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EV Prices To Drop With Proposed Subsidy On Battery Manufacturing

EV Prices To Drop With Proposed Subsidy On Battery Manufacturing

NITI Aayog is said to have proposed an INR 700 Cr annual subsidy for battery manufacturing

The proposal will now be sent to the cabinet for approval

This move is expected to bring down the cost of EVs

The finance ministry has reportedly approved NITI Aayog’s proposal to provide an annual subsidy of INR 700 Cr for battery manufacturing for electric vehicles and mobile phones. 

According to a media report which cited government officials, the proposal will be sent to the cabinet for approval, after which the NITI Aayog will invite bids from manufacturers in December this year. 

“The plan is to award contracts soon after that so that battery manufacturing plants are up and running by 2022,” an official was quoted as saying. 

With the reduced cost of battery manufacturing, the government expects cost of batteries to be lowered down to $76 or about INR 5,450 per kilowatt hour, as compared to the existing $276 or INR 19,800 per kWh. This would give a huge impetus to manufacturing.

This reduction in battery costs is expected to lower the cost of electric vehicles and make them comparable to ICE vehicles in the next three to four years. The report also noted that at present, batteries account for an average of 50% of the cost of electric vehicles in the country. 

Earlier in July, Anil Srivastava, director general of Development, Monitoring and Evaluation Office (DMEO), NITI Aayog has said that the EV industry needs to invest in building 50-60 GWh of battery capacity by 2025. He had then estimated that the industry needs an investment of $40 Bn on battery capacity over the next three years. 

Govt Focus Turns To Charging Infra

With the announcement of the latest Union Budget 2019, the Indian government has finally turned its focus to developing EV infrastructure in the country. The Finance Minister had then proposed a new scheme which will invite global companies through a transparent competitive bidding process to set up mega manufacturing plants in sunrise and advanced technology areas including lithium storage batteries, and charging infrastructure. 

The new scheme has also promised manufacturing plants investment-linked income tax exemptions. Certain parts used in EV manufacturing were also said to be exempted from customs duty. 

Due to issues such as lack of proper EV charging infrastructure and low domestic EV parts manufacturing capacity, companies in this space had to invest heavily in setting up their own charging infrastructure and spending huge amounts on importing key EV components. 

The Indian electric vehicle industry recorded sale of 7.59 Lakh units in India in FY2019. This included the sale of 1.2 Lakh two-wheelers, 6.3 Lakh three-wheelers and 3,600 passenger vehicles. 

Overall, the automobile industry is undergoing a massive slump in sales. According to the Society of Indian Automobile Manufacturers, the auto industry has recorded a 31% drop in sales in 2019 as compared to last year.