A crucial question is raised as India steps up its efforts to increase the adoption of electric vehicles (EVs): when will EVs become as affordable as conventional cars? This important barrier across a range of vehicle categories is clarified by insights from a recent International Council on Clean Transportation paper titled “Electric vehicle demand incentives in India”.
According to the analysis, some vehicle types are getting closer to or have already attained cost parity, while others still require continued governmental assistance in order to become more affordable than conventional automobiles.
Electric models are almost reaching cost parity in India’s market, where two-wheelers dominate. Based on earlier studies by the ICCT that were included in the study, cost parity for short- to mid-range electric two-wheelers (E2Ws) is predicted to occur between 2025 and 2027 with a ₹15,000 per kWh subsidy. The study does, however, issue a warning that this milestone may be delayed by four to five years due to the recent fall in subsidies to ₹10,000 per kWh.
In order to attain cost parity for traditional two-wheelers, the research suggests giving an initial purchase subsidy of ₹15,000 per kWh of battery capacity, up to 40% of the ex-showroom price. This would be in line with government objectives. Then, as the price of electric vehicles continues to drop, this incentive can be gradually decreased.
In many cases, the cost of electric three-wheelers—especially e-rickshaws—has already been competitive. With the subsidies that are now in place, electric three-wheelers are more cost-effective than their conventional counterparts when considering total cost of ownership (TCO), which accounts for all expenses like gasoline and maintenance.
The route to price parity in the passenger automobile market differs depending on the sub-segments:
According to the report’s study, EVs are already competitive in the hatchback market in terms of total cost of ownership (TCO), costing 13% less than gasoline models and 23% less than CNG models when the subsidy is taken into account.
For cars and SUVs, the circumstances are more diverse. According to the research, electric models in these categories often cost between one and one and a half times as much as conventional vehicles when the subsidy is applied.
The bus segment has made significant progress; with the FAME subsidy, costs per kilometer from the Grand Challenge procurement are 21%–27% cheaper than those of regular buses in the same cities.
The study promotes the provision of subsidies for vehicles in order to encourage adoption, emphasizing that significant incentives might be required to achieve near-term cost parity.
The paper highlights that the pace at which price parity can be reached will depend on a number of factors, such as fuel pricing, manufacturing scale, legislative support, and battery costs.
The path towards cost parity will be closely watched by industry participants and government as India looks to increase its existing 7% EV market share
