Will EV firms speed up on govt charge?

With GST on the sale of electric vehicles (EV) reduced from 12% to 5%, start-ups are having a good reason to cheer. And it's not just electric mobility start-ups that are to benefit. Even those start-ups that work in tandem with EVs have a lot to celebrate.

''The budget incentives, FAME-II, and now the GST rate cut have provided big incentives to the end buyer of electric vehicles, driving up the demand," says Sameer Aggarwal, founder and CEO of RevFin, a digital lending start-up that gives loans to electric autorickshaws and electric scooters.

Besides the GST rate cut, the government has slashed the tax on chargers and charging stations for EVs from 18% to 5%. Moreover, the government has approved Rs 10,000 crore to encourage faster adoption of EVs under the FAME-II scheme and has done away with customs duty on certain EV parts to boost this nascent segment.

EV as a market in India is expected to reach $707.4 million by 2025, growing at a compounded annual rate of 34.5%, as per data by Prescient & Strategic Intelligence. Categorised into battery operated electric vehicles, hybrid electric vehicles and plug-in hybrid electric vehicles, the market is dominated by battery electric vehicles. Start-ups have been buzzing in this segment with electric cars, two-wheelers, bicycles, and autos, and have been attracting marquee investors off late. Recently, Ola's electric vehicle subsidiary called Ola Electric Mobility raised $250 million from SoftBank and attained the unicorn status.

"The GST cut will give established automobile companies an edge over emerging start-ups. However, since EV as a field is fairly new, start-ups which have solutions for electric mobility can sell their solutions to established companies," says Amit Gupta, co-founder and CEO, Yulu, which offers electric bicycles on hire for last-mile connectivity. Yulu is reportedly in news to raise about $15 million from a host of investors. "We are rapidly expanding our offerings. We currently live in Bangalore and Mumbai and plan to increase our footprint in these cities, while adding new cities. In the next 12-18 months, we aim to have a fleet size of 80,000-100,000 bicycles in 10 cities,'' adds Gupta.

Says Greg Moran, co-founder and CEO of Zoomcar, "Out of our current fleet of over 8, 000 cars, 500 are EVs. At present, we are collaborating with other big brands in the EV space and will be growing our existing fleet of EVs. We have decided to invest aggressively in EVs for the future. Moreover, over 70% of our EVs are on a subscription where customers share these mainly on days when they don't use."

According to Gagan Agrawal, director of Shigan eVoltz, which manufactures three-wheeled electric vehicles, the sector will attract huge investments including at the micro-level when it comes to lithium-ion batteries, electric powered motors, and controllers, etc. "The GST boost could also help reduce illegally operating e-rikshaws in the eastern and northeastern states while reversing the trend of slow adoption of e-rikshaws in the south and western states."

RevFin is looking to finance 3 lakh electric vehicles in the next five years. "With average finance of Rs1 lakh per vehicle, this translates to loans of Rs 3, 000 crore,'' says Aggarwal.

However, experts feel a lot more needs to be done to actually boost EVs. Gupta feels that incentives are needed for shared mobility start-ups which are focused on the transition and use of electric mobility, rather than just the sale of vehicles.

According to Shamik Moitra, managing partner, Maitreyi Capital Advisors, a GST cut won't impact fleet operators positively unless the countervailing GST input-output is matched between the manufacturer and the service provider. Agrees RevFin's Aggarwal who feels the GST needs to be rectified as manufacturers procure raw materials at 12% GST. "This increases the cost for manufacturers. There are over 600 EV manufacturers in India, most are small and will not be able to absorb this cost and may scale down."

Moreover, there needs to be a thorough check on whether there exist other encouraging factors on the demand side like if there is an incentive to switch from CNG to electric, adds Moitra. "And about the switching costs, who bears it? There needs to be an integrated mass transport plan which focuses on influencing the microeconomics of hired vehicles.''

Says Aggarwal, "Incentives are needed to switch from CNG/diesel vehicles to EVs. And re-conversion of old chassis from CNG to electric at subsidised rates.”