Boost For EV ecosystem In Interim Budget 2024, According To Auto Sector Experts

According to automotive sector analysts, the initiatives outlined in the FY25 interim budget will strengthen the country’s electric vehicle (EV) ecosystem and boost the electrification of public transportation networks, which will be aided by increased use of electric buses.

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What did the Finance Minister say?

Finance Minister Nirmala Sitharaman stated during the presentation of the interim budget that the government will develop and improve the EV ecosystem by investing in production and charging infrastructure.

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“Greater usage of electric buses for public transport networks will be promoted through payment security mechanism,” she went on to say.

The government has budgeted Rs 2671.33 crore for FY25 to extend the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle in India (FAME India) project for an additional year. According to the updated projections, the budget for FY24 was Rs 5,171.97 crore, of which Rs 4,807.40 was spent. The government spent Rs 2,402.51 crore on the initiative in FY23.

The Production Linked Incentive (PLI) schemes for automobiles and auto components, as well as advanced chemistry cell (ACC) battery storage, have seen the most growth.

The budget for the PLI plan for automobiles and auto components has grown by seven times, from Rs 483.77 crore in FY24 to Rs 3500 crore in FY 25. The PLI plan for ACC battery storage would cost Rs 250 crore in FY25, up from Rs 12.01 crore in FY24.

Analysts praised the initiatives.

“The disbursement of funds under PLI schemes would encourage cash flows and credit metrics for automotive OEMs and ancillaries,” says Shamsher Dewan, Senior Vice President and Group Head of Corporate Ratings at ICRA.

“The government’s push for the development of the EV ecosystem continues, with a renewed emphasis on enhancing charging infrastructure, which is expected to alleviate range anxiety and increase EV adoption. The continuance of FAME II subsidies after March 2024 is also expected to boost uptake, raising prospects for further subsidy support in the future. Furthermore, the government’s efforts to improve payment security for electric bus fleet operators would help to accelerate the implementation of electric buses,” Dewan said.

CRISIL Ratings Director Gautam Shahi stated that policy measures announced in the interim budget, such as the establishment of a payment security mechanism and an emphasis on increasing support for manufacturing and charging infrastructure, are positive steps toward increasing the adoption of electric buses in public transportation networks.

CRISIL Ratings anticipates electric bus penetration to rise to roughly 8% by FY25, up from nearly 4% in FY23.

Sudarshan Shreenivas, Director of CareEdge Ratings, stated that the interim budget emphasized support for the EV sector by pledging to fund the expansion of the country’s charging infrastructure and total EV ecosystem.

“For the motor sector, the FY25 interim budget maintains the course set by previous budgets by focusing on EVs. The budget prioritizes public mobility above personal mobility. Most bus tenders have been based on the gross cost model, which poses a major risk to the OEM/operator. With the implementation of the payment security method, there is likely to be increased interest in electric buses, accelerating adoption,” said Anurag Singh, Managing Director of Primus Partners.

The increased focus on charging infrastructure is set to address a major bottleneck in the EV value chain,” Singh stated, adding that the PLI schemes are making good progress and that the FAME scheme would now prioritize public mobility above personal mobility.

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