In the Budget 2023, the government has announced to exempt customs duties on capital goods on lithium-ion batteries. The Union Minister of finance, Nirmala Sitharaman says,” To further provide impetus to green mobility, customs duty exemption is being extended to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles.”
He also said the basic custom duty rates on goods, textiles, and agriculture,is from 21 to 13. For this to reduce tax, there are some changes on price including toys, bicycles, automobiles and naphtha.”
The battery is the most expensive component of any electric vehicle. This reduces tax on batteries, and most of the companies will be attracted to manufacturing batteries in India under the PLI scheme.” There are still many parts of EV componentry -such as lithium cells, permanent magnets for electric motors, semiconductors etc that will need to be imported,” says Sohinder Gill, the director general of SMEV company.
Right, there is no lithium-ion battery plant in India. The industry has only options to import the battery cell outside India. Recently, China and South Korea are two major suppliers of battery cell and technology- with a market share of 35% to 40% each. Where Japan acquired only 20% space of these three countries, close to 90%.
So, competing against the low price Chinese lithium-ion battery is a major roadblock in battery manufacturing in India. But India is not ready for that. However, given the increasing rates of adoption, there is a gradual shift towards manufacturing critical components of BEVs, including cells
After the price reduction, the lithium-ion battery prices will drive up the penetration rate of BEVs in India, especially in the two wheeler sector. Because India is the largest market in the world, and about 375-400 million two wheelers are running on the road, and this number is continuously growing. Electric two wheelers make up about 94% of total BEV market-which crossed cumulative sales of one million units in 2022. In this segment, electric two wheelers acquire about 3.6% of all two wheelers in India.
For this tax reduction, some EV companies like Ola, Ather and more who are manufacturing EVs battery in India.
