China Vs India: Spending On Promoting EVs

  • Apart from other benefits, such as tax rebates, the Chinese government has allocated nearly $57 billion to support the purchase of electric cars between 2016 and 2022.
  • In contrast, the total budget for India’s FAME II (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles) scheme is Rs 10,000 crore.

According to the World Resources Institute (WRI), the top five countries with the highest electric vehicle sales include Norway (where all-electric vehicles accounted for 80% of passenger vehicle sales in 2022), Iceland (41%), Sweden (32%), the Netherlands (24%), and China (22%). WRI emphasizes China’s inclusion in this list due to its significance as the world’s largest car market.

For India, the report notes that EV sales increased from 0.4% to 1.5% in just one year, from 2021 to 2022. This growth rate is approximately three times faster than the global average, which took three years to go from 0.4% EV sales in 2015 to 1.6% in 2018.

While both countries have been offering incentives to vehicle manufacturers and buyers to encourage electric mobility adoption, China has made a substantially larger financial commitment. For example, according to the consultancy firm AlixPartners, China invested close to $57 billion to support the purchase of electric cars between 2016 and 2022.

In comparison, the total allocation for FAME II in India is Rs 10,000 crore. It’s worth noting that India has recently become the third-largest auto market in the world.

FAME Fiasco

Currently, China faces sanctions for the EVs it exports to Europe and the West, while Indian authorities have been embroiled in disputes with several electric vehicle manufacturers. Many of these manufacturers have faced scrutiny by the Ministry of Heavy Industries for non-compliance.

In fact, auditors consulting with SMEV had earlier contended that the figures stated by MHI on the achievement of FAME II mandated targets included sales of EVs that were not funded under the scheme, which they found “incongruous and disingenuous.”

The total number of electric two-wheelers sold under the FAME II scheme between April 2019 and 2023 is listed at 9.6 lakh. Of these, SMEV claims that 4.5 lakh vehicles have not received the subsidy component to date, “for one reason or another.”

Moreover, in May 2023, MHI reduced the FAME II subsidy for electric two-wheelers from 40% to 15%. Instead of INR 15,000/kWH, only INR 10,000/kWH will now be available as a subsidy.

There are also rumors in the market that several EV makers have proposed that MHI allow them to request consumers to return the subsidies. China’s original plans included discontinuing road-tax subsidies, but in a recent move, the country announced an extension of these subsidies until 2027.

EV Exports-Centric China

According to India Trade Data, India exported 38.7K electric vehicles in 2022. The Center for Strategic & International Studies (CSIS) indicated that in 2022, China overtook Germany to become the second-largest car exporter, with exports led by the EV segment. China exported EVs worth around $22.5 billion.

Notably, car exports from China are not subject to a 13% value-added tax. Furthermore, the majority of EV manufacturers in China pay only a 15% tax rate, while the standard rate is 25%.

In contrast, India has announced two PLI (Production-Linked Incentive) schemes focusing on rewarding automakers based on their sales. The first PLI scheme, Advanced Automotive Technology (AAT), includes automobiles and auto components. It was allocated a budgetary outlay of INR 25,938 crore and provides sales-linked incentives of up to 18% of the sale value for AAT manufacturing. The second scheme is centered on Advanced Chemistry Cell Battery Storage technology and has an outlay of INR 18,100 crore.

Several other reports indicate that governments and authorities at various levels in China procure EVs for their usage on a large scale.


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