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India 18-Mar, 2024

Government approves EV policy to boost defence manufacturing: A look at electric vehicle sales in last 10 years

By: Team India Tracker

Government approves EV policy to boost defence manufacturing: A look at electric vehicle sales in last 10 years

In order to encourage India as a manufacturing destination and enable the production of e-vehicles (EVs) with cutting-edge technology there, the Union Government has approved a scheme. Image Source: IANS

In addition to a minimum investment requirement of ₹4,150 crore ($500 million), the policy stipulates that manufacturing facilities must be established in India within three years

In order to encourage India as a manufacturing destination and enable the production of e-vehicles (EVs) with cutting-edge technology there, the Union Government has approved a scheme. Reputable international EV manufacturers are hoping to invest in the e-vehicle market thanks to this regulation.

This will strengthen the EV ecosystem by encouraging healthy competition among EV players, leading to high volume of production, economies of scale, lower cost of production, reduce imports of crude oil, lower trade deficit, reduce air pollution, especially in cities, and have a positive impact on health and the environment. It will also give Indian consumers access to the newest technology and support the Make in India initiative.

In addition to a minimum investment requirement of ₹4,150 crore ($500 million), the policy stipulates that manufacturing facilities must be established in India within three years, commercial EV production must begin, and domestic value addition (DVA) must reach 50 percent within a maximum of five years. Additionally, it stated that DVA during production would require achieving a localization level of 25 percent by the third year and 50 percent by the fifth year.

The term "domestic value addition" (DVA) describes the proportion of locally produced parts used in production. Businesses need to localise at least 25 percent of their content by the third year and 50 percent by the fifth.

The Ministry of Commerce stated that "vehicles of minimum Cost, Insurance and Freight (CIF) value of $35,000 and above would be subject to the customs duty of 15 percent (as applicable to completely knocked down or CKD units) for a total period of five years subject to the manufacturer setting up manufacturing facilities in India within a three-year period." According to the statement, the duty waived on the entire amount of EVs permitted for import will be capped at the investment made or ₹6,484 crore, which is the equivalent of the PLI scheme's incentive, whichever is less.

It went on to say that if the investment was $800 million or more, a maximum of 40,000 EVs at a rate of no more than 8,000 per year would be allowed. It would be possible to carry over unused annual import limitations.

With sale of 622,337 units, electric two-wheelers account for 62.23 percent of total EV sales in India in 2022 and 4 percent of India’s overall two-wheeler market which recorded cumulative sales of 1,53,07,255 units. The top 10 (Original Equipment Manufacturers) OEMs – Ola Electric, Okinawa Autotech, Hero Electric, Ampere Vehicles, Ather Energy, TVS Motor Co, Bajaj Auto, Pur Energy, Revolt Intellicorp and Being India Energy – account for 550,562 units or an overwhelming 89 percent of total sales. The electric two-wheeler market was dominated by Ola Electric in 2022 with a sale of 108,130 units followed by Okinawa Autotech with a sale of 101,366 units. In February 2022, around 57,424 electric vehicles were sold in the country, this number increased exponentially in February 2023 as the total sale of EVs was recorded at 1,06,107. This shows that the sale of electric vehicles in India has nearly doubled in one year. The chart below takes a look at the sales of electric vehicles in the country since 2015.

Source: Ministry of Road Transport and Highways (E-Vahan Portal)

*As of March 17, 2024

The electric vehicle market in India has come a long way from a sale of 7,772 units in 2015 to more than 1.5 million in 2023. The highest year-on-year growth in the sale of EVs in the country was recorded in 2016 at 531.22 percent. The EV sales jumped from 7,772 in 2015 to 49,065 in 2016. The rise in product availability in the market, the high cost of petrol, diesel, and compressed natural gas, as well as state subsidies and incentives provided under FAME II scheme, are all factors that contributed to the domestic EV industry's sales growth in 2022. Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME II), is a scheme launched by the Government of India to give a boost to development of Electric Vehicles. The Central Government has allocated a budget of Rs 10,000 crore for the second phase of this scheme. The scheme was launched to achieve the goals of National Electric Mobility Mission Plan (NEMMP). Phase I lasted from 2015 to 2019 and Phase II of FAME was launched in 2019.

Apart from the above mentioned schemes, The Government on September 15, 2021 approved the PLI Scheme for Automotive Sector with a budgetary outlay of Rs. 25,938 crore to support domestic manufacturing of vehicles. Electric vehicles are covered under this PLI scheme. Also, the Government on May 12, 2021 approved a Production Linked Incentive (PLI) Scheme for manufacturing of Advance Chemistry Cell (ACC) in the country. The total outlay of the scheme is Rs. 18,100 Crore for a period of 5 years. The scheme envisages to establish a competitive ACC battery manufacturing set up in the country (50 GWh).

Ankit Kedia, Founder & Lead Investor, Capital A said, "Lithium-ion batteries are by far the most efficient, safer, and lightweight battery options for the electric vehicles. This is where the discovery of Lithium reserves in different parts of India augurs very well for Indian EV ecosystem. It is true that the mere discovery of the Lithium reserves isn’t automatically going to change everything as we will need to build processing infrastructure and expertise. This is an area where countries like China and the US are far ahead of us in terms of sophistication and maturing of markets."

In the Financial Year 2022-23, 11,71,944 units of electric vehicles were sold registering a year-on-year growth of 155 percent as compared to FY2021-22 which recorded a sale of 4,58,746 units of electric vehicles.

Source: Ministry of Road Transport and Highways (E-Vahan Portal)

*As of March 17, 2024

 

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