Losing spark: Delhi's electric vehicle adoption to hit speed bump

The removal of road tax waiver in the city estimated to make such vehicles about 10% costlier for its residents

Thinking of ditching your gas-guzzler for an eco-friendly electric vehicle (EV)? Think again, Delhiites! The national capital’s war on pollution has just gotten a whole lot pricier.

In a shocking move, the Delhi government has revoked the road tax and safety cess waiver on EVs effective from September 1, making such vehicles about 10 per cent costlier in Delhi, even as 23 other states are luring eco-conscious customers with sweet incentives.

Industry executives and sector experts warn that this price hike may not only hinder Delhi’s EV adoption goals and dampen interest in green vehicles but could also set a precedent for other states. Delhi has not only removed the tax waiver but is now imposing the highest road tax and safety cess rates in the country, according to an analysis of Ola Electric's online sales database by Business Standard.

Currently, besides Delhi, 11 states — Assam, Bihar, Chhattisgarh, Gujarat, Jharkhand, Kerala, Madhya Pradesh, Manipur, Nagaland, Tripura, and West Bengal — and the union territory of Dadra and Nagar Haveli impose road taxes ranging from Rs 2,900 to Rs 9,788.

The remaining states and union territories in the country offer road tax waivers. Ola’s online sales portal does not provide details on road tax for the Andaman and Nicobar Islands and Lakshadweep.

“The removal of the road tax waiver in Delhi is likely to dampen consumer enthusiasm,” said Jaibir Siwach, CEO, Kabira Mobility, highlighting how even minor price fluctuations can influence purchasing decisions in a price-sensitive market like India.

Siwach believes the move will lead to a 10 per cent to 15 per cent decline in sales volumes in Delhi compared to previous projections. He, however, remains optimistic that this impact will be temporary and pins his hopes on the much-anticipated Faster Adoption and Manufacturing of Electric Vehicles (FAME-III) incentive. “The upcoming FAME-III scheme will provide a significant counterbalance,” he said.

Even a 15 per cent decline, as projected by EV players, could impact not just Delhi's but the country's overall EV sales. The national capital, ranking among the top ten states for EV sales, has sold 54,800 vehicles this year alone, contributing 4 per cent to the national total of 1.26 million electric vehicles sold.

With the change, now a customer planning to buy Ola Electric's S1 Pro 2nd Gen scooter will face an additional cost of Rs 11,600, which is approximately 9 per cent of the scooter’s ex-showroom price of Rs 1,29,999.

A query sent to the Delhi Transport Department on waiver removal remained unanswered until the time of going to press.

The impact of the tax is more pronounced on electric three-wheelers (e3Ws) and e-cars, with prices experiencing a rise of up to 10 per cent.

Ayush Lohia, CEO of Lohia Auto, notes that the sudden price increase has already led to a sharp decline in registrations. “This drop in sales underscores how crucial affordability is for driving EV adoption,” he said.

The average daily EV registrations fell to 148 in the first week of September, down from 180 in August and 255 in July.

The challenge for electric cars is more complex, as customers were already hesitant due to their high cost. “The cost of electric cars could increase significantly, with even the base variant of the Nexon facing a ₹1.5 lakh tax. This may lead customers to reconsider, as EVs are typically at least 1.5 times more expensive than their petrol counterparts,” said Preetesh Singh, a specialist in CASE and alternate powertrains at NRI Consulting & Solutions.

Of the total 1.26 million electric vehicles sold in CY24, fewer than 58,000, or 4 per cent, are cars. Despite the concerns raised by the price hike, original equipment manufacturers (OEMs) indicate they are unlikely to lower prices to offset the increase for customers.

“EV prices may not take a hit because, in many states, road tax is already applicable, and OEMs have not reduced prices. Customers in these states have adjusted to the road tax, so we don’t anticipate OEMs lowering prices in response to this,” said Madhumita Agrawal, Founder and CEO of Bengaluru-based e-motorbike company, Oben Electric.

“We believe that while some states may follow Delhi’s lead, others already have such taxes in place. The EV industry must be prepared to adapt, as this trend could continue,” she added.

OEMs plan to meet with the state government and are working on solutions with their dealers. Since September 1, dealers from EV manufacturers, including Ather Energy, Bajaj Auto, and TVS Motor Company, as well as leading electric passenger vehicle makers like Tata Motors, MG Motor India, and BYD, have expressed concerns about the impact of the tax hike.

The removal of the waiver has added to the woes of OEMs and dealers, whose showrooms are already filled with unsold inventory. Last week, the Federation of Automobile Dealers Associations (FADA) reported a sluggish trend in the PV segment, with an unsold inventory of 62-67 days, valued at around Rs 60,000 crore, sitting at car dealerships.

OEMs are now pinning their hopes on the upcoming festive season for recovery. “With the upcoming festive season, we anticipate that sales will rebound to previous levels,” said Anjali Nashier Rattan, Chairperson Revolt Motors, an e-motorbikes company.