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Budget 2023: Duty exemption on battery cell equipment may reduce prices of EVs.

Date: 02-02-2023
Subject: Budget 2023: Duty exemption on battery cell equipment may reduce prices of EVs
With the government exempting customs duties on components required to manufacture lithium-ion cells, companies making Electric Vehicle (EV) battery cells domestically will likely benefit. A boost in domestic manufacturing of battery cells will further help in bringing down the prices of EVs for the end consumer, according to industry players.

"To further provide access to green mobility, customs duty exemption is being extended to import of capital goods and machinery required to manufacture lithium-ion battery cells for batteries used in electric vehicles," finance minister Nirmala Sitharaman said.

Companies like Ola Electric, Reliance Industries and Rajesh Exports were shortlisted by the government to avail of the Rs 18,000 crore production-linked incentive scheme to make batteries that power EVs domestically. Currently, all the EV makers import batteries from countries like China and South Korea. These are the most expensive components used in an EV.

Pankaj Sharma, managing director and cofounder of battery cell maker Log9, told ETtech that equipment adds significantly to the cost of manufacturing battery cells and a customs duty exemption will help reduce the final price.“ In lithium-ion cell manufacturing, equipment plays a big part....,” said Sharma. “In India, there are no equipment manufacturers so we are all importing components from Germany, China among other countries.”

Tushar Garg, cofounder and chief business officer of EV cab company, BluSmart told ET that the budget announcement does not affect their business directly in any manner but welcomed the move by the government to exempt the customs duty on cell manufacturing as it likely to bring down prices of electric cars in the long run.

Though Sitharaman said that “green growth” is a focus area in this year's budget, the industry had multiple other demands before the budget. Some OEMs expected a reduction of goods and service tax for different components to be brought down to 5%. Though the final price of an EV comes in the 5% bracket, the taxes of different components that go into an EV differs. There were also expectations among EV makers to extend the Rs 10,000 crore FAME-II subsidy beyond 2024.

"It is a growth-oriented budget but we would have liked to see some more specifics for the EV sector - like harmonization and simplification of GST along with reduction to 5% for batteries would give a fillip to EV adoption," said Amit Gupta, cofounder and CEO of EV and battery swapping company Yulu. "Granting EV sector a priority-sector lending status has been a missed opportunity for years and we were hoping this year's budget to address it."

Gupta, though, said that it is heartening to see "green" as a dominant theme in this year's budget.

"We are implementing many programmes for green fuel, green energy, green farming, green mobility, green buildings and green equipment and policies for efficient use of energy across various economic sectors," Sitharaman said.

The government has also set aside Rs 35,000 crore “for priority capital investments towards energy transition and net zero objectives”, though the industry is seeking more information about the allocation of this fund.

"The announcement of Rs 35,000 crore budget for green transition allocation and the proposal of zero carbon emission goal by 2070 are huge steps forward in promoting India's progression towards green growth," said Chetan Maini, cofounder and chairman of battery swapping company Sun Mobility. "However, the industry looks forward to the government to share more insights about the capex allocation to support the commercial vehicle sector as part of the green growth agenda."

The government has also set aside Rs 35,000 crore “for priority capital investments towards energy transition and net zero objectives.”

Sitharaman also said that adequate funds will be provided to the state governments to replace their old vehicles.

“Replacing old polluting vehicles is an important part of greening our economy. In furtherance of the vehicle scrapping policy mentioned in Budget 2021-22, I have allocated adequate funds to scrap old vehicles of the central government. States will also be supported in replacing old vehicles and ambulances,” she said.

Industry watchers are expecting these vehicles to get replaced with EVs. The government has also increased the import duty of semi-knocked down units of all vehicles, including EVs, to 35% from 30% in this year's budget. Sitharaman also emphasised replacing old vehicles from the government's fleet, which many industry watchers expect to be converted to electric.

Source Name:-Economic Times


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