DEHRADUN :

FY2024-25 is a crucial year for EVs in India. While the FAME I and II schemes have successfully generated demand for the segment, the real floor test of the segment’s feasibility and expansion begins now. With significant investments already in place and more flowing in under the PLI scheme for the EV technology, battery manufacturing and charging stations, among other parts for automotive, the announcements made by the government under theBudget 2024-25 sets the right tone for a sustainable, and robust EV ecosystem.

"The Budget reinstates the government’s commitment towards sustainability and a green economy. This year is pivotal for electric vehicles (EVs), and the Budget's announcements related to skill development, support for MSMEs, exemption of customs duty on imports of Lithium and Cobalt, and other rare materials, as well as the extension of concessional custom duty on Li-cells, are significant. Additionally, the focus on manufacturing, infrastructure, and improved purchasing power among customers strengthens the proposition for a robust EV sector,” says, Puneet Gupta, Director, S&P Global Mobility. 

Gupta says, “While there has been some disappointment regarding the lack of an announcement for FAME III in the Budget, we anticipate that it may be addressed under a different initiative. To elevate the EV market to the next level, it is crucial to develop and nurture skills, build a sustainable green grid, and foster a conducive manufacturing environment. The government has addressed these needs within the Budget, showing a commitment to the growth and sustainability of the EV sector.

"The Budget has proposed to reduce the BCD for critical minerals to nil from up to 10% earlier, for enabling processing and refining of these minerals and enhancing backward integration in EV supply chain. “The critical mineral mission for domestic production, recycling of critical minerals, and overseas acquisition of critical mineral assets, is expected to include technology development, skilled workforce, extended producer responsibility framework, and a suitable financing mechanism for these minerals and would enhance localisation of the EV battery ecosystem. With the expected reduction in the production costs of battery cells, the overall cost of EV batteries will gradually decline, thus making EVs a more economically viable option,” says Srikumar Krishnamurthy, Senior Vice President & Co-Group Head- Corporate Ratings, ICRA Limited.

One of the key headwinds for the sector has been the availability of skilled labour, especially with emerging vehicle technologies. The Budget’s proposal towards skilling programmes, opportunities on internship and employment linked incentives, namely one month wage to new entrants in formal sectors, incentives towards first time employment for specified scales, and reimbursement of EPFO contribution of employers (upto INR 3,000 per month for two years) “would enable availability of the right talent pool for the industry, especially in the light of the ongoing technological developments in the industry,” adds Krishnamurthy. 

“In 2024, many top engineering, technical institutions, and business schools have faced challenges in their placement processes, resulting in a significant percentage of students being unemployed or underemployed. At the same time, companies struggle to hire the right talent due to the wide gap between required skills and available talent. A new skilling scheme will train 20 lakh youth in collaboration with state governments and industry, emphasizing industry-aligned courses. This initiative will positively impact employment creation,” says Dr. Chandan Chowdhury, PracticeProfessor (Operations Management and Information Systems), and Executive Director (Munjal Institute for Global Manufacturing), Indian School of Business (ISB).

While India is one of the larger automobile markets globally, the EV industry is still at a nascent stage. However, there has been a strong push by both the Central and State governments for faster adoption of EVs, especially in recent years. Vehicle electrification has gathered pace in the last few years spurred by Government support in the form of subsidies (under the FAME-II policy), enhanced awareness, and increasing product launches.

“Given the healthy subsidies available in the electric two-wheeler (e2w) segment, it accounted for approximately 85-90% of the total EV sales (excluding the e-rickshaw segment) till date. Even as hybrids are viewed as an intermediate step towards acceptance of EVs in the passenger vehicle segment, mitigating range anxiety and offering superior mileage, EV penetration is improving at a healthy pace, aided by enhanced customer acceptance,” Krishnamurthy further points. ICRA expects EV penetration to be ~25% for two-wheelers (2W), 40% for three-wheelers (3W), and 30% for buses and ~20% for light commercial vehicles (LCVs) as a percentage of total sales by 2030.

India is on a cusp of transformation, one that would see the country reducing its economy-wide emission intensity by 45% below 2005 level by 2030, and leading the world with new innovations and opportunities. Automotive industry that contributes 7.1% to India’s GDP and makes 42% of the manufacturing sector is going play a crucial role in job creation, skill development, Zero Emission agenda, and overall economic development of the country.