Electric vehicle (EV) charging infrastructure in the country is inadequate to encourage manufacturers and buyers to switch to electric mobility, a Parliamentary Standing Committee on Industries stated in its report.
The Committee, headed by K Keshava Rao, Rajya Sabha MP, advised the government to adopt a phased manufacturing programme for the switchover to e-mobility as the entire automotive manufacturing system will have to be overhauled.
“The Committee expresses its concern over the proposal of the government to move to 30 percent EV by 2030, which is seemingly a big challenge amid lack of charging infrastructure and therefore a clear roadmap may be drawn up for achieving parity in terms of cost with fuel-based engines to start going electric, so that demand for EVs is generated”, said the report.
EV sales in India stood at 380,000 in 2019-20 and the EV battery market stood at 5.4GWh during the same year, according to a report prepared by the India Energy Storage Alliance (IESA).
In the base case scenario, the EV market is expected to grow at a CAGR of 44 percent between 2020 and 2027 and touch sales of 6.34 million units by 2027.
Annual battery demand is forecast to grow at 32 percent to hit 50GWh by 2027. Of this, 40+GWh will be lithium-ion batteries. The estimated battery market potential is forecast to grow to $14.9 billion by 2027 from $580 million in 2019, said the report by IESA.
Demand for cut in GST
The Committee has also recommended a reduction of the goods and services tax (GST) on automobiles to 18 percent to spur demand and improve GST revenue.
The cut in GST will mitigate the 10-15 percent increase in the cost of vehicles affected by the switchover to Bharat Stage VI (BS-VI) emission norms at the start of the year, the panel’s report added.
“If GST rebates for electric vehicles could be given for creating public demand, there is scope for reducing GST on internal combustion vehicles also to spur its demand to overcome the present slump in the automobile sector,” the report said.
During the April-November period, the automobile sector reported a 26 percent drop in sales to 11.2 million units, including a 22 percent drop in sales of passenger vehicles and a 25 percent drop in two-wheeler vehicles, according to data shared by the Society of Indian Automobile Manufacturers (SIAM).
“The cost of BS-VI vehicles is 10-15 percent higher due to the upgraded technology. To mitigate this cost increase, the Committee is of the view that a reduced GST rate to 18 percent will bring down a sizeable amount in vehicle price, creating more demand for newer vehicles,” the report added.
SIAM and its other associated entities made several pleas to the government to bring down the GST on automobiles as an immediate relief measure for the beleaguered sector. The lockdown of April and May brought the entire automotive sector to its knees with factories and sales channels shutting down completely.
A few months ago, Finance Minister Nirmala Sitharaman conceded that the GST on two-wheelers needed a correction. However, no action was taken thereafter and the auto industry gave up hope.
GST reduction on used cars
Used vehicles attract GST of 12 percent and 18 percent, depending on the size and type of vehicle. The Committee recommended a reduction in GST on pre-owned vehicles that spur demand as well as make the sector organised. Only 15-20 percent of the used vehicle market, which is estimated to be 1.4 to 1.5 times the size of the new vehicle market, is organised.
“The Committee is of the considered opinion that a thrust to increase automobile business would be to reduce GST on used cars from 12-18 percent on value difference to flat 4 percent so that this sector becomes organised and the used car market will grow manifold paving the way to create a seamless market to the entire vehicle purchasing mechanism for smoother upgradation of existing vehicle owners to new vehicles,” the report stated.
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