Incentives under the Gujarat government's electric vehicle (EV) policy, coupled with enhanced subsidy under the Centre's FAME-II scheme, will lead to a price reduction of electric two-wheelers by around Rs 30,000 in the state, according to ratings agency ICRA.

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With the state government also offering incentives for electric four-wheelers at Rs 10,000 per kilowatt-hour (kWh), the ratings agency said there is a possible price reduction of Rs 1.5 lakh to Rs 3 lakh for electric cars in Gujarat.

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The Gujarat State Electric Vehicle Policy, 2021, which will commence from July 1, 2021, for a period of four years, is targeting 1.1 lakh electric two-wheelers (e2W), 70,000 electric three-wheelers (e3W) and 20,000 electric four-wheelers (e4W) during the policy period.

Under the policy, a demand incentive of Rs 10,000 per kWh is being provided by the state government for e2W, e3W and e4W over and above any subsidies available from the central government, with the maximum ex-factory prices being capped at Rs 1.5 lakh, Rs 5 lakh and Rs 15 lakh, respectively, for the three vehicle categories.

ICRA Vice-President and Sector Head (Corporate Ratings) Ashish Modani said, "As per our estimates, the recent amendment by the Department of Heavy Industries (DHI) as well as incentive by GoG (government of Gujarat) could result in a price reduction of about Rs 30,000 on an e2W."

It is substantial and will help in achieving price parity with conventional two-wheelers, he added.

Modani also said, "Another key highlight is the possible price reduction of Rs 1.5-3 lakh for electric car buyer in Gujarat, as FAME-II policy does not provide subsidy to electric cars for personal mobility."

Recently, DHI had modified FAME-II and increased the demand incentive for e2W to Rs 15,000 per kWh from the earlier uniform subsidy of Rs 10,000 per kwh for all EVs, including plug in hybrids and strong hybrids except busses. Besides, it had also capped incentives for e2W at 40 per cent of the cost of vehicles, up from 20 per cent earlier.

ICRA said the changes announced by the Gujarat government are "positive, especially for the e2W and e3W segments. Moreover, passenger vehicle for personal usage is covered under state policy, which is currently excluded from FAME-II scheme".

The Gujarat EV policy also announced a 25 per cent capital subsidy of up to Rs 10 lakh per station on equipment for the first 250 commercial public EV charging stations to address infrastructure gaps in the public charging space.

However, the subsidy for charging stations shall only be given to those developers, individuals or entities that have not availed subsidies under any other promotion schemes under the Government of India policies or schemes.

"The focus on direct incentive for consumers as well as capital subsidy for charging infrastructure roll-out will help in accelerating EV adoption," ICRA said.

Modani said that if successfully implemented, the Gujarat EV policy could result in "over 25 per cent EV penetration in 3W segment, though its target of 1,10,000 e2W units over four-year period remain modest as compared to over 1.06 million 2Ws sold in FY2020 itself".