Government Subsidies and Falling Battery Prices Make Electric Vehicles More Affordable in India
Government subsidies and declining battery prices are making electric vehicles (EVs) more accessible even though they still have higher upfront costs than conventional internal combustion engine (ICE) vehicles, according to an analysis by Axis Securities.
“EVs have higher upfront costs than ICE vehicles but are becoming more affordable with subsidies and falling battery prices. Lower running costs over time make EVs more economical in the long run,” the report added.
Although the initial cost of an EV may be higher, over time, the lower operational costs (such as lower electricity prices and less maintenance expenditures) make them more cost-effective. EVs are improving with better battery technology and reducing the gap anxiety.
ICE vehicles benefit from a mature fuel network, but EV charging stations are also expanding rapidly in the country, with growing government and private sector support. The report also noted that while ICE vehicles have a stable resale market, EVs are catching up as battery technology improves, which will stabilize their long-term value.
Separately, a report by Bernstein pointed out that the overall EV two-wheeler industry in India generates about USD 1.3 billion in annual revenues but incurs an estimated EBIT loss of USD 300-400 million without incentives. However, additional benefits from GST have helped narrow the price gap between electric and ICE vehicles.
The report highlighted that the EV industry remains heavily reliant on government incentives and subsidies. To stay competitive, the EV industry needs sustained focus, large-scale operations, and significant cost reductions to break the traditional ICE market.
Going forward, the government is pushing the sector by giving subsidies. The Union Cabinet earlier this month approved the proposal of the Ministry of Heavy Industries (MHI) for the implementation of the scheme titled ‘PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme’ for the promotion of electric mobility in the country. The scheme has an outlay of Rs 10,900 crore over a period of two years.
Doubts Revealed
Government subsidies -: Government subsidies are financial help given by the government to make things cheaper for people. In this case, it helps make electric vehicles (EVs) more affordable.
Battery prices -: Battery prices refer to the cost of the batteries used in electric vehicles. When these prices go down, it makes EVs cheaper to buy.
Electric vehicles (EVs) -: Electric vehicles (EVs) are cars that run on electricity instead of petrol or diesel. They use batteries to store energy.
Internal combustion engine (ICE) vehicles -: Internal combustion engine (ICE) vehicles are cars that run on petrol or diesel. They have engines that burn fuel to make the car move.
Running costs -: Running costs are the money you spend to keep a vehicle working, like fuel, maintenance, and repairs. EVs usually have lower running costs than ICE vehicles.
Battery technology -: Battery technology refers to the science and improvements behind making better batteries. Better batteries can store more energy and last longer.
Gap anxiety -: Gap anxiety is the worry that an electric vehicle will run out of battery before reaching a charging station. Better batteries help reduce this worry.
USD 1.3 billion -: USD 1.3 billion is a lot of money, about 10,000 crore rupees. It shows how big the EV industry is in terms of money.
Government incentives -: Government incentives are rewards or benefits given by the government to encourage people to do something, like buying EVs.
PM E-DRIVE Scheme -: The PM E-DRIVE Scheme is a plan by the Indian government to support electric vehicles. It has a budget of Rs 10,900 crore, which is a lot of money, to help make EVs more popular.
Rs 10,900 crore -: Rs 10,900 crore is a huge amount of money. It is used by the government to support the electric vehicle industry in India.
