Union Minister for Road Transport and Highways, Nitin Gadkari, recently announced that the electric vehicle (EV) sector in India no longer requires government subsidies. Speaking at the Bloomberg NEF Summit, Gadkari explained that the rising demand for EVs and increased production volumes have reduced costs, making the need for subsidies obsolete. He highlighted that the existing tax structure already favors EVs, with electric vehicles being taxed at just 5% compared to up to 48% for internal combustion engine (ICE) vehicles, providing a substantial advantage to the sector.
Gadkari’s remarks come at a critical time when the EV industry is anticipating the third phase of the FAME scheme, which aims to promote faster adoption of electric vehicles. His statement suggests a potential policy shift, signaling that the government may reduce or eliminate subsidies for the sector, believing that it has matured enough to sustain itself without financial aid. However, this move has raised concerns, particularly as the Delhi government recently withdrew its road tax waiver for EVs, causing a significant increase in prices and a subsequent drop in sales.
Despite Gadkari’s optimism, the EV industry is currently facing challenges. Recent data shows a decline in EV sales, with August 2024 witnessing a 10% year-on-year decrease in the sales of electric passenger cars, SUVs, and MPVs. This downturn is indicative of the industry’s potential vulnerability without government support, despite an overall growth in cumulative sales during the first eight months of the year. Industry stakeholders are now planning to meet with state transport authorities to discuss possible solutions to the current challenges.