The Budget has been promising for the EV sector, but people will now look forward to increased development of charging infrastructure to further accelerate the growth of the sector
Keeping in mind the rising environmental hazards, the Union Budget 2023 laid emphasis on transforming India into a pollution-free and eco-conscious country. If the current environmental emergency is not addressed at the correct time, it can affect almost 3 billion people globally.
The push towards green mobility will propel the growth of the EV sector in India and will encourage further investments. To usher in a green industrial and economic transition, India is committed to achieving net-zero carbon emissions by 2070. With its focus on green growth and push for green mobility, this Budget provides the much-needed impetus to the sector.
The customs duty exemption on capital goods and machinery to manufacture li-ion batteries will be an implementer for the country to transition to sustainable and eco-friendly transportation. The exemption will have a domino effect on the overall sector with a substantial decrease in the overall cost of the finished products wherein the cost of battery packs is likely to reduce by 5 per cent coupled with lower initial investments. Additionally, the vehicle scrapping policy will also be beneficial if the old vehicles are replaced by electric vehicles. This will further aid the country’s vision of mass EV adoption by 2030.
Some of the other benefits the Budget announcements are:
Increase manufacturing: The favourable policies put in the place by the Government of India in the Union Budget will encourage increased backward integration by more businesses. This will aid in the growth of more manufacturing units within the country. The increased manufacturing will create both blue-collared and white collared employment opportunities in the EV manufacturing sector, including assembly line workers, technicians, engineers and managers. The growth of the EV sector will provide a strong support to the Indian economy and aid in the rise of the country’s GDP. Additionally, the indigenous manufacturing will also reduce dependency on foreign imports.
Cost reduction: The extension on the exemption of customs duty on capital goods and machinery to manufacture li-ion cells for batteries will result in the reduction of the cost of setting up an EV manufacturing unit in India. Thus, encouraging further penetration of electric mobility in the country as the upfront cost of setting up a manufacturing unit will reduce considerably. This will have a positive impact on the finished battery packs. Also, it will further increase competitiveness in the sector, as a result, opening up more investment opportunities from both domestic and international investors.
Encouraging adoption of EVs: The reduction in the cost of EVs and their components due to the exemption of custom duty will make electric vehicles more affordable for consumers. This will encourage more people to switch from traditional gasoline-powered vehicles to electric vehicles, reducing the country's dependence on fossil fuels and reducing carbon footprint. By promoting the adoption of EVs, the government is taking a step towards a cleaner and more sustainable future. Additionally, reducing the country's dependence on fossil fuels will also help to reduce India's oil import bill, making the country more energy self-sufficient.
Also, the decreased upfront investment to set up manufacturing plants for ancillary parts including batteries coupled with reduced GST from 18 per cent to 5 per cent will encourage entrepreneurs to venture into the space.
While the Budget has been promising for the sector, people will look forward to increased development of charging infrastructure resulting in reduced range anxiety to further accelerate the growth of the sector.