EV Makers No Longer Need Subsidies: Transport Minister Nitin Gadkari

Union transport minister Nitin Gadkari has reportedly said that the Indian electric vehicle (EV) industry no longer needs government subsidies.

As per news agency PTI, Gadkari said that consumers are now choosing EVs on their own, making subsidies for EV players unnecessary. 

“Consumers are now choosing electric and compressed natural gas (CNG) vehicles on their own and I do not think we need to provide much subsidy for electric vehicles,” Gadkari said. 

Speaking at a green mobility convention in New Delhi, Gadkari also said that the cost of manufacturing EVs is high initially, but the increase in demand has resulted in lower production costs. This, he said, has rendered incentives unnecessary. 

Highlighting the lower GST rates on EVs compared to petrol and diesel vehicles, the minister said that the “ask for subsidies isn’t justified anymore”.

“My personal belief is now we don’t need too many subsidies. The GST on petrol, diesel vehicles is 48%, the GST on electric vehicles is only 5%. Still, after getting 5% GST, if someone is expecting a subsidy from the government, my honest opinion is now we don’t need subsidies,” Gadkari added.

The minister also underlined falling battery costs as a key factor driving EV affordability, adding that lithium-ion battery prices have dropped from $150 per kilowatt-hour to $107-108 per kilowatt-hour. 

Gadkari predicted that within two years, EV prices would reach parity with internal combustion engine vehicles.

“Now, five companies are starting lithium-ion battery (production),” Gadkari added, referring to manufacturers benefiting from the government’s production-linked incentive for advanced chemistry cells (PLI-ACC).

The statement comes as the government prepares to roll out the third iteration of the FAME scheme. It was initially expected to be a part of the Union Budget 2024 but union minister H.D. Kumaraswamy, in the run up the Budget, confirmed its exclusion citing ongoing preparations. 

The scheme, with an expected outlay of INR 10,000 Cr to INR 12,600 Cr, is now likely to be implemented within the next two months. It will replace the interim Electric Mobility Promotion Scheme (EMPS) that was introduced after FAME-II ended in March 2024.

However, industry leaders have expressed mixed opinions on the necessity of continued subsidies. Ola Electric founder and CEO Bhavish Aggarwal said last month that while the EV industry is less dependent on FAME subsidies, some support is still beneficial.

Alternatively, Bajaj Auto CEO Rajiv Bajaj said, “There’s no party happening as of now in the electric two-wheeler space.” He noted that EV penetration remains at 4-5% despite subsidies and discounts.