Here's What States Offer To Drive Demand For EVs In India

As India offers incentives to fast-track the adoption of electric vehicles, states have joined the push to transition away from fossil fuel-powered vehicles by offering subsidies and tax cuts.

The nation has some of the world's most polluted cities. Yet, less than 1% of passenger vehicles and two-wheeler sales in the country are contributed by battery-powered units compared with 5% in China. Poor charging infrastructure, anxiety over single-charge mileage and lack of awareness and supply ecosystem are some of the bumps.

After the first version of FAME—or Faster Adoption of Manufacturing of Hybrid and Electric Vehicles—did little to boost electric mobility, India came up with the second phase with higher incentives in 2019.

States are now offering additional subsidies to nudge customers towards EVs.

Assam last week became the fifteenth state to notify a policy for EVs as it targets to add two lakh battery-powered vehicles in five years. Guidelines are expected in 10-15 days.

According to the think tank Ola Mobility Institute, the EV policy is at the draft stage in six states. Once they notify, 22 states will have a framework to boost EV adoption. Rajasthan has notified incentives for two- and three-wheelers but is yet to release the policy, it said.

Uttar Pradesh, India's most populous state, has the highest number of electric vehicles registered, followed by Delhi. Both the states have seen a higher adoption of electric three-wheelers. Karnataka ranks third, with two-wheelers contributing the most.

According to Hetal Gandhi, director at Crisil Ltd., states are pushing EVs broadly in three ways:

• Subsidy to buyers of electric vehicles. The focus is on driving sales of battery-powered two- and three-wheelers, and taxis and buses.

• Incentives to set up EV and battery manufacturing plants.

• Incentives to set up charging stations and enabling infrastructure.

Delhi, Maharashtra, Gujarat and Meghalaya offer subsidies over and above those granted by the central government, according to Ola Mobility Institute. Punjab, Andhra Pradesh, Telangana, Tamil Nadu and Uttarakhand offer exemptions on road tax and registration fees.

Gandhi said incentives by Maharashtra, Odisha, Gujarat, Uttar Pradesh, Punjab, Karnataka, Madhya Pradesh, Andhra Pradesh and Bihar focus on creating a charging infrastructure. Uttar Pradesh, Telangana, Punjab and Karnataka are looking to aid EV and battery manufacturing.

Here’s a closer look at what some of the states are offering:

• Offers a maximum subsidy of Rs 10,000 per kilowatt hour—capped at Rs 20,000 for two-wheelers, Rs 50,000 for three-wheelers and Rs 1.5 lakh for electric cars. It exempts EVs from registration fee.

• Targets 2 lakh electric vehicles on the road—1.1-lakh two-wheelers, 70,000 three-wheelers and 20,000 cars—in the next four years.

• Offers subsidy of up to Rs 10 lakh for the first 250 commercial public EV chargers.

• Petrol pumps to be given approval to set up charging stations.

• Targets 25% of all new vehicle sold by 2024 to be electric.

• Offers subsidy of Rs 5,000 per kWh—capped at Rs 30,000 for two- and three-wheelers, and Rs 1.5 lakh for electric cars.

• Offers to waive road tax and registration fee on EVs, besides a scrapping incentive of Rs 5,000-7000.

Ola Mobility Institute said Delhi stands out for its high subsidies, efficient system of subsidy disbursal, a clear target, and a strong awareness push through the 'Switch Delhi' campaign.

According to Jasmine Shah, vice-chairperson of Dialogue and Development Commission, a think tank of the Delhi government, the incentives are technology agnostic, be it battery swap or fast charging. The state will launch a unified public transport app, allowing users to check the live status at 300 charging points—public and private. An additional 500 charging points will come up in six months.

The shift towards EVs is very visible in Delhi, Shah told BloombergQuint over the phone. “The share of EVs before the policy was 1.2%, and now a year later it has increased to 3.3%,” Shah said, adding he expects it to rise to 10% by the year-end.

• An incentive of Rs 5,000 per kWh for all categories, with a maximum cap of Rs 10,000 for two-wheelers, Rs 30,000 for three-wheelers and Rs 1.5 lakh for four-wheelers.

• An additional early bird discount of Rs 5,000 per kWh before Dec. 31, besides a scrapping incentive of Rs 7,000-25,000 on two- and four-wheelers.

• Targets 10% of the new vehicle registrations and about 25% of aggregator fleet to be battery-powered by 2025.

• Aims to set up at least one gigafactory to make advanced chemistry cell batteries.

• Targets setting up 2,375 charging stations during the period. Incentives of up to Rs 15,000 for slow chargers and up to Rs 5 lakh for 500 fast chargers.

• Mandatory for all upcoming properties to have dedicated 20% EV-ready parking spaces in residential apartments, 25% in institutional and commercial complexes and 100% in government offices.

• Automakers have to offer five-year battery warranty to customers.

Maharashtra offers some very forward-looking non-fiscal demand incentives such as green number plates, low emission zones, parking and lane preferences, according to Ola Mobility Institute said. The state also stresses on improving quality of products by offering incentives to original equipment makers for offering buybacks or even a minimum five-year battery warranty, it said.

• A subsidy of Rs 10,000/kWh with a cap of Rs 20,000 for two-wheelers, Rs 50,000 for three-wheeler and Rs 1.5 lakh for four-wheelers.

• An exemption on road tax and registration charges for five years.

• 15% retro-fitment incentive of up to Rs 15,000 for three-seater autorickshaws, and 100% waiver on parking charges for EVs for five years.

• A 20% subsidy on plant and machinery costs up to Rs 15 lakh for micro units making EVs, Rs 50 lakh for small units, Rs 1 crore for medium units and Rs 10 crore for large units.

• A maximum subsidy of Rs 10 lakh for the first 500 commercial public charging EVs.

“Assam looked at policies of eight to nine states, including Delhi, Maharashtra and others, before finalising its EV policy,” Ohed Uz Zaman, joint secretary to the state’s Department of Industries and Commerce, told BloombergQuint over the phone. The focus, he said, is on creating demand and offering incentives to manufacturing.

• Purchase subsidy of Rs 10,000/kWh for the first 3,500 electric two-wheelers, Rs 4,000 per kWh for the first 200 electric three-wheelers, 2,500 four-wheeler EVs and 30 electric buses purchased and registered in the state.

• Targets 15% of new registrations to be electric by 2024.

Meghalaya’s policy does include some progressive levers, Ola Mobility Institute said. These include mandating government agencies to gradually transition fleet to electric, linkage of EV deployment with tourism hot spots, and its proposal to implement ‘polluter pays’ and ‘feebate’ concepts to make the financial burden less taxing for the state.