehicle Future" noted that progress in the EV market is likely to be slow over the next few years, it should increase dramatically after 2025 after certain barriers are overcome. The decision to provide income tax exemption for loan on electric vehicles is expected to significantly reduce the gap between the price of a conventional petrol or diesel automobile and an electric vehicle. Currently, the FAME scheme - meant to encourage electric adoption - provides incentives only for taxis and fleet buyers, while there is no particular benefit for private auto owners.

The reduction in GST rates on electric vehicles (EV) from 12 per cent to 5 per cent will also motivate manufacturers of EVs and electronic vehicle loans will boost sales, some experts claimed. "Additionally, bringing down custom duty on lithium-ion cells to nil would further cut down the cost of batteries and help local battery manufacturers to scale-up the business". However, the government has not yet announced any subsidies in this regard. The time consumed for charging the batteries of electric vehicles is another hindrance towards the progress of this initiative. "It now becomes imperative that OEMs chalk out plans that allow the industry to scale up and meet the demand for compelling products". These measures will certainly help in making EVs more affordable and attractive to the consumers, which is in line with the recommendations made in the Economic Survey, " SIAM said.

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