Budget 2024: From FAME extension to tax cut, what EV sector expects from FM Sitharaman

The growth in sales of electric vehicles (EV) is expected to continue in 2024 on account of a rise in focus on electrification in the country, improving EV ecosystem, a planned reduction in battery costs and the development of new models across categories, say experts.

Both stakeholders and industry observers also say that continuation of the FAME II initiative is expected to further push EV demand.

“Increased incentives and subsidies further encourage consumers to adopt EVs, thus driving growth. An increase in the number of EVs will promote sustainability and reduce carbon emissions, contributing to the government’s environmental goals. The massive adoption of EVs can boost battery technology and infrastructure, further enhancing the EV ecosystem. These incentives reduce the upfront cost of vehicles, making them more attractive to consumers,” says a report released by Care Edge Ratings earlier this month.


For context, the calendar year 2023 saw a significant growth: EVs sales surpassed 1.5 million, a 50% rise over 2022.

Suman Mishra, MD & CEO, Mahindra Last Mile Mobility, says electric three-wheelers and commercial vehicles have improved the financial standing of many people as it has widened income generation avenues — through e-rickshaws and such. “EVs’ clean operation also safeguards our urban health by reducing noise and air pollution. We call upon the Union Budget 2024 to prioritise this segment through continued FAME support, fostering economic empowerment for the most deserving and environmental well-being for all,” adds Mishra.

Will Budget 2024 announce FAME extension?
On December 20, the Parliamentary Standing Committee on Industry recommended that the government should extend the deadline of the Faster Adoption & Manufacturing of Electric Vehicles (FAME)-II Scheme by at least three years. The deadline for the ongoing FAME II scheme is March 31, 2024.

Sushant Kumar, Founder & Managing Director, AMO Mobility, says, “FAME has significantly accelerated EV adoption in India. To maximise its impact and expedite the transition to sustainable mobility, we urge the government to extend the scheme and increase its budget substantially. FAME II, initially funded at Rs 10,000 crore, has already transformed our industry. Extending and adequately funding the scheme can further boost the EV market, potentially reaching over 10 million annual EV sales by 2030, creating over 2 million jobs and significantly reducing carbon emissions.”

Hari Kiran, Co-Founder and COO, eBikeGo, wants the government to continue with the third phase of the FAME programme for all EV segments, including two-wheelers, for another five years. “Eliminating existing EV incentives under FAME II could have a considerable impact on overall demand as EV prices will rise and investments would be hindered. It will also derail the current momentum that electric vehicles have garnered. FAME II's local production mandate is also closely linked to the government's ambitious 'Make in India' initiatives, and its absence may result in increased component imports, undermining the project,” says Kiran.

"The continuation of FAME scheme for the next 5 years, extending beyond its current schedule till March, is essential. This extension is vital for maintaining upfront price parity for EVs compared to Internal Combustion Engine vehicles, ensuring sustained EV adoption momentum and protecting investments in the sector. FAME III will be crucial to bridge the price gap, sustaining interest in EVs, and contributing to pollution reduction and fuel security. These concerted efforts will not only advance the EV industry but also make substantial contributions to creating a cleaner and more sustainable automotive future in India.” says Akshit Bansal, CEO & Founder, Statiq.

Tax and duty cut
Pankaj Goyal, Co-Founder & COO of AutoNxt Automation, says a substantial reduction in taxes and duties on EV components, such as batteries, will enhance cost competitiveness. His budget expectations also include financial incentives for EV financing, streamlined regulations for faster homologation of new models, and increased funding for the development of EV infrastructure.

Industry stakeholders say that to invigorate the electric two-wheeler sector, the government should cut GST on e-bikes and scooters from 5% to 2%, making them more affordable.

“Expanding charging infrastructure and battery swapping stations, particularly in urban areas and along highways, is vital to address range anxiety. Providing incentives for local manufacturing of electric two-wheeler components and batteries would enhance self-sufficiency, reduce imports, and generate employment. These actions, in conjunction with extending the FAME scheme, could position India as an eco-friendly mobility leader, targeting 50 million electric two-wheelers by 2030, with a 20% annual growth rate,” says Kumar.

Financial support
Stakeholders say that financial support for financing through public sector banks can make EVs more affordable, encouraging widespread adoption.

“Subsidies at central and state levels can significantly boost the accessibility of electric two-wheelers,” says Goyal.

He bats for accelerated investment in battery manufacturing to ensure a reliable supply chain. Infrastructure support, including charging stations in urban areas, is vital. “Integrating these measures into budget considerations is pivotal for fostering the growth of the electric two-wheeler segment in India,” adds Goyal.

In 2023, the overall EV share in auto sales rose to 6.38% from 1.75% in 2021 in just 2 years. In terms of category, 2W and 3W posted growth of 37% and 66%, respectively, while PV (passenger vehicles) was at 113% and CV (commercial vehicles) at 169% on account of a lower base.

All stakeholders agree that the budget could holistically focus on a more thorough regulatory framework for EVs, addressing problems like licensing, safety standards and insurance regulations dedicated to electric vehicles.