How State-Level EV Policies Are Shaping Regional EV Markets

Some states establish tax breaks for purchasing land to set up EV manufacturing facilities, exempt EV manufacturers from stamp and electricity duties, or provide discounted utility rates to support the expansion of the sector.

December 10, 2024. By News Bureau

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The Electric Vehicle (EV) market in India has reached an interesting turning point in its journey. Having successfully overcome the initial bumps, it is now on a path of continuous growth and expansion. The sales of these vehicles grew 19% in the first half of 2024-25, rising to 8,36,621 units from 7,02,013 units in the first half of 2023-24.

This impressive growth rate can be largely attributed to the unwavering support provided by the Indian Government through favourable policies and incentives, that has accelerated the transition to a clean and green transportation system. While the central government's policies such as the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, Electric Mobility Promotion Scheme (EMPS) and others have been instrumental in promoting EV adoption, various states across India have also implemented their own EV policies to boost the uptake of these vehicles in their respective regions.

These state-level policies encompass a range of initiatives, such as attractive financial incentives for EV purchases, exemptions from road taxes and registration fees, etc. These initiatives help to reduce the overall cost of owning an EV, making them a more cost-effective and appealing option for consumers, thereby stimulating market demand. Moreover, various governments provide capital subsidies for EV manufacturing as well as research and development efforts to spur innovation and growth in the industry. Some states establish tax breaks for purchasing land to set up EV manufacturing facilities, exempt EV manufacturers from stamp and electricity duties, or provide discounted utility rates to support the expansion of the sector. Others prioritize infrastructure development, introducing policies that support the installation of EV charging stations, which is crucial for addressing range anxiety and increasing the convenience of owning an EV. By focusing on infrastructure expansion, states are not only supporting existing EV owners but are also laying the foundation for future growth and adoption of EVs. All these initiatives go a long way in shaping the regional EV markets by incentivizing consumers and businesses to make the switch to clean energy transportation.

Notably, each state in India has its own set of needs and priorities when it comes to advancing the adoption of EVs. This is due to the diverse landscape of the country, which includes varying levels of urbanization, infrastructure development, and environmental concerns across different states. State governments are better positioned to understand these unique opportunities and challenges in their regions and have the flexibility to tailor their policies to suit their specific local needs. Thus, state EV policies vary widely in their scale, scope, objectives and targets. The implementation of customized incentives, regulations, and infrastructure development at the state level leads to more effective outcomes in terms of EV adoption. For instance, states such as Gujarat, Maharashtra and Meghalaya are offering generous subsidies to EV buyers for the purchase of electric two-wheelers, three-wheelers and four-wheelers, making EVs more affordable in these states and thus encouraging more people to make the switch.

Similarly, states of Telangana and Tamil Nadu offer EV buyers complete exemption from registration charges and road tax. These state-level benefits have significantly bolstered the adoption of EVs in their respective regions. According to a CEEW-CEF study, states that offer consumer incentives experience a 2x growth in market volume as compared to states without these incentives. In addition, states like Karnataka are supporting EV manufacturers by offering subsidies to encourage the production of electric cars. As of Q1 FY25, 25 states and Union Territories had notified their own EV promotion policies, with a majority having consumer incentives. As more states implement these policies, we can anticipate a rise in the number of electric vehicles on the roads, ultimately contributing to a more sustainable future.

The presence of these ambitious policies signals the state governments’ commitment to promoting e-mobility in India. These policies, by addressing the unique transportation needs specific to each region, could ultimately give a collective push to the nationwide EV market. Thanks to these initiatives, notable progress is already apparent with EVs becoming more accessible and affordable to the consumers in various parts of India, while manufacturers also being encouraged to create more advanced and innovative EVs.

However, while state-level EV policies are effective in stimulating EV adoption within individual regions, collaboration between states is equally important in creating a cohesive and interconnected national EV market. By working together, states can share their best practices, align incentives, and create a more consistent regulatory environment for EVs, which can further streamline the adoption process. Ultimately, this collaboration can help overcome the barriers to EV adoption and pave the way for a sustainable and electrified future.

- Yogesh Bhatia, MD and CEO, LML