India’s EV Market: From Subsidies to Market-Driven Growth

Union Minister Nitin Gadkari recently stated that the electric vehicle (EV) industry has matured to a point where government subsidies are no longer necessary to support manufacturers. Consumers are now choosing EVs or CNG vehicles on their own, potentially causing a shift in India’s mobility industry. 

Gadkari highlighted that the cost of manufacturing EVs has dropped over the years, further making subsidies unnecessary. A study by Lawrence Berkeley National Laboratory found that the cost of grid-scale lithium-ion battery storage in India was $187 per kWh in 2020, with an estimated drop to $122 per kWh by 2025. Gadkari further predicted that EVs would reach price parity with traditional petrol and diesel vehicles within the next two years​. 

This development in India mirrors global trends, where countries like Norway and China have already started phasing out subsidies as their EV markets mature. India’s EV sector benefits from a 5% GST rate on electric vehicles compared to 28% for fossil fuel-powered vehicles, offering significant financial incentives to consumers and manufacturers.

Despite these advances, India still faces challenges in meeting its 2030 goal of 30% EV penetration. As of mid-2023, EVs accounted for just 5.28% of two-wheeler and 1.99% of four-wheeler sales. In 2023, only 72,930 four-wheeled electric vehicles were newly registered in India, although this was nearly double the 2022 figure, according to government data from the Vahan Dashboard aggregated by Clean Mobility Shift. Two-wheelers and e-rickshaws comprised 56% and 38% of total EV sales, respectively. Overall, the EV market grew to a 6.3% share in 2023, a significant increase from just below 1% pre-pandemic, buoyed by government subsidies under the FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) program.

With the upcoming FAME III initiative, the focus will likely shift from direct subsidies to improving infrastructure and reducing costs​. This policy change reflects confidence in the EV sector’s ability to sustain itself.

– Shivani Singh