The Union Finance Budget 2022-23 will be key to setting the tone and roadmap for the economic revival of India – including the Automotive sector companies.
Anticipated to be a progressive Budget to boost job creation, consumerism and rural economy, there are concerns about the supply side which is impacted by the global semiconductor shortage. The sector is looking forward to rationalisation in the tax structures and incentivizing innovation and R&D initiatives.
Tax Rationalization to Speed-up EV adoption
The need to have in place an effective scrapping policy, and introduce provisions to allow retrofitting and conversion of ICEs to EVs, thus making renewable mobility accessible to everyone. According to Mr. Arun Sunny, Founder & CEO – Trouve Motor, “For mass adoption of electric vehicles, people expect the convenience and availability of the EV charging infrastructure – ideally, one charging station in 3*3km area and every 20 km on highways, hence incentivising infra-development and rules & schemes to promote swapping of batteries will help. Rationalising the tax (GST) regime on batteries and other components used for the manufacture of electric vehicles will go down well to further cost management, benefits of which can be passed on to the customers. Further tax benefits for home-grown EV manufacturers who make it from scratch, to promote the cause of Make-in-India.” Trouve Motor is a manufacturer of high-speed electric motorcycles, bringing in Blockchain integrated structure with its own metaverse ecosystem.
Since, such an underserved segment, small manufacturers and related SMEs don’t have any formal mode of credit rating for assessment, therefore Ms. MeghnaSuryakumar, Founder & CEO, Crediwatch, says “Such companies need incentives to digitize and use technology to scale their business. To encourage the widespread use of technology, the budget needs to provide financial incentives to MSMEs who invest in technology solutions. Also, more straightforward GST rate structure and simplification of GST compliance.” Crediwatch is a data-driven rating and information database platform which aids credit and risk, assessment models.
“As a solution to traffic congestion, we suggest an extension of FAME II subsidy to promote the conversion of ICE vehicles to electric and for electric two-wheelers above Rs. 1.5 lakhs, in addition to RTO approvals for retrofitted electric vehicles. Extension of tax benefit for buying electric vehicles under 80EEB for two more years and easy collateral-free finance for start-ups that foray into EV retrofitment and manufacturing to set up operations will be a welcome step.” added Mr. Arun Sunny of Trouve Motor.
“In the last decade, the government of India (GOI) has announced policies and regulations like Faster Adoption and Manufacturing of Hybrid and Electric vehicle (FAME), which was supposed to end in March 2022 but has been extended till 2024, to encourage the EV industry. However, the sector still requires a uniform policy to promote EVs across the nation, making it easier for businesses focusing on green transportation to expand their footprint,” says Mr. Ketan Mehta, CEO and Founder – HOP Electric Mobility
Mr. Mehta further mentioned, “As EV manufacturers, we expect the government to correct the inverted duty structure. As of now, GST input on raw materials is 18-28%, while outward supplies stand at 5%. By amending this framework, the government can help manufacturers like us to optimize cash flow. While tax exemptions up to INR 1.5 lakh were announced in 2019 on the interest paid on loans taken to finance purchasing of electric vehicles. While this was laudable, we believe more such tax benefits and subsidies will motivate EV buyers and end-users.”
Financing and incentivising digitization
According to a report by JMK Research and Analytics – in December 2021 Electric Vehicle registrations crossed the 50,000 units mark in a month. Overall EV sales in December clocked 50,866 units, recording a 240% year-on-year growth from the number recorded in the corresponding month in the previous year. However, EV acquisition due to high cost and lack of financing options is a concern.
“EV-financing will become the biggest enabler for Electric Vehicle adoption in the next few years. Attractive economics and push by governments have already increased the demand for EVs substantially, however, the Commercial EV segment, which is expected to be a key growth vertical, is faced with a lack of financing options, hence remaining the biggest challenge. The industry has the potential to grow to USD 150 billion by 2030, hence the Finance Minister’s attention to ease accessibility to financing, particularly for the unbanked will do good to the segment.” said Mr. Sameer Aggarwal, Founder & CEO, of RevFin Services – a financial technology (FinTech) digital lending platform focussed at increasing EVs’ adoption, especially among unbanked & underserved sections, enabling micro-entrepreneurism.
Need for a Conducive environment for EV-Ecosystem
“Provisions for enabling fast-charging infrastructure across India will be expected. To do that, the sector expects the government to provide subsidies to motivate EV manufacturers and businesses. While states like Maharashtra, Punjab, and Bihar offer varying levels of subsidies on charging stations, the same should be encouraged across the country to boost the confidence of EV buyers.” says Mr. Ketan Mehta, CEO and Founder – HOP Electric.
