Maharashtra recently revamped its electric vehicle (EV) policy and packed it with a bundle of attractive incentives, aiming at electrifying 10% of new vehicle registrations by 2025, with a focus on urban areas of Mumbai, Pune, Nagpur, Nashik, and Aurangabad. The policy covers all major vehicle segments while prioritizing shared and public transport, two-wheelers, and three-wheelers. The policy rightly identifies upfront cost parity, model availability, charging infrastructure, and low consumer awareness as key uptake barriers and checks many right boxes in addressing these issues head-on.
Policy tilts in favour of electric two-wheelers
A recent research indicates that without any incentives, electric two-wheelers may not match upfront prices of conventional petrol two- wheelers for another 8-10 years. With petrol prices near Rs 100 per liter, electric two-wheelers are already becoming cheaper to own and operate over their useful lifetime, but consumers may still balk at the higher upfront cost of an electric vehicle.
The recently revised incentives offered by the Central government (FAME-II) along with preferential GST rates bring upfront cost-parity for electric two-wheelers closer to 2025. Maharashtra’s new EV policy generously tops up these central government incentives to tilt the case clearly in favour of electric models. A 3-kWh electric two-wheeler purchased in 2021 is eligible for a demand incentive of Rs10,000 along with an “early bird” discount of Rs15,000. For electric two-wheelers purchased against scrapped Internal Combustion Engine (ICE) models, the policy offers additional scrappage incentives of up to Rs 14,000 for consumers.
Taken together, Maharashtra’s direct incentive package for two-wheelers nearly doubles the FAME-II incentives offered by the central government. This can make an electric scooter nearly 15% cheaper to purchase than a petrol scooter. Even after the early-bird discount disappears from January 2022, electric two-wheelers in Maharashtra will continue to be attractive to purchase compared to their petrol counterparts because the policy also offers a full road tax waiver for electric vehicles. With the early bird discount, Maharashtra’s demand incentive package compares most favorably today amongst state EV policies in India. For example, while both Delhi and Gujarat offer generous demand incentives to electric models, a 3 kWh scooter purchased before the end of this year in Maharashtra can be INR 14,000 cheaper than Delhi, while about Rs 20,000 cheaper than in Gujarat.
Policy may pare down EV prices
Maharashtra’s EV policy could end up lowering prices of electric two-wheelers and three-wheelers even beyond these incentives. Manufacturers who offer a 5-year battery warranty or assured buy-back schemes are eligible for additional subsidies, provided that they pass on the benefits to consumers. These additional incentives have been instituted to address consumer concerns on the resale value of electric vehicles. No other states in India today have such incentives in place.
Policy hints at ZEV program
Also tucked inside Maharashtra’s policy is the state’s intention to issue an innovating zero-emission vehicle (ZEV) credit program for vehicle manufacturers. Experience from around the world indicates that markets that have such programs have far greater electric model availability and uptake in comparison to those that do not. Led by California, 14 states in the United States already have a ZEV credit program. Four out of every five ZEVs sold in the United States are in these states. China has adopted a similar program at the national level, while South Korea is actively debating a similar ZEV credit program.
ZEV credit programs need not specify timelines for 100% electrification. Rather, they work by requiring manufacturers to make electric vehicles an increasing percentage of their total sales over time. On the manufacturer side, a mechanism like this will help in moving the Indian auto industry out of its current position of caution and foster much needed competition in the EV space, particularly for passenger cars. Tradeable credit mechanisms and other design features can offer the required compliance flexibility to optimize both short and long-term investment strategies. EV only start-ups such as Tesla have benefitted mightily from generating ZEV credits which they can sell to other manufacturers who are yet to introduce EVs or are lagging in meeting their ZEV target.
Over time, all mainstream manufacturers will also introduce EV models across their lineup instead of purchasing ZEV credits from leading EV manufacturers. Introduction of EVs from all mainstream brands across multiple market segments and price points will have far-reaching impact on consumer perception as well. A larger model pool offers consumers choice, which was previously unavailable or limited. It also signals to consumers that EVs have “arrived” and positively impacts technology visibility and acceptance. If finalized, Maharashtra will be the first state in India to adopt such a program and will lead in deployment of electric vehicles in the country.
Enhancing charging infrastructure in the state
The new policy also introduces encouraging measures to expand charging infrastructure in the state that both complement and supplement central government initiatives. Service providers can avail subsidies of up to INR 5 lakhs for installation of public and semi-public charging stations that are not subsidized through the FAME-II scheme. The policy directs cities covered under the National Clean Air Program to use their program funding towards charging infrastructure expansion and upgradation of power systems. On the residential side, Maharashtra’s policy introduces another unique measure in the form of property tax rebates to increase private charging infrastructure. Property tax rebates in the range of 2% to 5% have been indicated from 2025 onwards for individuals and housing societies. These measures are expected to have cumulative impacts on overall charger availability.
Recent revisions to Maharashtra’s EV policy are indeed raising the bar on state level actions to support vehicle electrification in India. The state’s EV policy is now among the most progressive in the country. The focus must now be on speedy operationalization of the policy, and effective monitoring and oversight of its implementation.
Views expressed above are the author’s own.
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