The penetration of electric vehicles in the country is likely to remain low at 3-5 per cent till 2025 due to higher prices of EVs compared to its internal combustion engine (ICE) counterparts, as well as the inadequate public charging infrastructure, said credit rating agency ICRA.

Given that the average car realisation in India is low compared to markets like the US and China, achieving price parity for EVs and ICE is likely to take a long time, it noted. This is in the backdrop of the Indian market being a price-sensitive one, and the economies of scale being a crucial factor for passenger vehicle OEMs to price its model competitively, it explained.

With technological advancements and benefits of economies of scale, lower battery prices of EVs may result in it achieving price parity with its ICE counterparts over a 10-12 years, ICRA said.

Government support remains a crucial factor to support the growth of EVs in the country, said Subrata Ray, Senior Group Vice President, ICRA Ltd. “Assuming subsidy of ₹1,50,000/vehicle, one per cent of total domestic PV sales in FY20 will need about ₹450 crore of subsidy support annually and; about ₹1,300 crore support over next three years.”

“The recent announcement of FAME 2.0 scheme however, provides limited visibility, as overall subsidy amount is much lower at ₹525 crore over the next three years,” he said.

Ray added that there is also a lack of clarity regarding the long-term road-map for charging infrastructure, as well as the incentive structure for EV and Li-ion battery manufacturing facilities in India.

Currently, with the global Li-ion battery market being dominated by international players, the high import dependence on batteries and other electronic components significantly dilutes the benefits of the lower crude import bill that the shift to EVs bring about, he added.

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