Union Finance Minister Nirmala Sitharaman on July 23 in her seventh consecutive Budget did not announce any major allocation related to the electric vehicle industry and uncertainty around the FAME (Faster Adoption and Manufacturing of (Hybrid and Electric Vehicles) scheme that provides subsidies to EV manufacturers persists, according to industry players.
The FAME scheme allocation for FY25 was unchanged at Rs 2,700 crore (the same as the Interim budget announcement) versus Rs 4,800 crore in FY24, while the Electric Mobility Promotion Scheme-2024 (EMPS) for the period April-July 24, with an allocation of Rs 500 crore, as announced in March 2024 will continue as it is. There is no change in the PLI scheme for Auto and Auto components for FY25 at Rs 3,500 crore, which is the same as the Interim budget announcement. The PLI scheme for Advanced chemistry cell (battery storage) for FY25, remains unchanged at Rs 250 crore, also remains the same as the Interim budget announcement.
However, EV players remain hopeful of a stronger FAME III to boost EV adoption in the country. “Extending subsidies with a strategic approach will be crucial for sustained EV growth, and we are hopeful for some incentives measures to boost charging infrastructure and battery swapping. A future-proof FAME III can truly empower young EV startups like ours to bridge the gap and make electric mobility a reality for every Indian household,” Tushaar Bajaj, Co-Founder and Director, Virtus Motors said. He adds that the Indian EV landscape is set for an exciting transformation, and the forthcoming FAME III policy holds immense potential in boosting electric mobility adoption.
The Minister of Heavy Industries had noted that FAME III was being finalised and that it would not be in the Budget.
The Budget announced that the customs duty on critical minerals (such as lithium, copper, cobalt and rare earth elements duty), graphite and platinum/palladium has been cut to zero. This is a marginal positive for both automobile OEMs, according to Nuvama. “Reduction in customs duty for critical minerals will reduce lithium cell manufacturing costs in the future, (as and when production starts in India),” Nuvama said.
Neuron Energy’s CEO and Co-founder Pratik Kamdar said that the decision to exempt custom duties on critical minerals like lithium and cobalt will help the EV industry. “This pivotal move will substantially lower the production costs of battery cells, directly translating into more affordable electric vehicles (EVs) for consumers. By reducing manufacturing expenses, the overall cost of EV batteries will decrease, making electric vehicles a more economically viable option,” he said.
This initiative, he adds, not only supports the growth of the EV industry but also reinforces India’s commitment to sustainable mobility solutions. “We anticipate that these measures will stimulate greater adoption of EVs, driving positive change towards a cleaner and greener transportation ecosystem,” he adds.
“This is a very positive move. It will support the EV cell manufacturing effort in the country with a reduction in input cost. This will have a positive impact on the bill of materials that will cascade down to the price of the EV battery, which contributes 40-50% to the cost of the electric vehicle,” said Moushumi Mohanty, Head of Electric Mobility Programme at the Centre for Science and Environment.
According to Siddarth Bhamre, Head of Research, Asit C Mehta Investment Intermediates, the budget’s indirect focus on the rural economy, employment and MSMEs will benefit the auto sector.