MoRTH makes a move to reduce cost of electric vehicles by delinking battery costs

APN News, August 13, 2020

In a swift move to facilitate the uptake of Electric Vehicles in India, the Ministry of Road Transport and Highways, on 12th August, allowed the sale and registration of electric vehicles sans their most expensive component, i.e. the batteries.

“While this comes as a welcome move to reduce the high upfront costs of electric vehicles it would require better alignment with existing schemes, particularly FAME II, for effective implementation” says Udai S. Mehta, Deputy Executive Director of CUTS International.

Battery costs, though one-time investments, account for a 30-40% of the cost of an Electric Vehicle. Soaring battery prices are the reason for EVs not being able to compete with their ICE counterparts in the current market scenario.

To add to this, technology upgrades lead to exponential rises in the costs, with a lithium-ion battery costing almost double of a lead-acid battery. Thus, this move by the MoRTH to delink battery costs from vehicle costs has the potential to put E-2 wheelers and 3-Wheelers back into the competition as the upfront costs plummet.

Given the price sensitive nature of Indian consumers, cost parity will allow them to make an informed choice between ICEVs and EVs.

The move also has the potential to create an enabling environment for creation of a battery swapping network as batteries may now be sold separately by OEMs or energy service providers, subject to certification by authorised Test agencies.

In a post-Covid market scenario this seems to be a breath of fresh air for the EV dealers who seem to be gagging under the economic impact of the pandemic and prolonged lockdowns.

However, a crucial link which may be broken by this initiative is that between EVs and purchase incentives under the FAME II scheme of the Central Government. This is because the incentives under the scheme are based on the battery capacity of an EV. Thus, the implementation of this move will require restructuring of the benefits in order to achieve its intended objective.

This news item can also be viewed at: