Gadkari sees cost of EV, ICE vehicles at same level in next one and a half years

The cost of electric vehicles is expected to reduce in the coming months with lower battery costs and higher scale, and is projected to be similar to that of vehicles powered by internal combustion engines, Minister of Road, Transport and Highway Nitin Gadkari said.

Speaking at the Winter Session of Parliament at the Rajya Sabha, Gadkari said, "Electric vehicles have become popular. The cost difference between petrol-diesel and electric variants is the major problem in higher adoption. I estimate that within one and half years, the cost of electric vehicles and internal combustion engine vehicles will be the same." 

Currently, the cost of an electric vehicle is about 25-30 percent higher when compared to a conventional internal combustion engine-powered car. The higher cost can be attributed to higher battery cost, significant import content, and lower scale.

The minister’s cost projection is in line with the expectations of India’s top electric car maker Tata Motors. While speaking at Autocar Professional’s India EV Conclave in collaboration with the government of Tamil Nadu last month, Tata Passenger Electric Mobility MD Shailesh Chandra said in less than one and a half  years, a 200-250 km real range car in the mass market could hit a similar price level as that of an ICE vehicle.

To boost early-stage adoption of electric vehicles, the government has come out with demand incentives through the FAME scheme and a lower GST rate for electric vehicles. Over 1.15 million electric vehicles are now on Indian roads, which received subsidies totalling Rs 5,228 crore under the second leg of FAME.

In addition, the government also has introduced a production-linked incentive scheme to set up advanced chemistry cell manufacturing facilities in India, which is expected to reduce the cost of batteries. India is likely to start manufacturing advanced chemistry cell batteries under the scheme from next month.

The current electric vehicle market share in the sales of two-wheelers is roughly 5%, while in passenger vehicles, it stands at approximately 2-3 percent. The government expects India's electric vehicle market to grow at a compound annual growth rate of 49% from 2022 to 2030 and targets a 30% electric vehicle market share by 2020.

The price of vehicles is also dependent on volume, the minister said, adding that he expects prices to come down with the increase in volume. “The cost of lithium-ion battery, which was at $150 kilowatt per hour, has now come to around $115 kilowatt per hour,” he added.

India’s largest passenger carmaker Maruti Suzuki and second largest two-wheeler Honda Motorcycles and Scooters India are yet to introduce their electric vehicles in the market. Maruti Suzuki is expected to come out with its first electric car in 2025, while Honda is likely to introduce an electric scooter next year.

Earlier, Maruti Suzuki’s Senior Executive Director for Sales and Marketing Shashank Srivastava said the pace of electric vehicle adoption in India’s passenger vehicle segment is likely to be faster from 2025 as he expects the adoption to be much quicker once the share of electric vehicles in the segment reaches 3.5-4 percent.

Also, it has to be noted that there could be an inflationary trend in the cost of internal combustion engine vehicles going forward, considering more stringent emission norms likely on vehicles burning fossil fuels.