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EV Incentives at Risk: Industry Warns of Momentum Halt

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  Published in Automotive and Transportation on Friday, January 30th 2026 at 23:24 GMT by moneycontrol.com
      Locales: Delhi, INDIA

Maintaining Momentum: The Case for Continued EV Incentives The past few years have witnessed a burgeoning interest in electric vehicles in India, fueled in part by government incentives designed to encourage adoption. These incentives - primarily subsidies on vehicle purchases and tax benefits - have been instrumental in making EVs more accessible to a wider segment of consumers. However, the industry warns that removing or significantly reducing these incentives could abruptly halt this positive momentum. Automakers argue that the cost of EVs remains higher than comparable internal combustion engine (ICE) vehicles, and continued financial support is vital to bridge this price gap, thereby encouraging sustained demand and furthering the nation's commitment to reducing carbon emissions.

The industry isn't simply asking for handouts; it's advocating for a predictable and long-term policy framework. Sudden changes in incentive structures create uncertainty for both manufacturers and consumers, disrupting investment plans and potentially stifling innovation. A phased reduction, aligned with advancements in battery technology and declining production costs, would be a more palatable and effective approach, allowing the industry to adapt and maintain a consistent growth trajectory.

Unlocking Efficiency: The Need for GST Clarity Beyond direct purchase incentives, the industry is also seeking greater clarity on the Goods and Services Tax (GST) framework. Currently, there's ambiguity surrounding the GST rates applicable to EVs and their critical components, particularly batteries. This lack of clarity creates administrative hurdles for manufacturers, complicates financial planning, and hinders efficient operations. A simplified and transparent GST structure would streamline the supply chain, reduce compliance costs, and ultimately benefit consumers through more competitive pricing. The industry believes that resolving these GST issues is crucial for creating a level playing field and attracting further investment into the EV sector.

Reaching the Heartland: Rural Market Support While urban centers have seen a relatively faster adoption of both EVs and conventional vehicles, the rural markets remain largely underserved. The industry recognizes the immense potential of these markets and is urging the government to prioritize infrastructure development in rural areas. This includes improving road connectivity, establishing charging infrastructure for EVs, and enhancing access to financing options for rural consumers. Financial assistance programs specifically tailored to rural vehicle buyers could significantly boost demand and contribute to inclusive economic growth. Improved rural infrastructure wouldn't just benefit the auto industry, it would also facilitate agricultural trade, improve access to healthcare and education, and create employment opportunities.

Addressing Broader Concerns: Raw Materials & Local Manufacturing The industry's concerns extend beyond EVs, GST and rural markets. Rising raw material costs, particularly those of steel, aluminum and critical battery minerals, pose a significant challenge to manufacturers. The budget is expected to address this issue through measures such as import duty rationalization or promoting domestic sourcing of raw materials. Furthermore, SIAM has highlighted the importance of strengthening local manufacturing of auto components through initiatives like the Production Linked Incentive (PLI) scheme, fostering self-reliance and reducing dependence on imports. Investments in research and development within the automotive sector are also deemed crucial for driving innovation and maintaining India's competitiveness in the global market.

Looking ahead, the Union Budget 2026 presents a pivotal opportunity to shape the future of the Indian automobile industry. By addressing these key demands, the government can unlock the sector's full potential, driving economic growth, fostering innovation, and accelerating the transition towards a cleaner and more sustainable transportation future.