From seeking tax relief to expanded infrastructure, and R&D incentives, the domestic EV sector has a lot of expectations as India anticipates the 2025 Budget.
As the nation is on tenterhooks for Saturday, when Finance Minister Nirmala Sitharaman will table the Union Budget 2025-26, stakeholders in the Indian electric vehicle (EV) sector are hoping for some groundbreaking reforms. Eyeing more relaxed taxes and better grants, the industry calls for affordability, infrastructure, and innovation improvements that will benefit both manufacturing and consumer adoption.
Currently, the central government has several programmes running, including two production-linked incentive (PLI) schemes to support this sector. However, in spite of all these efforts, industry leaders have recommended strengthening initiatives in several fields that require to be addressed in this Budget.
Incentivising innovations
The EV industry is calling for greater incentives to support research and development (R&D), particularly in areas like advanced battery technology and automotive electronics. Abhinav Kalia, CEO and co-founder of EV service provider ARC Electric highlighted the need for cutting-edge technology, “increased investments in R&D for advanced battery technology, such as solid-state batteries, are essential.”
“Government could consider additional income tax reduction for Indian corporates spending over three per cent of their turnover to advance R&D and filing patents/designs in India,” added Prashanth Doreswamy, President and CEO, Continental India.
He agreed that a well-designed incentive system is crucial to fostering growth in AI, IoT, and embedded technology, supporting startups, and ensuring India remains competitive in the global automotive market.
More investments in charging infrastructure
One of the key concerns is addressing the infrastructure deficiencies, particularly the lack of sufficient charging stations, which remains a barrier to EV adoption. Stakeholders are urging the government to invest in expanding public charging infrastructure, along with providing subsidies, tax incentives, and financial support. Additionally, they call for affordable mobility options like electric two- and three-wheelers in smaller cities to boost adoption across diverse demographics.
“Allocating resources for expanding charging networks, especially in Tier 2 and Tier 3 cities, will reduce range anxiety and encourage widespread EV usage,” commented Kalia.
However, according to a prediction made by The Mint, despite these requests, the government is unlikely to grant ‘infrastructure industry’ status to the charging infrastructure sector in this Budget.
Lower GST on EVs and its batteries
Industry representatives advocate for changes to the Goods and Services Tax (GST) structure to reduce costs on the consumer as well as manufacturer front. Many urged to standardise the GST rate at 5% for EVs, their components, and charging infrastructure.
Pulkit Khurana, Co-Founder of Battery Smart, highlighted a major issue, “Currently, EVs with lithium-ion batteries attract a GST of 5%, while standalone batteries face a much higher rate of 18%. This disparity places a significant financial burden on commercial EV drivers, particularly electric three-wheelers and gig workers, who are at the heart of India’s EV ecosystem.”
Supporting the 5% standardisation, he further noted, “This adjustment would not only reduce costs for commercial drivers but also make EVs more accessible and financially viable.”
“Currently, manufacturers procure electrical components at 12% and 18% GST and mechanical parts at 28%, while the final vehicle is taxed at 5% to encourage adoption. A more consistent GST structure across components could help streamline operations, improve working capital efficiency, and accelerate the expansion of EV infrastructure,” stated Avinash Sharma, Co-Founder and CEO, of ElectricPe.
Expanding the PLI range
The industry also seeks an expansion of the PLI scheme to include incentives for advanced battery technologies and the local manufacturing of essential EV components. With a budget of almost ₹260 billion, the existing one has already benefited companies like Ola Electric, which received certification for PLI support for its scooters. Furthermore, industry representatives are requesting continued subsidies under the PM E-Drive Scheme and consumer tax incentives, such as retail financing options, to accelerate adoption.
“Hybrid Technology is always considered as a bridging tech”
Interestingly, the industry also believes a push for hybrid vehicles would be beneficial, as it is a linking technology that will later facilitate EV adoption. However, Doreswamy noted, “Hybrid vehicles in India are currently burdened with the highest rate of tax of 28%, making them less attractive than fully electric or conventional petrol/diesel vehicles.” He suggested that while a full-fledged development of EV-charging infrastructure will take time, the Budget 2025 could focus on hybrid vehicles.
Something for recycling and more sustainability?
The EV industry is also urging the government to prioritise the development of robust battery recycling networks with attractive incentives in the budget allocation. “Policies that promote the development of advanced battery manufacturing, establish robust recycling networks, and support circular economy initiatives are crucial for a self-sufficient and sustainable electric vehicle ecosystem,” recommended Rajesh Gupta, Founder and Director of Recyclekaro.
India’s total EV sales hit the two-million mark at the end of 2024, and the country’s total EV count is now above 5.6 million. Several schemes have been implemented like the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME India), launched in two phases in 2015 and 2019 respectively.
Furthermore, the PLI Scheme for the automobile and auto components industry, the Advanced Chemistry Cell (ACC) PLI Scheme also played a significant role.
In September 2024, when the industry was anticipating a third phase of the FAME, the ₹109 billion PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme was announced, followed by PM e-Bus Sewa-Payment Security Mechanism (PSM) Scheme.
With these initiatives in place, the big question remains: how much will this Budget fuel India’s EV revolution? All eyes are on February 1st, 2025.
