As the third largest player in the automobile industry, India is currently undergoing a transition in the production from internal combustion engine (ICE) vehicles to electric vehicles (EVs). The automotive industry is expected to grow Rs. 20 lakh crore by 2030, through adopting and boosting the domestic manufacturing of EV. While the budget 2025 brings new incentives and strategic frameworks, it is debatable how much changes the EV will actually experience.

The budget emphasizes on renewable energy transition in the automobile sector by combining both industrial strategy with climate and clean air action. Key components include improvements to the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme, incentives for R&D and battery manufacturing through the Production Linked Incentive (PLI) program, and policies targeted at reducing import dependency. The budget also underlines the importance of expanding mass transit to include electric buses in order to maximize energy efficiency and reduce the emissions through a multifaceted approach to promoting EV adoption, with a focus on production, infrastructure, and resource security.

Some of the important provisions are:
(a) Customs tax waivers on capital products for EV battery production will increase domestic battery manufacturing capacity,

(b) Financial assistance for the domestic production of motors, controllers, and other important EV components, reducing reliance on imports,

(c) A special budget of Rs 4,000 crore to speed up electrification in the two-wheeler and heavy-duty vehicle segments,

(d) the PM e-Bus Sewa Payment Security Mechanism is intended to assure the procurement and long-term operation of electric buses in public transport, thereby contributing to urban decarbonisation, and

(e) Continued support for the PLI plan for advanced chemistry cell manufacture, which is consistent with the Economic Survey’s emphasis on building domestic supply chains.

Potential of India’s EV Policy
The shift to electric mobility is supported by a number of advantages offered by the Indian government's EV program. By offering incentives to producers, these programs promote home production, lessen dependency on imports, and create a competitive domestic market. A reduction in import taxes for fundamental EV components like batteries and motors creates better affordability which makes its production in India more feasible. The component localization reduces import expenses of EV parts which builds favourable trade conditions for the country.

The policy strengthens the national infrastructure capacity to establish more charging stations throughout the country. The rationale behind this initiative will help overcome consumer concerns about driving range limitations which enables broader acceptance in the market for electric vehicles.

Affordability also plays a significant factor in this analysis. The GST tax for electric vehicles has been cut to 5% from 12% and consumers benefit from direct subsidies given through the FAME scheme which reduces their total purchase costs. These initiatives specifically support two-wheeler and commercial EV segments that play a key role in local transport and delivery services.

Additionally, the policy includes green energy integration which combines EV adoption with renewable energy growth as it establishes solar-powered charging installations; this move ensures complete sustainability in electric mobility transition. This approach enables India to decrease its fossil fuel dependence as well as fulfill climate targets and maintain stable energy costs throughout the long term. Through smart grids and time-based electricity pricing the consumption of energy becomes more optimized and increases overall efficiency while saving money.

Challenges to Adoption
On the other side, the policy has several gaps and faces criticism on multiple fronts. The charging infrastructure deficit is one major concern. While the government has invested in expanding charging stations, the current network remains insufficient, particularly in rural areas. A lack of widespread, accessible, and fast-charging facilities hinders EV adoption, as consumers worry about being stranded due to inadequate charging options. The benefits of EV adoption to urban centres are limited as the establishment of charging stations, especially in lower-tier cities is particularly slow which creates regional economic disparities.

Another major challenge is the battery supply chain. India is heavily dependent on lithium imports, primarily from countries like China and Australia. Any small change in the global supply chain affects India and also makes production more expensive. The volatility of global lithium prices further blows up this issue, making long-term cost projections uncertain for manufacturers. High initial costs continue to be a barrier to widespread EV adoption. Even with subsidies and tax cuts, the upfront cost of EVs is higher than traditional vehicles. Middle-class consumers, who form a large portion of India’s vehicle buyers, find EVs unaffordable. The higher insurance premiums and the limited resale value of EVs further deter cost-conscious buyers. The financial burden on the government due to subsidy outlays raises concerns about the sustainability of these incentives in the long run.

Moreover, the transition to EVs could lead to job displacement in the conventional automotive sector, particularly in industries related to ICE vehicle production, such as engine manufacturing and oil refining. Without a clear workforce reskilling and transition strategy, the economic benefits of EV adoption may be offset by labour market disruptions. Currently, we believe that while India's budget does allocate resources and the necessary funds for further movement of the project, results are not going to be noticeable any time soon. All these challenges need to be overcome before growth can be seen in the vehicles being driven around us.

Comparison with the Rest
When compared to global giants such as China, the EU, and the United States, India's strategy remains ambitious, but it confronts hurdles in execution, infrastructure preparation, and supply chain resilience. The Economic Survey expressed concern over India’s excessive reliance on imported raw materials, mainly from China, for EV manufacture. The research highlights the importance of localising technologies and developing domestic processing of important minerals such as lithium and cobalt to reduce supply chain risks. The IMF has also warned that disruptions in essential resource exports might reduce EV investments by up to 30% by 2030, highlighting the importance of a strong domestic ecosystem.

The development of the EV policy in India remains behind the rest of the world. China has proactively expanded its EV infrastructure through government support and building substantial charging networks and battery recycling programs. While combined policies for EVs appear throughout the entire EU territory, the United States implements the EV policy through tax subsidies while adhering to domestic mineral security practices under carbon neutrality targets. India's policy framework demonstrates ambition yet needs to address global differences which would serve long-term operational success.

Moving Forward: Key Focus Areas
The EV sector has now received a push through the 2025 budget, but in order to achieve sustained advancement, targeted and deliberate decisions need to be made. A more strategic partnership between public entities and private firms through PPPs (Public-Private Partnerships) should lead to the expansion of charging stations into underserved rural locations. The EV industry requires investment in battery recycling and development of alternative materials such as sodium-ion and solid-state batteries to minimize dependency on foreign lithium and cobalt resources. Market fragmentation emerges as a significant challenge because different states have not reached agreement on policies relevant to the electric vehicle industry. National standards for incentives and regulations and infrastructure requirements must create universal clarity so manufacturers and investors can easily expand the EV market.

Therefore, the budget 2025 provides a solid platform for EV growth, but long-term success is dependent on successful execution, infrastructural expansion, and a resilient supply chain. While India’s policy framework is consistent with worldwide best practices, gaps exist in charging infrastructure, cost, and raw material security. The question remains: Will India's EV ambitions charge ahead towards a cleaner future, or will gaps in execution and infrastructure stall its progress?

Dr. Barun Kumar Thakur teaches economics at FLAME University, Pune. Ms. Tanvi Patil and Ms. Samyuktha Nair are studying at FLAME University, Pune. Views expressed are personal.