India’s Electric Vehicle (EV) industry is witnessing a surge in momentum, fuelled by continued government support to drive its growth and development. In a significant move, the recent Union Budget announced a full exemption of basic customs duties on cobalt powder, lithium-ion battery waste and scraps, and critical minerals like lead and zinc.
These minerals play a crucial role in lithium-ion battery manufacturing, enhancing battery performance, energy density, and lifespan. By removing customs duties on these essential materials—along with 35 additional capital goods previously exempted—the initiative is expected to have a transformative impact on India’s EV market. This policy underscores the government’s commitment to fostering sustainable transportation and accelerating the country’s transition to clean mobility.
The heavy custom duties imposed on these critical minerals have been a major factor contributing to the high costs of lithium-ion batteries in India. These custom duties made it more expensive for manufacturers to acquire these essential minerals, thereby hindering the possibilities of domestic production of EV batteries. As a result, a large percentage of the lithium-ion batteries used in EVs are being currently imported from other countries, such as China and Taiwan. These batteries are the most expensive components of an EV, comprising about 50 per cent of the total cost. This ultimately has been leading to higher EV production expenses for manufacturers, which were being reflected in the final price of electric vehicles, making them less affordable for the average consumer. Moreover, high custom duties also stifled innovation in the industry, deterring manufacturers from investing in research and development of new technologies due to increased production costs.
The recent announcement has once again set the stage for the EV industry to embark on a new phase of growth and innovation. The decision to eliminate custom duties on critical minerals for lithium-ion batteries marks a significant turning point for the industry. As these barriers get removed, manufacturers will now be able to access these essential minerals at a lower cost, leading to a decrease in the overall production costs of electric vehicles. These cost savings will ultimately be passed on to consumers in the form of more affordable EVs, making them a viable option for a wider range of consumers. This increased affordability would further drive higher adoption rates of these vehicles in the country.
This initiative is not only a win for consumers but also a strategic move to encourage domestic production of EV batteries. As the cost of importing essential raw materials for battery production will significantly reduce, EV battery manufacturing is expected to become more economically viable in the country. Thus, India can reduce its dependence on foreign imports of EV batteries and create a self-sufficient ecosystem for EV manufacturing. Thus, by supporting local battery production, this initiative aligns perfectly with the government’s central ‘Make in India’ objective. Furthermore, the availability of locally manufactured batteries will lead to a more robust supply chain for EV manufacturers. With easy access to high-quality batteries, Indian automakers can focus on designing and producing electric vehicles that are competitive in terms of performance, cost, and range. This, in turn, will boost the overall growth of the EV sector in the country.
More and more companies will now be encouraged to set up battery manufacturing plants in India, fostering healthy competition and innovation. This expansion of the EV battery manufacturing sector will create numerous job opportunities for the local workforce. Moreover, with reduced costs and a reliable supply of batteries, automakers will be more inclined to invest in EV production. With increased domestic production, India can also focus on developing indigenous technologies for EV batteries. This will not only lead to technological advancements in the field but also boost the country’s reputation as a hub for sustainable energy solutions.
Clearly, the entire EV ecosystem stands to benefit from the strategic announcement of exempting the critical minerals for EV battery manufacturing from custom duties. It is a welcome move that is set to drive advancement and rigour in the EV sector. These proactive measures by the government from time to time to support the industry bode well for the future of electric mobility in the country. However, it is imperative for the government, industry stakeholders, and consumers to collaborate and capitalize on this opportunity to accelerate the transition towards sustainable transportation.
