Budget 2024: No Major Boost for the Electric Vehicle Industry

Key Highlights:

• The Budget did not announce any major allocations for the electric vehicle industry.
• The FAME scheme allocation for FY25 remains the same as the Interim budget, at Rs 2,700 crore.
• Customs duties on critical minerals like lithium and cobalt were cut to zero, reducing future manufacturing costs for EV batteries.
• Industry players hope for a stronger FAME III policy to boost EV adoption in the country.
• The budget’s focus on the rural economy, employment, and MSMEs is expected to benefit the auto sector.

Union Finance Minister Nirmala Sitharaman, in her seventh consecutive Budget on 23rd July, did not announce any significant allocation for the electric vehicle (EV) industry. 

The uncertainty around the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme, which provides subsidies to EV manufacturers, persists according to industry players.

FAME Scheme Allocation

• The FAME scheme allocation for FY25 remains unchanged at Rs 2,700 crore, the same as the Interim budget announcement.
• In FY24, the allocation was Rs 4,800 crore.
• The Electric Mobility Promotion Scheme-2024 (EMPS), for April-July 2024, will continue with an allocation of Rs 500 crore.

PLI Scheme Details

• No changes were made to the PLI scheme for Auto and Auto components for FY25, remaining at Rs 3,500 crore.
• The PLI scheme for Advanced Chemistry Cells (battery storage) for FY25 continues at Rs 250 crore, with no changes.

Hope for FAME III

Despite the lack of immediate changes, EV players remain hopeful for a stronger FAME III policy to boost EV adoption. Tushaar Bajaj, Co-Founder and Director of Virtus Motors, emphasized the need for strategic subsidies and incentives to improve charging infrastructure and battery swapping.

Customs Duty Cuts

The Budget announced a cut to zero for customs duty on critical minerals such as lithium, copper, cobalt, rare earth elements, graphite, and platinum/palladium. This move is seen as a positive step for automobile OEMs.

Nuvama commented that reducing customs duty for critical minerals will reduce lithium cell manufacturing costs in the future, as production begins in India.

Neuron Energy’s CEO, Pratik Kamdar, noted that exempting custom duties on minerals like lithium and cobalt will lower production costs of battery cells, making EVs more affordable.

Industry Reactions

Moushumi Mohanty, Head of Electric Mobility Programme at the Centre for Science and Environment praised the move, highlighting its positive impact on EV cell manufacturing costs.

Siddarth Bhamre, Head of Research, Asit C Mehta Investment Intermediates, observed that the budget's emphasis on the rural economy, employment, and MSMEs would positively impact the auto sector.

Also Read: Budget 2024: Promotes E-bus Adoption through Innovative Payment Security Measures

CMV360 Says

The recent budget is a bit disappointing for the EV industry, as it didn't include any major updates to important schemes like FAME. Cutting customs duties on critical minerals is a good move, but it seems like just a small part of what’s needed. What we really need is a stronger FAME III policy to drive long-term EV growth. 

It's crucial for the government to provide strategic support for EV startups and invest in better infrastructure. Only then can we hope to see a real acceleration in electric mobility across India.