Cost of batteries for electric vehicles (BV) will drop to levels that will make them affordable in 2-3 years even if the government were to withdraw subsidies offered on EVs, an executive at Tata Motors has claimed.
India’s EV industry is thriving on an array of incentives provided by central and state government to promote the faster adoption of the eco-friendly vehicles.
If incentives from both channels are put together, the total benefit for an electric car buyer could amount to as much as Rs 3 lakh.
“Subsidies are going to be important for the next few years but this will be required as long as battery prices are at a certain level,” Shailesh Chandra, president of the Passenger Vehicle Business Unit at Tata Motors, said on a conference call with analysts.
“Going forward, in the next 2-3 years, battery prices will come down rapidly. Besides, there is also a localisation initiative that we are running. So, the reduction in cost that we will see will completely offset the need for any subsidy,” Chandra added.
The ex-showroom price of the base version of the Tata Nexon EV, India’s largest-selling electric car, is Rs 13.99 lakh. Buyers benefit from central government subsidies that can go up to Rs 1.5 lakh and up to Rs 1 lakh offered by the Maharashtra government.
The central government offers subsidies under the Faster Adoption and Manufacturing of Electric Vehicles, or FAME II, scheme.
Falling battery costs
According to the US’s Department of Energy, the cost of EV lithium-ion battery packs has declined 87 percent between 2008 and2021.
From $157/kWh now, battery pack costs are expected to decline to $100/kWh in 2023. Batteries typically make up 30-40 percent of the cost of an EV, so any reduction in their prices has a significant impact on car prices.
“So even if the subsidies go away it will not take away in any manner the penetration levels that one is thinking for the EV industry in India as well as Tata Motors’ ambition of achieving 20 percent penetration by FY26,” Chandra added.
The base version of the electric Tata Nexon is priced a little under double the price of the petrol-powered base variant, which is available at Rs 7.29 lakh (ex-showroom, Mumbai). Despite the price premium, the Nexon enjoys a market share of 70 percent in the electric passenger vehicle segment.
Tata Motors is working on electric versions of the Punch and the Harrier in the coming years as well as born-electric models, all of which will make up seven new product offerings by FY26, taking the total EV portfolio of 10 products. From 3 percent penetration presently, Tata Motors hopes to generate 20 percent of its total passenger vehicle sales from EVs by FY26.
The expected slide in battery costs will benefit two and three-wheeler EV manufacturers as well. The adoption of electric scooters has been encouraging despite most of the new high-speed models costing Rs 1 lakh and above.
Cargo electric three and four-wheelers as well as passenger electric three-wheelers will also benefit from the drop in battery costs.
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