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Why is the electric vehicle industry a huge opportunity for India?

  • Aug 6, 2020 | Divita S Gupta

Why is the electric vehicle industry a huge opportunity for India?

The future is electric, and India is a potentially huge market for the Electric Vehicle industry. While almost every industry in the country has been affected by the current COVID-19 crisis, the electric vehicle industry is one of the few to have projected a swift recovery in the post-COVID era and shows great promise as per the latest report by Frost and Sullivan. Their market forecast until 2025 gives an optimistic overview of the EV market and how it’s likely to recover in the coming months.

There are certain segments like the e-rickshaws, e-autos and e-two wheelers which will account for over 4 million units by the year 2025. In a country like India, where 90% of the population is reliant on public transport, auto rickshaws (three wheelers) and two-wheelers, the outlook for these sectors looks very positive. Also, very specific to the two-wheeler segment, which is split between motorcycles and scooters, electrification of scooters is far easier as compared to motorcycles and that accounts for 30% of the two-wheeler segment. Bigger vehicles like e-buses require huge support like infrastructure and a fast-charging network of stations in order for them to be electrified on a large scale. For this, the government must encourage more EV imports with tax benefits to push the country’s ‘Make in India’ agenda.

On a global level, there’s a massive gap in power electronics and India can help bridge this gap with the help of building these power electronics at lower costs and bring about a paradigm shift. Availability of batteries, thermal management and power electronics will offer significant opportunities and help localize and build an exhaustive supplier ecosystem in India by the year 2025. In order for this to happen, the government has to create favourable situations focussed on the growth of the industry with the help of tax benefit schemes and subsidies.

Last year, the GST council conducted a meeting where certain policies were discussed that were favourable to the EV industry. One of them was deducting the GST rate from 12% to 5% which would be a huge win for the industry and invite a myriad of opportunities to boost the market. This is in sync with the government’s NITI Aayog mission of moving to a green, electric India. Reduced GST rates can result in global investments in terms of setting up manufacturing arms in India which will push the country in the right direction. In addition to slashed GST rates, the government has to plan for better incentive schemes, growing distributor and dealership network in addition to spreading awareness and acceptance of EV by consumers in India.

The next couple of years will shape the future of the EV market in India. We are still grappling with this persistent coronavirus pandemic and while it has disrupted the supply chain and the distribution channels in the EV industry, the projections in terms of recovery seem to be promising and have the potential to pave way to a sustainable, greener and self-reliant EV market in India provided the government formulates GST policies favouring the growth of the segment.

Avalara helps businesses of all sizes get GST return filing, e-way bill generation and e-invoicing right with cloud-based GST compliance solutions in India. Goods and Services Tax (GST) rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Divita S Gupta
Avalara Author Divita S Gupta
Divita has served as a writer and editor for top financial services organizations in India. She has written on topics like mutual funds, insurance, taxes, SME financing for globally recognized banking and financial organizations including ICICI, Aditya Birla Group, News Corp. With a Masters in Business Administration from Symbiosis International University, she currently owns a small business in Mumbai.

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