The Indian government has taken a significant step towards making electric vehicles (EVs) more affordable by fully exempting basic customs duty on materials required for lithium-ion battery production. This strategic move aims to reduce EV manufacturing costs, encourage local production, and decrease reliance on imports, particularly from China and Taiwan.
Boosting Domestic Manufacturing
Industry experts believe this policy change, announced by Finance Minister Nirmala Sitharaman in the recent budget, will bolster the development of a robust domestic EV manufacturing ecosystem. Since batteries constitute nearly 40% of an EV’s total cost, reducing material expenses will lead to more competitively priced electric vehicles, increasing their accessibility to consumers.
Nirmal K Minda, Chairman and Managing Director of Uno Minda, emphasized the importance of localizing key EV components, including batteries, motors, and controllers. “This initiative will not only lower upfront costs for consumers but also strengthen India’s EV industry by enhancing domestic production capabilities and reducing dependency on foreign imports,” said Minda.
Driving EV Penetration
As of 2024, EV penetration across different segments stood at 6.1% for two-wheelers, 2.4% for passenger vehicles, 56.6% for three-wheelers, and 0.99% for commercial vehicles. With reduced production costs, these numbers are expected to rise as more consumers consider EVs as a viable and cost-effective alternative to traditional fuel-powered vehicles.
The Role of the Clean Tech Mission
The Clean Tech Mission is set to play a crucial role in fostering domestic value addition and creating a sustainable ecosystem for EV manufacturing. Shailesh Chandra, President of the Society of Indian Automobile Manufacturers (SIAM), highlighted the benefits of the National Manufacturing Mission in supporting clean tech initiatives. “The exemption of critical minerals such as cobalt, lead, and zinc, along with 35 additional capital goods, will significantly contribute to strengthening India’s EV ecosystem,” he stated.
Encouraging Investments and Innovation
The government’s latest proposal includes exemptions on cobalt powder, lithium-ion battery waste, and other essential materials, ensuring the availability of key raw materials for domestic manufacturers. Pritesh Mahajan, co-founder and CEO of electric two-wheeler maker Revamp Moto, views this as a crucial step towards technological advancements and job creation. “Lower production costs will encourage companies to scale operations, drive innovation, and create high-value employment opportunities for India’s youth,” Mahajan noted.
The Road Ahead
With a growing push for sustainable mobility, the removal of customs duties on battery materials aligns with India’s vision of becoming a global leader in clean energy transportation. As the government continues to support the sector through policy incentives, investments, and infrastructure development, EV adoption is expected to accelerate, ultimately contributing to a greener and more self-reliant economy.