India Takes Steps To Popularize Electric Vehicles, Reduces Taxes To Make Them Cheaper

The Indian government is now offering incentives for boosting demand for electric vehicles while also easing a number of regulatory restrictions in order to make the country a global hub for manufacturing of electric vehicles.

The Indian government has announced allowance of an additional income tax deduction of 150,000 rupees (about $2,185) on the interest paid for loans taken for buying of electric vehicles. This was announced by the Indian Finance Minister Nirmala Sitharaman while delivering the yearly budget for the government. She further said that over the entire loan period, as much as 250,000 rupees in total can be availed by purchasers of electric vehicles.

“The government is trying to create demand, to spur demand, and thus help (original equipment manufacturers),” Puneet Gupta, associate director of automotive forecasting at IHS Markit, told CNBC. The lack in the growth of demand for electric vehicles in India is hindering the auto industry from expansion of production capacity for electric vehicles, explained Gupta.

“I think the first thing is to kickstart the demand because, right now, if you see, we’re selling less than 2,000 electric vehicles in a year, which is almost negligible,” Gupta said. Currently, there are about 4 million light vehicles — cars, SUVs, and light trucks, in India, he added. “You’re not targeting the mass, you’re still targeting a limited population.”

In order to further incentivizing the electric vehicle market India has also announced reduction in the taxation costs for such vehicles compared to those applicable to vehicles that run on the conventional combustion engines. For example, an SUV that uses conventional fuel attracts a 28 per cent in Goods and Services Tax (GST) and an additional 20 per cent tax on it is also levied, explained Gupta.

In comparison, initially a GST of just 12 per cent was levied on electric vehicles in India which costs about 1.3 million rupees (about $19,000) on the average. According to Gupta, that has now been lowered to 5 per cent.

The aim of the Indian government to push popularity and adoption of electric vehicles is partly because of the need for reduction of the dangerously high levels of pollution in most of the major metropolitan cities and partly to reduce the dependency of the country on oil – most of which is imported resulting in hefty import bills. India is amongst the highest importers of crude and refined petroleum – behind China, in the world.

The global demand for electric vehicles in on the rise, and the leading markets are that of the United States and China, and some countries in the European Union.

In 2018, the total number of electric vehicles in the world was over 5.1 million which was 2 million more than the previous year, said an outlook report released in May from the International Energy Agency (IEA). The sale of electric powered cars had almost doubled in 2018 compared to the figure a year earlier. The largest market for electric vehicles was retained by China in 2018 and the IEA report predicted that about 57 per cent of the global electric vehicles market would be dominated by China by 2030.

(Adapted from

Categories: Creativity, Economy & Finance, Entrepreneurship, Regulations & Legal, Strategy, Sustainability, Uncategorized

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