8 ideas for Budget 2020 to make EV batteries cheaper

• EV batteries account for 50% of the cost of an electric vehicle.
• While tax incentives to consumers are a good short-term idea, developing local EV battery manufacturing industry will have a more far-reaching impact on the adoption of EVs in India.
• In Budget 2020, the Indian government will have to use a combination of short and long-term policies to achieve its EV dream.

Electric Vehicles gained popularity as awareness of climate change has grown. Not only do EVs help reduce air pollution and emissions, they also help the government reduce fuel imports, allowing it to shore up foreign exchange reserves.

However, a major obstacle in realizing this dream remains the cost of EVs

To encourage people to buy EVs, the Indian government announced an additional Income Tax deduction of ₹1,50,000 on the interest taken to purchase EVs.

But this may not be enough. To encourage large scale adoption of EVs, they will have to come up with policies in Budget 2020 that help manufacturers bring down the cost of the production of EVs.

According to a ICRIER report, the battery in an EV is its most expensive component, accounting for 50% of its total cost.

While interest deductions are a good way to encourage consumers, reducing the cost of EV batteries can in Budget 2020 have a more far-reaching impact on the future of EVs in India.

ICRIER has compiled a list of Budget 2020 policy ideas that could help in making EV batteries cheaper.

Incentivizing manufacturing of EV batteries

Promoting and incentivizing local manufacturing of EV batteries should help bring down the battery costs in the long term.

The government is planning to offer duty cuts and reduction in minimum alternative tax for a period of eight years, starting from 2022. States could be asked to reduce GST, facilitate land acquisition and offer single-window clearance to enable easy setup of battery manufacturing plants.

Improving the availability of critical EV battery cell components like lithium, cobalt and graphite will also ease another pain point.

Development of ancillary industries

Development of ancillary industries for various components that go into a battery will reduce the overall cost of production of batteries. It will also help with integration and supply chain management.

ICRIER (Indian Council for Research on International Economic Relations) identified protection control boards, integrated circuits and other products used in battery cells as areas that need development.

Incentivizing reverse logistic services

In Budget 2020, it can help if the government Incentivizes companies to offer reverse logistic services like recycling of batteries, recovery of critical materials from used batteries.

Battery standardization

Developing battery designs and testing standards should enable battery makers to focus on quality. Standardization will also help manufacturers scale up production.

New business models to reduce cost of ownership

Incentivizing businesses to offer Battery as a Service should help reduce the cost of ownership of batteries, whilst generating revenue from new business lines.

Adoption of EVs in public transport systems

Public transport systems offers an extensive use case for EVs as it caters to a large segment of the population. This can augment the overall demand for EV batteries, and bring down costs eventually.

Promoting research and development

Setting up a dedicated institute for research and development of new battery technologies should help make EV batteries more economical in the future.

See also:

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