In a scenario where a subsidy of ₹15,000 per kWh is provided, it is anticipated that the upfront cost parity for short- and mid-range electric two-wheelers (E2Ws) would be achieved between 2025 and 2027. However, with the recent reduction in subsidy to ₹10,000 per kWh, the achievement of upfront cost parity is expected to be delayed by approximately 4 to 5 years.
As India intensifies its efforts to boost electric vehicle (EV) adoption, a pivotal question arises: when will EVs match the cost of traditional vehicles? Insights from a recent International Council on Clean Transportation report titled “Electric vehicle demand incentives in India” shed light on this significant threshold across various vehicle categories.
The report reveals that while some vehicle types are approaching or have reached cost equivalence, others still depend on ongoing policy support to close the price gap with conventional vehicles.
In the dominant two-wheeler segment of India’s market, electric models are nearly achieving cost parity. According to previous research by the ICCT highlighted in the report, with a ₹15,000 per kWh subsidy, cost equivalence for short- to mid-range electric two-wheelers (E2Ws) is anticipated between 2025 and 2027. However, the report cautions that the recent subsidy reduction to ₹10,000 per kWh could postpone this milestone by 4 to 5 years.
The report recommends aligning with government objectives to achieve cost parity for conventional two-wheelers by introducing an initial purchase subsidy of ₹15,000 per kWh of battery capacity, which would be limited to 40% of the ex-showroom price. This subsidy could then be progressively reduced as electric vehicle costs continue to decrease.
Electric three-wheelers, particularly e-rickshaws, have already reached cost competitiveness in many scenarios. Current subsidies make electric three-wheelers more economical than their conventional counterparts based on total cost of ownership (TCO), which includes all costs such as fuel and maintenance.
In the passenger car sector, the path to pricing parity varies across different sub-segments:
For hatchbacks, the report’s analysis indicates that EVs are already competitive on a TCO basis, being 13% cheaper than gasoline models and 23% cheaper than CNG models with the subsidy included.
In the case of sedans and SUVs, the situation is more varied. The report notes that, on average, after applying the subsidy, electric models in these categories cost about 1–1.2 times more than traditional vehicles.
The bus segment shows notable progress, with costs per kilometre from the Grand Challenge procurement being 23%–27% lower than those of conventional buses in the same cities; these costs drop further to 31%–35% lower with the FAME subsidy.
For trucks, the report advocates for the introduction of subsidies to spur adoption, highlighting that substantial incentives might be necessary to attain near-term cost parity.
The report emphasizes that various factors, including battery costs, production scale, policy support, and fuel prices, will affect how quickly price parity can be achieved.
As India aims to expand its current 7% EV market share, the journey towards cost parity will be keenly monitored by both industry players and policymakers.
