Battery prices have been falling. In 1991, Lithium Ion Cells used to cost USD 7,500 per kWh. 35 years later in 2024, they just cost 75 per kWh. But this isn’t the reason why electric vehicles (EV) in India are all set to get even more cheaper in 2025. It’s the Indian government that’s the reason.
What, Indian government?
According to Reuters, the Indian government is working on a new EV policy that will be launched in 2025. Under this policy, the government plans to give the same incentives it planned to give Tesla to car makers who have existing manufacturing facilities in India, subject to meeting specific conditions.
For Tesla, the condition was that the American electric maker invest a minimum of 500 million US dollars (about Rs. 4,200 crore) in India, and source 50 % of components from India. Upon doing this, Tesla was promised that it could import 8,000 cars each year at an import duty of just 15 %, compared to the 100 % duty that’s otherwise charged.
Since Tesla seems disinterested to set up a factory in India, the government is reworking the policy to give car makers who already have factories in India the lower import duty benefit if they invest 500 million dollars to set up production lines for EVs.
This investment can be in their current factories also. Only a separate production line for EVs needs to be set up to take advantage of the Government’s benefits. Why, even the equipment used to build EVs in India can also be used to build other kinds of cars, according to the new EV policy.
Toyota and Hyundai are expected to make use of the benefits under the new EV policy. The new EV policy is expected to be launched by March 2025, post which some electric cars could get cheaper.
Take for instance, the Kia eV6. If Kia Motors makes a 500 US million dollar investment to build EVs in India, it could import the eV6 at just a 15 % import duty instead of the current 100 %. This means that the Kia eV6’s price could drop from Rs. 61 lakh to about Rs. 35 lakh.
Similarly, the price of the Kia eV9 super luxury electric SUV could drop from the current 1.3 crore to about 70 lakh.
Should you buy an EV now or wait for the new policy?
It’s hard to say a clear yes or no, because of the following reasons.
- Well, as of now, it’s not clear as to what exactly the policy conditions are although the Reuters report does shed light on what it could be.
- Even if the Indian government announces the new policy, it remains to be seen which automakers make use of it.
- As of now, fully imported electric vehicles are mainly those in the luxury segment, and even if these vehicles get cheaper, they will have a very limited market.
- Even a luxury car maker like Mercedes Benz has already begun assembling high-end luxury electric cars in India. For instance, the top-of-the-line Mercedes EQS sedan (electric version of the S-Class) is now assembled at Mercedes’ Chakan factory.
- Net-net, this policy makes the most sense only to those car makers who already have a slew of electric cars on sale internationally, and which they can bring to India quickly and cheaply under the new, proposed duty regime.
Major beneficiaries of this scheme could be the likes of Volkswagen and Skoda, who have lined up the iD4 and Enyaq electric SUVs for the Indian market. For instance, if imported at a duty of 15 %, both the Volkswagen iD4 and Skoda Enyaq electric SUVs could cost as little as 30 lakh, down from their Rs. 50-55 lakh estimated price tag when imported with a 100 % duty. Apart from these brands, no major mass market car maker has indicated that it would import electric cars.
As for Toyota, Maruti Suzuki is putting together the eVitara, due to launch early next year. The eVitara will be produced in India, at the Suzuki Gujarat factory, and will also be supplied to Toyota with Toyota branding. Toyota plans to sell the Toyota-badged eVitara globally, as its low cost electric car.
In case of Hyundai, a heavily localized Creta EV is lined up for launch in January. The Creta EV is expected to come with a competitive price tag as it’s manufactured locally. Clearly, cheaper imported EVs, even under the new policy, seem to be few and far in between.
Therefore, not waiting for the new policy to buy a new EV, and instead buying what’s available currently in the Indian market will make sense for majority of car buyers. Only those looking at high-end luxury EVs may wait.
