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Union Budget 2024 is likely to evoke mixed feelings among EV buyers and manufacturers. On the one hand, it has set the stage for a reduction in EV battery prices by lowering custom duties on key minerals used in battery manufacturing, while on the other, it has been silent on restoring or increasing e-two-wheeler subsidies.
First, the good news: The budget reduced customs duties for critical minerals such as lithium, cobalt and copper from 10 to 2.5 percent on various metals to nil – a move that can reduce battery prices by as much as 20%.
"Batteries account for 40%-50% of the cost of EVs,” pointed out Vikrant Singh, Co-Founder, Director, and CTO at battery recycling firm Batx Energies. “The government has assisted battery manufacturers by lowering the cost of imports of key battery materials such as nickel, which is required for cathode manufacturing. The government's overall mineral policy is also a welcome step because it will allow battery costs to be reduced by more than 20% as a result of such policy initiatives," he added.
Rajat Verma, Founder & CEO of LOHUM – also into battery recycling – was equally upbeat. He said the Critical Mineral Mission will enhance production, recycling, and overseas acquisition of critical minerals. “The mission’s focus on technology development, a skilled workforce, and suitable financing mechanisms is just what the ecosystem needs right now,” he added.
Randheer Singh, former Director at the Government of India's Niti Aayog and CEO of consulting firm Foresee Advisors, also agreed to state that Finance Minister Nirmala Sitharaman's waiver of import duties on 25 minerals, including lithium, is expected to lower the manufacturing costs of batteries and reduce the prices of electric vehicles for consumers.
In addition, the budget introduced several measures to support battery and cell manufacturing, startups, and India's energy transition. While industry stakeholders appreciated these initiatives, there was disappointment over the lack of specific EV policies and the absence of a FAME III announcement for continuing government demand-driven subsidies.
At least some within the industry expected the finance minister to at least mention a successor to the FAME II scheme, although Minister of Heavy Industries HD Kumaraswamy had last week hinted that the new scheme would not be announced in the budget. The so-called FAME III was supposed to come with an allocation of Rs 10,000 crore. However, the budget reiterated the Rs 2,671 cr allocation for FAME II for the year.
In the absence of concrete announcements on FAME III, industry participants were also looking for an extension Rs 500 crore Electric Mobility Promotion Scheme (EMPS) 2024 plan to subsidise electric two- and three-wheelers. However, this too did not materialise. The EMPS scheme offered incentives of up to Rs 10,000 for electric two-wheelers and Rs 50,000 for electric three-wheelers, but the scheme is set to expire on July 31st.
"In this budget, we expected specific EV policies, particularly the announcement of the FAME III policy or even the continuation of the EMPS scheme,” said Mayur Misra, Director and CEO of Corrit Electric, a B2B EV startup. “This is a missed opportunity for advancing our sector.”
A new, FAME III scheme could have provided a boost to the government's plans to take the penetration of electric vehicles to 30% by 2030, said Rahil Gupta, Co-Founder and CTO of the Jaipur-based electric motorcycle manufacturer HOP Electric. "With FM failing to provide relief to EV manufacturers, it may have an impact on EV sales, which have already been declining in recent months," Gupta stated.
Randheer of Foresee also agreed that the budget could have included more strategic measures to boost Indian companies' competitiveness against China's dominance, particularly in terms of technology and scale for EV manufacturing. The budget also included the elimination of the angel tax for all categories of investors, which was viewed as a significant boost to the Indian startup ecosystem. Mayur of Corrit Electric praised the FM's move to reduce the angel tax on investments in start-ups, stating that "the announcement made for the abolition of the angel tax for all classes of investors, which will significantly boost the Indian startup ecosystem."
Another ‘missed opportunity’ in the Budget was the lack of focus on setting up charging infrastructure. “While the FM has supported the overall growth of cell and battery manufacturing, we were hoping that the fundamental problem of charging infrastructure could have been prioritised," said Dr. Amitabh Saran, CEO and Co-Founder of Electric three-wheeler start-up Altigreen Propulsion Labs.
"For users in India to adopt EVs widely in the country on a sustainable and long-term basis, there is a need to address the infrastructural cost, which subsidies can help to overcome," he added.
He urged that the government's EV policy, which includes demand-side subsidies, should be maintained until electric vehicles achieve 15-20% penetration. “We were hoping that the budget would support this increase in EV penetration until the electric vehicle industry became self-sufficient," Saran said.
While the Budget's emphasis on lowering solar component duties was seen as a positive step for renewables, stakeholders were also looking for greater support for heavy-duty vehicle (HDV) adoption and manufacturing.
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